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Health insurance rate hikes: Things are not as bad as they seem

As reported recently, health insurance rates are about to rise quite sharply in Minnesota. A double-digit increase in health insurance premiums — some increases as high as 49 percent – seems scary, especially for people who are already having trouble making ends meet.

There are, however, two key points that we should keep in mind with regard to the individual health insurance market:

First, once you dig into the details, things are not as bad as they seem.

While we can speculate the reasons why Minnesota’s premium rates went up, we should remember that Minnesota has had among the lowest – if not the lowest – individual rates in the nation. So while the percent increases seem large, Minnesota’s rates are simply coming more into line with the rest of the nation’s rates.

Moreover, consumers should understand that not all plans are increasing their rates by extremely high amounts, and there are several plans available that will still remain very affordable. Although searching through hundreds of plans may seem a bit daunting, there is free help available through companies like Gravie, which can help people sort through the options and buy the plan that fits their individual needs.

More will be eligible for tax credits

Higher premiums will also mean that many more Minnesota consumers will be eligible to take advantage of tax credits available through MNsure. Those who already receive these credits will see an increase in what they get, which will offset the price hikes. And many more people will become newly eligible for these tax credits.

Abir Sen
Abir Sen

The second key point is that for many companies and their employees, the individual market remains more attractive than traditional group plans. Even with the rate increases, for many companies the individual market will continue to be less costly than group insurance for the upcoming enrollment period. Contributing a fixed amount to help an employee buy individual health insurance is a more predictable and, most likely, lower expense than offering group insurance.

For employees, group plans limit choices, forcing them into a one-size-fits-all approach. With hundreds of plans available in the individual market, employees can choose how much coverage they want and need, and thus, how much they pay. Moreover, they may be eligible for financial assistance from the government, which is unavailable if their employer offers a group plan.

Ever since the Affordable Care Act required minimum levels of coverage and ensured that no one can be denied coverage or charged more for insurance due to a pre-existing condition, individual health insurance has become a viable, cost effective alternative for employers and employees. It used to be that the only way to get good health insurance was through your employer. That world is no more.

Early stages of an epic shift

We are in the beginning stages of an epic shift in health insurance. We are moving from an employer-centric market to a consumer-driven one. The recent spikes in the individual premium rates shows that insurers are still adjusting to this shift, and some are adjusting better than others. It is by no means certain that the successful insurers of tomorrow are the ones that we know of today. As evidenced by the recent investment by Google into health insurance company Oscar, several savvy new players are jumping in the game, which will ultimately benefit consumers.

No one wanted to see the recent spike in Minnesota’s individual premium rates (with the possible exception of the insurers). But the bottom line is that consumers who diligently shop for a new plan and take advantage of available tax credits should be able to find good health insurance that is still affordable.

Abir Sen is chief executive and co-founder of Minneapolis-based Gravie, a health benefits marketplace for consumers.

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Comments (13)

  1. Submitted by joe smith on 10/06/2015 - 09:23 am.

    Not that bad for who? A neighbor up here on the Range runs a fabricating shop, employs 4 workers and the cost of his insurance for he, his wife and 2 small children has doubled since Obama claimed he would save 2,500 bucks!! He works hard so he won’t have to use tax credits because he believes in small government.
    Let me get this straight since prices have sky rocketed more folks will get tax credits (geeze who pays for those) and that is a positive thing…… Only liberals would think that way. As Ronald R. said we should judge welfare by how many folks are getting off help not by how many more are needing it.
    This story is once again head spinning logic by liberals who just won’t admit that Obamacare was rushed thru by procedure and not very well vetted or written.

  2. Submitted by Frank Phelan on 10/06/2015 - 09:44 am.

    How About This Epic Shift?

    Let’s shift into a single payer plan and avoid all of this non-sense?

    And as far as “consumer driven”, that’s more non-sense. Consumers need to have time to shop and compare, and clear pricing of goods and services BEFORE they buy. That’s a steep hill to climb when no one can tell you prices and it’s kind of hard to shop around when you’re being hauled to the ER in a meat wagon with a broken leg or a heart attack.

  3. Submitted by Jim Million on 10/06/2015 - 09:59 am.

    Superficial Nonsense

    From an insurance agency exec. [salesman]

    There are just too many places to begin a critique, so I will end here.

  4. Submitted by Todd Hintz on 10/06/2015 - 11:52 am.

    Rates

    A buddy works for one of the health insurance companies and says their rates are slated to go up 40%. The primary reason for the hike is they got into the market in a big way and positioned their products below cost so they could grab market share. Now that they’re got the market, it’s time to jack up prices so they can make a buck.

