So why are Individual Medical Rates So High?

Individual Healthcare: Past, Present and Future

I know you’ve read about the increasing premiums for individual health insurance plans. Or saw something about it on TV. Yes, premiums have increased.

Let’s start with some history.

Prior to ACA, individuals in Minnesota could purchase individual health policies from one of two places.  If you were healthy enough to qualify, individuals could purchase low cost, high quality health coverage from a number of insurers.  Rate increases year over year were stable, usually 5{bcdee29d8ece072d76c660bfa283f395bc73ff9272f7bb81f739f49cdd20ae0b} to 6{bcdee29d8ece072d76c660bfa283f395bc73ff9272f7bb81f739f49cdd20ae0b} per year.

Those who could not qualify for coverage because of health could automatically enroll in Minnesota’s state risk pool called MCHA.  MCHA accepted all Minnesota residents who could not purchase health policies because they were sick.  Remarkably, the MCHA risk pool was stable and offered low cost high quality coverage.  Premiums were affordable through a state mandate limiting monthly premiums to no more than25{bcdee29d8ece072d76c660bfa283f395bc73ff9272f7bb81f739f49cdd20ae0b} above the cost a healthy person.  Like the private market, MCHA rates were stable with 5{bcdee29d8ece072d76c660bfa283f395bc73ff9272f7bb81f739f49cdd20ae0b} to 6{bcdee29d8ece072d76c660bfa283f395bc73ff9272f7bb81f739f49cdd20ae0b} increases.  The MCHA policy had a short preexisting condition limitation that was usually waived. Since they were a nonprofit they seemed to bend over backwards to help the policyholder.

Twenty-seven thousand Minnesotans loved their MCHA coverage.  It was affordable, it was stable and it offered, nearly unlimited network access.  You could drive down to Rochester and check in to the Mayo, no questions asked. It even had low out of pocket maximums…$3,000 per calendar year was the norm.

MCHA ran deficits each year (for arguments sake let’s call it $240 million per year), since the 27,000 MCHA subscribers, whose premiums were limited to 125{bcdee29d8ece072d76c660bfa283f395bc73ff9272f7bb81f739f49cdd20ae0b} of a healthy person’s premium, used their plans a lot. To make up the deficit, MCHA was authorized to assess all fully insured plans in Minnesota a pro-rata share of the annual deficit.  Translation…a $240 million annual deficit was divided among about 3 million Minnesotans.  Insurers would simply build this assessment into the cost of their fully-insured premiums covering all Minnesotans.  The way the math worked, we all paid about $5.50 per month to make up the $240 million annual deficit. We didn’t even know this was happening!  What was happening was the genius of pooling risk among a very large population.

The disruption in the market really started on January 1, 2014 when policymakers decided to terminate the MCHA plans for the 27,000 participants, and instead combined them with the 227,000 or so individual policyholders, to form the new pool of individuals totaling about 227,000 Minnesotans.  In doing so the predictable $240 million annual deficit now must be divided among 250,000 people rather than 3 million people.  Obviously, for the math to work, rates increases are must head to the moon along with big benefit cuts; thus the disintegration of the individual medical marketplace we are experiencing.

Let’s talk about today.

As part of the Affordable Care Act (ACA), the government set up Health Insurance Marketplaces (also called Exchanges) where you can shop for insurance and compare plans offered by private insurance companies. The Marketplaces are run by the Federal government, or by the state, or by both working together.

Each year, there is a set time (the open enrollment period) when you can shop for Marketplace plans. The open enrollment period is November 1, 2016 to January 31, 2017. After the open enrollment period ends, you cannot buy a plan or change your plan unless you have a qualifying life event (such as losing your insurance coverage, getting married or having a baby).

The insurance plans offered include a set of essential health benefits, and financial assistance is available for those who qualify. In 2014, one of the ACA changes was eliminating pre-existing condition exclusions that insurers relied on to contain costs. Thus insurers have struggled to make a profit and some have dropped out from offering individual plans.

With the largest health insurance companies dropping out of the market and the smaller ones demanding 50 percent to 67 percent premium increases, on top of higher and higher deductibles, people who can’t get insurance through their employer or other group are risking bankruptcy if they get sick, even if they have coverage.

This is not a pretty picture. This is not how many of us pictured the individual insurance marketplace looking. Indeed, earlier this summer we thought there wouldn’t be an individual insurance marketplace at all.

A vision for the future.

What can be done to restore stability to the individual market? Simple; restore the age old concept of pooling high risk people across a broad population.  Return those high risk pools that were successfully adopted and administered in 34 states. so that those citizens who most need health insurance are able to purchase great coverage at a reasonable cost.  I’m willing to start paying my $5.50 per month again into the pool. How about you?

The recent unprecedented volatility in the individual medical market is not caused by greedy insurance companies, gouging pharma, or even big cost increase in medical care.  If it were, we would be seeing the same extreme volatility in the group markets, but we are not.

The problem is an insurance pooling problem that can be reversed about as easily as it was mandated.

So let’s get to it Minnesota! We lead the nation in the High Risk pool concept in 1976.  Let’s once again lead the nation in reversing the negative impact of mandating it out of existence.

In Minnesota, the Individual market serves 250,000 state residents. You may be one of them, or know someone who is. It’s really important that if you are shopping for individual health plan, you get expert help. There are so many changes this year.

Let us guide you through the changes. You can call us at 952-945-4210. Or go online at and complete the form.


Be well,


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