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Minnesotans once again face steep increases in insurance premiums due to federal health care law

Back in June, Blue Cross Blue Shield of Minnesota announced it was pulling out of Minnesota’s individual insurance market due to heavy losses.  As a result, 103,000 policy holders will lose their policies and must now shop for a new plan.

Those shoppers and everyone else looking to purchase individual health insurance will be facing a steep hike in their premiums next year.  As the Star Tribune reports, the federal government yesterday revealed preliminary rates “with proposed jumps for thousands of people averaging anywhere from 36 percent to 67 percent.”

Those reported numbers are averages.  My own brief investigation into insurance filings reveals some Minnesotans will be hit with up to a 100 percent rate increase.  These rate increases might be huge, but this ongoing rise in premiums is not at all surprising.

Despite its name, the Affordable Care Act (ACA), otherwise known as Obamacare, was never about making healthcare less expensive.  In fact, as the New York Times reported back in 2009 when the ACA was being debated, the director of the Congressional Budget Office delivered some blunt testimony that “shook up the political landscape by suggesting that none of the major health care bills would significantly slow the growth of health spending.”

Anyone who knows anything about how insurance works knew the ACA would eventually lead to rate increases.  The fact is, a number of ACA provisions make it much harder for the individual insurance market to maintain a stable risk pool with a balanced mix of sick and healthy enrollees.  Here are some of the more obvious culprits.

1) The ACA requires insurers in the individual market to guarantee coverage to all regardless of their health status, which allows people to wait until they are sick before they sign up for coverage.

2) The ACA eliminated Minnesota’s high risk pool that had previously guaranteed coverage to people with preexisting conditions and protected the individual pool from being gamed by people who remained uninsured until they needed care.

3) The ACA allows people under 26 to stay on their parents’ health plan, which reduces the number of young and healthy people enrolling in the individual market.

4) The ACA restricts insurance companies from varying premiums between the old and the young by more than a 3 to 1 ratio. This raises premiums for young adults and discourages them from entering the individual pool.

5) The ACA requires people to go through insurance exchanges, like MNsure, that introduce unnecessary complications to the process of shopping for insurance. Many people simply don’t sign up after they experience the severe customer service issues with gaining coverage through MNsure.

6) The ACA expanded the number of people in Medicaid and Minnesota created a Basic Health Plan that crowds people out of the individual market. Moreover, these public program expansions make private coverage more expensive.  Public programs often pay providers less than the cost of care and so providers raise prices on private payers to cover the difference.

7) The ACA politicized the insurance markets and led Minnesota regulators to pressure companies to keep rates too low. This has led to substantial volatility in premiums that makes the market less attractive to healthy people who don’t have immediate needs.

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