MNsure market share much lower than most states
In Minnesota, just one sixth of the individual market has coverage purchased through MNsure, the state-run exchange. There are no grandmothered plans in Minnesota, but the individual market of 300,000 people likely still includes several thousand grandfathered plans. Although the vast majority of people in Minnesota’s individual market now have ACA-compliant plans, most of them have purchased their coverage outside the exchange. Total enrollment in private plans through MNsure stood at just over 49,000 in mid-2015.
MNsure’s market share is still much lower than most states, but it’s increased over the last year. In 2014, just 14 percent of the state’s individual market enrollees had purchased their coverage through the exchange.
The low on-exchange enrollment is likely due to the exchanges’s technology problems in the first two years, as well as the fact that the state enjoyed the lowest average premiums in the nation in 2014 and 2015. Low premiums mean that fewer people qualify for subsidies, which means they pay the same amount regardless of whether they shop on or off-exchange. MNsure is also funded by a 3.5 percent premium assessment on policies sold through the exchange. Some state-run exchanges spread their fees across the entire market, including off-exchange plans. But MNsure’s funding means that carriers have an incentive to encourage people to enroll directly (rather than through the exchange) if they don’t qualify for premium subsidies.
MNsure is partnering with 20 insurance agencies around the state in an effort to increase on-exchange enrollment during the current open enrollment period (November 1 to January 31). Last year, they piloted the program with six agencies. By November 18, MNsure reported that 6,864 people had enrolled so far in private plans through the exchange for 2016, including 4,583 new applicants and 2,281 people actively renewing existing coverage.
Since the entire individual market in Minnesota is facing steep rate hikes for 2016, MNsure is working hard to publicize the fact that premium subsidies are available through MNsure (and only through MNsure) to lower the amount that people must pay in premiums each month. The rate hikes will likely mean that many of the people who currently have off-exchange individual coverage in Minnesota will switch to a plan through MNsure instead, in order to take advantage of the premiums subsidies.
Three different levels of financial assistance are available for health coverage in Minnesota: Medicaid (Medical Assistance), a Basic Health Program (MinnesotaCare), and subsidized private plans (QHPs). QHPs are also available without subsidies if the enrollees have incomes in excess of 400 percent of the poverty level (not all enrollees with income under 400 percent of the poverty level qualify for subsidies).
MNsure: new and improved for 2016
In addition to the market-wide premium increases that will likely drive consumers to MNsure, the exchange is also banking on the fact that its operations are much improved over the last two years.
Although MNsure struggled with technological issues during the past two open enrollment periods, then-interim CEO Allison O’Toole promised the exchange’s legislative oversight committee in October that round three would be much better. The technology platform has been upgraded with better security, and MNsure has hired more enrollment assisters. The website is also more user-friendly than it was in the past, and O’Toole noted that MNsure has “learned a lot of important lessons the last two years.”
O’Toole was named permanent CEO in November 2015, despite the fact that she hadn’t applied for the position; board members persuaded her to continue to lead the exchange, as they felt she was the best fit for the job.
When the legislative oversight committee met in October, the area of most concern to them was the rate increases that are coming in 2016, and that wasn’t something MNsure had control over. Rates were approved by the Minnesota Commerce Department, which would have used the same process regardless of whether the state was using its own exchange or Healthcare.gov.
Rates are increasing significantly in 2016 across the entire individual market in Minnesota – including plans sold thrugh MNsure, the state-run exchange. But the state expects to still have the lowest overall premiums in the upper midwest, and subsidies will offset much of the rate increase for MNsure enrollees with incomes under 400 percent of the poverty level. Although Minnesota appears to have the highest average rate increase in the country for 2016, they had the lowest overall rates in the country in 2014 and 2015, which helps to put the significant rate increases in perspective.
A team of actuaries at the Minnesota Department of Commerce spent the summer scrutinizing the proposed rates that were filed for 2016, and final rates were announced on October 1. For plans available through MNsure, regulators approved the the following average rate changes for coverage effective January 1, 2016 (market share is as of the end of the 2015 open enrollment period):
- UCare Minnesota = 27.3 percent increase – carrier had requested a 12 percent increase (20 percent of MNsure’s market share)
- HMO Minnesota (Blue Plus) = 45 percent increase – carrier had requested a 54 percent increase (7.3 percent of MNsure’s market share)
- Group Health Plan (Health Partners) = 32.2 percent increase – carrier had requested a 22.64 percent increase (24.2 percent of MNsure’s market share)
- Blue Cross Blue Shield of Minnesota = 49 percent increase – carrier had requested a 54 percent increase (43 percent of MNsure’s market share)
- Medica = 14.2 to 15.6 percent increase – carrier had requested a rate increase below 10 percent (6 percent of MNsure’s market share)
Regulators finalized higher-than-requested rates for Medica, Health Partners and UCare. But they approved slightly lower-than-requested rates for Blue Plus and Blue Cross Blue Shield of Minnesota. Overall, for plans sold within MNsure, the weighted average rate increase for 2016 is about 38.5 percent.