    It’s like the oil companies in the 1920s and ’30s, who went into a market and set up their own company-owned gas stations. They sold their product below market to drive out the competition. When the competitors were bankrupt, then they raised prices above market rate and used to profits to fund the scheme in other markets.

    That’s why we have laws on the books today that say you can’t sell gasoline below cost.

    • Submitted by Dan Berg on 10/06/2015 - 12:39 pm.

      That was the story

      In general prices went up after the antitrust legislation was enacted and Standard Oil was broken up. So while it is a good story the facts don’t bare out the results you indicate. Besides, the ultimate monopoly would be a government run system. All of the issues people have with large corporations are even more egregious in government. If it is unfair for a gas station to sell fuel below cost why is it alright for government to provides services in that way? The effects are similar in that it drives out any competition for that service and creates dependance on those who use it at the artificially low price.

  5. Submitted by joe smith on 10/06/2015 - 12:28 pm.

    Only liberal logic will claim sky rocketing insurance rates are a good thing because subsidies in the form of tax credits will be available to more folks. Who do you think pays for those subsidies? How about the poor folks who don’t qualify for tax credits?
    As President Ronald R. said “welfare should be judged by how many folks get off of it, not how many more need it”. Any chance the American people can have say in this? Obamacare was a poorly written not thought out plan, rolled out with disastrous glitches, not vetted by congress, not read by elected officials and passed by procedure. It is not working, please agree to fix it, not say it is way too costly but don’t worry the Government will pay for it.

  6. Submitted by Bill Willy on 10/06/2015 - 03:40 pm.

    What’s wrong with this picture?

    “Typical water consumption for a single family, residential property [in St. Paul, MN] is 22 units (16,456 gallons) per quarter (88 units per year) [which] would be $291.76 a year for water.”

    http://www.stpaul.gov/index.aspx?NID=3343

    “The average monthly residential electricity bill in Minnesota is $90” ($1,080 per year).

    http://www.electricitylocal.com/states/minnesota/

    “Average Family Premium per Enrolled Employee For Employer-Based Health Insurance”

    In Minnesota, the employer and employee “contributions” total $14,820 per year. That, divided by 12, means the average cost of employer provided health care insurance is somewhere in the neighborhood of $1,200 per Minnesota family per month.

    http://kff.org/other/state-indicator/family-coverage/

    Water: $25 per month.

    Electricity: $90 per month.

    Health care insurance: $1,200 per month.

    (Or, of course, insert your own household’s cost of those things.)

    What’s wrong with that picture?

    How would life change at your house if you had no access to water for 90 days?

    How would it change if you had no access to electricity for 90 days?

    How would it change if you had no access to health care insurance for 90 days?

    Why is health insurance 48 times more expensive than water?

    Why is it 13 times more expensive than electricity?

    Is it 13 or 48 times more valuable? Is there 13 or 48 times more “demand” for, or less “supply” of it?

    Or could it be something else?

    “The U.S. ranks worst among 11 wealthy nations in terms of ‘efficiency, equity and outcomes’ despite having the world’s most expensive health care system.”

    http://time.com/2888403/u-s-health-care-ranked-worst-in-the-developed-world/

    And, as a reminder to those who blame the government for that (and everything else), remember: The industrialized world’s most expensive, lowest quality health care system was created and has been managed by the Private Sector.

    What’s needed in Minnesota is what is working well for those other industrialized countries that are ahead of us on that list of 11. What’s needed in Minnesota (until some version of that is implemented) is the Medical Services Industry equivalent of the Public Utilities Commission.

  7. Submitted by Mark Kulda on 10/06/2015 - 04:12 pm.

    Lowest premiums is misleading

    It is true that Minnesota has the lowest average premiums in the nation but we also had the highest average deductibles in the nation. Your failing to point that out is misleading because you make it seem like overall consumers are better off because of it but that’s not true. Personally, I would rather pay a little more in premiums on a monthly basis and have a lower deductible. Higher premiums rather than higher deductibles can be spread out and paid on a monthly basis so the bite is not as bad. If you have a lower premium and higher deductible, you can face a large bill if you have to consume so much health services that you have to pay that large deductible all at once to a provider.

  8. Submitted by Tom Anderson on 10/06/2015 - 08:41 pm.

    I have to agree with some previous posters

    Creating more poor people who qualify for subsidies is not a good thing. We haven’t even gotten to the parts of the ACA that really hurt, once President Obama leaves office.

