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.
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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