In general, the carriers cited higher-than-expected claims costs over the past year, along with the coming phase-out of the ACA’s reinsurance program as justification for their 2016 rate requests. But Governor Mark Dayton called some of the higher proposed increases “outrageous,” and promised a rigorous review of the filed rate changes and justifications. Ultimately, regulators were able to limit the highest rate increases to 49 percent – as opposed to the 54 percent that had been requested by Blue Plus and BCBS of MN – but the final weighted average rate increase in the individual market in Minnesota looks like about 41 percent for 2016 – the highest in the nation.
That 41 percent weighted average rate increase is market-wide, for the entire 5.5 percent of Minnesota residents who purchase their own individual health insurance. So it includes PreferredOne, the carrier that famously withdrew from MNsure in 2014. They’re still only offering plans outside the exchange for 2016, but their rates are increasing sharply once again, by 39 percent (lower than the 49 percent rate increase they requested in May).
Minnesota Commerce Commissioner Mike Rothman called the rate increases “unacceptably high,” and Gov. Dayton noted that he was “extremely unhappy” with the rate changes. But Rothman noted that his office “objected to all of the rates across the board,” and “squeezed out everything we could that was not actuarial justified.” In other words, the final rates, although much higher than officials and policy holders would have liked, are justified based on medical claims costs – the population enrolled in individual health plans in Minnesota is sicker than expected, and drug costs have been particularly onerous.
Given the volatility of MNsure’s rates heading into 2016, it’s vitally important for enrollees to shop around during open enrollment, as opposed to letting their 2015 plan auto-renew.
More enrollees receiving subsidies
Only about 55 percent of people who have 2015 coverage through MNsure are receiving premium subsidies. But due to the sharp premium increases, that has increased to about 70 percent for the people who have purchased or renewed coverage for 2016.
Part of the reason for the relatively small number of 2015 enrollees who have premium subsidies is that MNsure had the lowest rates in the nation in 2014 and 2015. Premium subsidies are based on keeping the cost of the second-lowest-cost silver plan (benchmark plan) at a specified percentage of enrollees’ income, so they’re less necessary if pre-subsidy premiums are low. But when benchmark premiums increase, subsidies must increase too in order to keep after-subsidy premiums in line with the affordability guidelines.
According to Kaiser Family Foundation data, the average benchmark premium in Minneapolis is 28.4 percent more expensive in 2016 than it was in 2015. Hence the significant increase in the percentage of enrollees who qualify for premium subsidies.
SHOP exchange: just one carrier in 2016
There are currently two carriers in MNsure’s SHOP exchange for small businesses: Blue Cross Blue Shield of Minnesota, and Medica. But Medica has announced that they are exiting the SHOP exchange in Minnesota, North Dakota, and Wisconsin. That leaves BCBS as the only small group carrier available through MNsure in 2016, but it won’t change much from a practical standpoint, since 83 percent of MNsure’s current small groups are enrolled in plans through BCBS.
Indeed, Medica’s reason for exiting the small business exchange is based on low enrollment in the first two years. There are only a total of about 1,500 employees currently enrolled in plans through MNsure’s SHOP exchange, despite the fact that the exchange had predicted 155,000 employees enrolled by 2016. Nationwide, SHOP enrollments have been much lower than anticipated (DC is an exception, mainly because Congress and staffers have to enroll through DC Health Link’s SHOP exchange).
Enrollment projections trimmed
In March, when MNsure’s effectuated private plan enrollment stood at about 52,000 people, the exchange was predicting 95,000 effectuated enrollments by the end of 2016, and 130,000 by the end of 2017. But those numbers were revised downward in July. MNsure is now aiming for 83,000 effectuated enrollments by the end of 2016, and 113,000 by the end of 2017. The new projections are based on the fact that enrollment to date has been lower than expected. Effectuated enrollment in MNsure private plans at the end of June stood at 49,066 people.