  9. Submitted by Jim Million on 10/07/2015 - 08:49 am.

    Charts & Graphs

    http://www.health.state.mn.us/divs/hpsc/hep/chartbook/section7.pdf

    For those who appreciate graphics, this MN Dept. of Health site offers excellent trend presentations, in either PDF or PowerPoint. The capture period includes 2013, just prior to MNsure data in the marketplace.

    These are very good baselines for many discussions/arguments.

  10. Submitted by Paul Udstrand on 10/07/2015 - 10:04 am.

    Obamacare IS a market driven system

    Until we dispense with all the malarkey that typically permeates our health care dialogue we’ll be trapped in some degree of miasma. The health care crises in the US is characterized by two basic and huge problems. First, the unavailability of affordable health coverage. Second, the actual cost of health care. We could’ve resolved both simultaneously with a single payer approach that would have simply expanded Medicare to everyone, but we didn’t that… yet.

    Obamacare is basically a version of Hillary Clinton’s plan, and the problem with THAT always was that it had no real capacity to contain health care costs. Providers charge what they charge simply because they can, and they’ll keep charging more so long as they can play insurance providers off against each other. So the problem is that so long as providers keep raising rates, or at least manage not to reduce rates, premiums will have to increase to cover the cost. And then yeah, just like any privatization scheme, companies will low-ball to capture market and then raise prices when they think they have the necessary leverage. THAT’S how markets actually work, and that’s markets don’t work well in some vary basic areas of the economy. Market are not magic reducers of prices and costs, anyone who’s paid $100+ for a pair of tennis shoes can tell you that.

    • Submitted by Jim Million on 10/07/2015 - 12:20 pm.

      Sorry, Paul

      This one just doesn’t hold up to reality.

      Medical providers have worked under increasingly lean Managed Care contracts here and elsewhere for two decades or more. Their reimbursements for given procedures have declined steadily in those years. As one result, they have learned and implemented more efficient processes. That is fact, not bias.

      Certainly new drugs have become much more expensive for several reasons most of us know; however, generics have steadily become far less expensive (except in some cases where shortages have skewed price).

      We must also clearly differentiate between price of an encounter versus aggregate claims cost. Demographic realities of aging and associated claims growth must be acknowledged along with other utilization trends.

      Your best argument would be the “Medicare for All” thesis. That’s fine and possibly the ultimate outcome. At the same time, we must be honest in the fact that current Medicare reimbursement payments are at their lowest levels per procedure; yet, Medicare continues toward financial instability.

      The best immediate remedy for these public program issues would be to raise market price, that is, beneficiary premiums. That is exactly what you argue against, apparently thinking government price increases via taxes and other fees are OK.

      Perhaps the better path to your goal is a step-wise process, so that we may learn important operating/financial realities along the way. That is exactly what ACA is set up to do. The first major imperative has been to uncover true aggregate claims risk by aggressively enrolling all previously uninsured people possible. That has been a success. No valid projections for any ultimate scheme are possible without that key data.

      I, for one, prefer to have my car in optimal operating condition before driving across the country.

    • Submitted by Jim Million on 10/07/2015 - 12:44 pm.

      Sorry, Paul

      This one just doesn’t hold up to reality.

      Medical providers have worked under increasingly lean Managed Care contracts here and elsewhere for two decades or more. Their reimbursements for given procedures have declined steadily in those years. As one result, they have learned and implemented more efficient processes. That is fact, not bias.

      Certainly new drugs have become much more expensive for several reasons most of us know; however, generics have steadily become far less expensive (except in some cases where shortages have skewed price).

      We must also clearly differentiate between price of an encounter versus aggregate claims cost. Demographic realities of aging and associated claims growth must be acknowledged along with other utilization trends.

      Your best argument would be the “Medicare for All” thesis. That’s fine and possibly the ultimate outcome. At the same time, we must be honest in the fact that current Medicare reimbursement payments are at their lowest levels per procedure; yet, Medicare continues toward financial instability.

      The best immediate remedy for these public program issues would be to raise market price, that is, beneficiary premiums. That is exactly what you argue against, apparently thinking government price increases via taxes and other fees are OK.

      Perhaps the better path to your goal is a step-wise process, so that we may learn important operating/financial realities along the way. That is exactly what ACA is set up to do. The first major imperative has been to uncover true aggregate claims risk by aggressively enrolling all previously uninsured people possible. That has been a success. No valid projections for any ultimate scheme are possible without that key data.

      I, for one, prefer to have my car in optimal operating condition before driving across the country.

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