As a result of the lowered enrollment projection, the exchange also expects revenue to be lower than previously forecast. With the previous enrollment trajectory, the exchange had expected to bring in $9.6 million in revenue over the coming year (through June 2016), but that’s been lowered to $8.7 million.
MNsure is looking ahead to 2016 however, and on July 7, the exchange awarded $4.2 million in navigator grants to fund outreach and enrollment efforts from July 1, 2015 through June 30, 2016.
Changes coming for MNsure?
In March, Gov. Mark Dayton – a MNsure supporter – asked the legislature to create a Task Force on Health Care Financing that would study MNsure along with possible future alternatives. Dayton noted in his letter that he supports making MNsure “directly accountable to the governor and subject to the same legislative oversight as other state agencies” and his budget includes half a million dollars devoted to the task force. The spending bill was approved by the legislature in May, and the 29-member task force is to be appointed this summer.
One of the possibilities that the task force will consider is the possibility of switching to Healthcare.gov, but it’s clear that there’s no cut-and-dried answer to the question of whether Minnesota is better served by having a state-run exchange or utilizing the federally-run exchange (or teaming up with the federal government on either a partnership exchange or a supported state-based marketplace).
There were significant reservations about making that switch prior to the Supreme Court’s ruling on King v. Burwell. The Court ruled on June 25 that subsidies are legal in every state, including those that use Healthcare.gov. Prior to the decision, a switch to Healthcare.gov could have jeopardized subsidies for tens of thousands of Minnesota residents. But now that Healthcare.gov’s subsidies are safe, some stakeholders are calling for Minnesota to scrap its state-run exchange and use Healthcare.gov instead. Because the MNsure task force was included in the 2016 budget, no hasty decisions will be made. Instead, the issue will be carefully considered, and the task force will make its recommendations to the legislature by January 16, 2016.
The magnitude of the 2016 rate increases that were announced in October resulted MNsure opponents renewing their calls to switch to Healthcare.gov. But it’s important to keep in mind that the 41 percent weighted average rate hike in Minnesota is market-wide, and does not just apply to MNsure enrollees. In fact, the off-exchange carrier (PreferredOne) has among the highest rate hikes in the state for 2016, at 39 percent, and the exchange’s weighted average rate increase (38.5 percent) is lower than the weighted average rate increase for the whole individual market (41 percent).
IT problems for Medicaid and MinnesotaCare
Technological issues persist at MNsure, despite numerous improvements over the last year and a half. As of July, there was a renewal backlog of 180,000 cases in the Medicaid and MinnesotaCare programs – significantly higher than the 55,000 case backlog that was estimated in May. The problem stemmed from tech issues at the federal data hub (since fixed) as well as MNsure, and the exchange is working to sort out eligibility issues for numerous enrolles who are currently in the publicly-funded health programs but might not actually qualify for that coverage. Part of the problem is that the MNsure technology has dramatically increased the time required to make changes to enrollees’ accounts, and workers have not been able to keep up. improvements are being implemented, but it’s not going to be an overnight fix.
In addition to the renewal issues, premium collection for MinnesotaCare (the state’s Basic Health Program, discussed below) has been fraught with difficulties since the program switched to MNsure as the enrollment and billing platform. In July 2015, the MinnesotaCare program decided to take their billing in-house (the way it was prior to MNsure’s launch), following a report that current billing problems at MNsure would result in a $21 million revenue shortfall over the next two years if the program continued to use MNsure for billing.
As of June, about 117,000 people were enrolled in MinnesotaCare, and premiums can be as high as $50 per month, depending on the enrollee’s income. In addition to securing future premiums, MinnesotaCare will also try to recoup back premiums, since many enrollees haven’t received any invoices for 2015, and there are also outstanding premiums due from 2014. But administrators note that it’s difficult to force people to pay past-due premiums when the error was on the billing end, not the payment end.
As a result of the billing and other technology problems that have impacted Medicaid and MinnesotaCare, some lawmakers have called for a legislative oversight committee to address the issues. They agree that any major changes to MNsure’s structure should wait until the task force makes its recommendations in January, but note that even if the exchange switches to Healthcare.gov’s technology platform, some of the current problems plaguing Medicaid and MinnesotaCare would still need to be solved.
Given MNsure’s difficult launch, the state conducted a series of audits and reviews. The first audit reviewed how MNsure spent state and federal money. Auditors concluded that the exchange has generally adequate internal controls and found no fraud or abuse. The review was conducted by the state Office of the Legislative Auditor, and the report was published in October 2014.
Another audit, also conducted by the Office of the Legislative Auditor and released in November 2014, found that the MNsure system in some cases incorrectly determined who qualified for public health benefits. The errors occurred during the first open enrollment period, before a series of system fixes were implemented. The audit did not quantify the total financial impact of the errors. The state Human Services commissioner said a consultant working on technical fixes to MNsure concluded that the eligibility functionality was working correctly as of June 2014.
A third audit, a performance evaluation report released in February 2015, said “MNsure’s failures outweighed its achievements.” Among other criticisms, auditors said MNsure staff withheld information from the board of directors and state officials, the enrollment website was seriously flawed and launched without adequate testing, and the first-year enrollment target was unrealistically low. Auditors recommended that the governor be given authority to appoint MNsure’s chief executive officer and that the state legislature consider an advisory-only role for the MNsure board.
In October 2015, Minnesota Rep. Greg Davids, the Chairman of MNsure’s Legislative Oversight Committee, requested more details from MNsure in terms of how they’re going to make up the shortfall in their three year budget. The MNsure tax is projected to bring in $4.5 million, but spending is projected to be $8.1 million.
Multiple changes considered in 2015 legislative session
Minnesota legislators reconsidered MNsure’s governance structure during the 2015 session. One bill (SF187) would have increased the size the MNsure board of directors from 7 to 9, and required that at least one seat be held by a representative from an insurance carrier, and another by a producer (agent or broker).
Another bill (SF139) would have dissolved the board and restructured MNsure as a state agency, which would give the governor and legislature more control. These measures both received support in their introductory chambers, but did not advance to a vote during the 2015 session.
Legislators also introduced a bill (HR5) that would have allowed consumers to receive subsidies even if they shopped off-exchange. This measure would require a federal waiver in order to be implemented, and it’s unclear what value federal officials would see from approving such a request. Like the other bills, HR5 did not advance to a vote.
2015 enrollment count
Between Nov. 15, 2014, and April 13, 2015, enrollment in qualified health plans (QHPs) through MNsure reached 61,874. In addition, 120,129 people enrolled in Medicaid (Medical Assistance), and another 37,769 enrolled in MinnesotaCare.
But attrition is a normal part of the individual market – some enrollees don’t pay their premiums, and others choose to cancel their coverage. By the end of March, 52,169 people in Minnesota had effectuated coverage in QHPs through MNsure. Nearly 50 percent of 2015 enrollees qualified for premium subsidies, and about 15 percent qualified for cost-sharing subsidies (these numbers are significantly lower than the national average, but that’s due in large part to the fact that Minnesota has a BHP that covers residents with incomes up to 200 percent of the poverty level. The lower-than-average uptake of premium subsidies is also due to the fact that Minnesota had some of the lowest insurance premiums in the country in 2015. When the plans are less expensive, fewer people qualify for subsidies, even if their income is under 400 percent of the poverty level).
By July 2015, total private plan enrollments (not all effectuated) had grown to 67,966. 186,376 people had qualified for Medicaid between November 15 and July 14, along with 51,680 who had qualified for MinnesotaCare.
Enrollment for Medical Assistance (Medicaid) and BHP MinnesotaCare, a health insurance program for uninsured, working residents, is open year round. Native Americans can also enroll in private plans year-round through the exchange.
The first BHP in the nation
For more than two decades, MinnesotaCare has been a state program subsidizing health insurance for low-income residents. As of January 1, 2015, it transitioned to a Basic Health Program under the ACA, becoming the first BHP in the nation. The future of the program is uncertain however, as Republican lawmakers would rather see MinnesotaCare enrollees transitioned to subsidized MNsure QHPs, and there’s general agreement that funding for the program needs to be reassessed.
Without MinnesotaCare, the program’s enrollees would be eligible for heavily subsidized premiums and cost-sharing reductions in the exchange, but they would still be paying more in premiums and out-of-pocket expenses than they do under MinnesotaCare.
2015 rates and participating insurers
PreferredOne, which offered the lowest rates in the nation in 2014 and captured a large portion of 2014 enrollees, withdrew from MNsure for 2015. PreferredOne said remaining on the exchange was “not administratively and financially sustainable.” A Star Tribune business writer attributed PreferredOne’s departure as a market dynamics rather than a problem with MNsure.
Consumers who bought a PreferredOne plan through MNsure for 2014 could renew their policies for 2015 by working directly with the insurer. However, PreferredOne rates went up an average of 63 percent, and consumers didn’t qualify for subsidies if they shopped outside the exchange.
Five insurers offered individual and family policies on MNsure in 2015: Blue Cross Blue Shield of Minnesota, Blue Plus, Health Partners, Medica, and UCare. MNsure offered 84 plans statewide, up from 78 for 2014. Blue Plus was new to the exchange for 2015.
Minnesota officials announced 2015 premiums increased 4.5 percent on average for the four insurers that returned to MNsure from 2014. MNsure critics characterized the official announcement as misleading as it failed to take into account low-cost 2014 plans from PreferredOne.
2014 enrollment summary
MNsure was quite successful at enrolling residents in 2014 — despite considerable technical problems. A study commissioned by MNsure and conducted by the University of Minnesota showed that the state’s uninsured rate dropped from 8.9 percent in the fall of 2013 to just 4.9 percent over the course of the 2014 open enrollment period — the lowest rate in state history. The study’s author called the drop “unprecedented in Minnesota,” and the state now has one of the lowest uninsured rates in the nation (a Gallup poll released in February 2015 put the current rate at 7.4 percent – still among the lowest in the country).
According to a MNsure press release, 300,085 people obtained health insurance through the exchange as of August 2014: 53,770 people enrolled in private health plans, 65,749 enrolled in MinnesotaCare, and 180,566 enrolled in Medical Assistance (Medicaid).
In April 2014, MNsure hired Deloitte Consulting to audit MNsure’s technology and improve the website to make enrolling in coverage and updating life events easier and more streamlined. Deloitte has been involved in successful state-run marketplaces for Connecticut, Kentucky, Rhode Island and Washington.
Software upgrades were installed in August 2014, and system testing continued right up until the start of open enrollment.
To reduce wait times for consumers and insurance professionals, MNsure increased its call center and support staff and launched a dedicated service line for agents and brokers.
More in-person assisters were available in Minnesota for the 2015 open enrollment period. MNsure encourages residents to utilize the exchange’s assister directory to find local navigators and brokers who can help with the enrollment process.
While these changes improved the experience for individuals shopping for private insurance, the exchange continued to be problematic in 2015 for county workers who help low-income residents. County officials told the MNsure board that the system remains “woefully inadequate” for verifying eligibility and enrolling people in Medical Assistance, MinnesotaCare, and other social services.
Some of the system issues encountered by social services staff may resolved over time with newly awarded grant money. The federal government awarded MNsure $21 million for IT fixes, and that grant triggered an additional $58.5 million from Medicaid. The money will be used to address a list of 18 priority issues. MNsure’s chief operating officer said the workload of social services staff was heavily weighted in creating the priority list.
In April 2015, the MNsure board voted to consider the possibility of partnering with an outside vendor to offer better plan comparison tools for MNsure users. There have been concerns that enrollees haven’t been able to properly compare plans, and have simply gravitated to the lowest-priced plans available in each area. Better plan comparison tools might help to solve that problem.
Four insurers offered individual policies through the marketplace for 2014: Blue Cross Blue Shield of Minnesota, HealthPartners, Medica, PreferredOne, and UCare. Kaiser Health News reported that Minnesota offered some of the lowest premiums for silver (mid-level) plans in the U.S. Four of Minnesota’s nine regions made Kaiser’s list of the 10 least expensive places to buy health insurance.
While low premiums are good for consumers, they raise financial concerns for the marketplace. As of 2015, MNsure’s operating costs are funded with a 3.5 percent withhold of premiums. Low premiums translate to less money collected through the withhold.
Low enrollment in private health plans compounds the financial problem. While Minnesota far exceeded its 2014 goal of 135,000 signups for overall enrollment, the mix is much different than expected. Enrollment in Medical Assistance was much higher than expected, while enrollment in private health insurance was much lower.
At a December 2014 board meeting, MNsure released lower enrollment targets and a revised budget. MNsure reduced projected enrollment in private health plans from 100,000 to 67,000 for calendar year 2015. The drop reduces projected revenue from private health plan enrollment by $4.7 million for fiscal year 2015.
Minnesota health insurance exchange links
State Exchange Profile: Minnesota
The Henry J. Kaiser Family Foundation overview of Minnesota’s progress toward creating a state health insurance exchange.