This week PreferredOne, a major insurer on Minnesota’s health insurance marketplace (called MNSure), announced it would not participate in the marketplace in 2015. The company’s press release states: “Continuing to provide this coverage through MNSure is not sustainable.” The news caused a stir because this insurer has the lowest premium rates on the marketplace, and in 2014 garnered 59 percent of overall enrollment. At least four insurers will remain in the marketplace to continue to serve consumers.
Why would a company leave the health insurance marketplace?
Affordable Care Act (ACA) prognosticators will be quick to draw conclusions from this market withdrawal. Some will say it’s a signal that the marketplaces themselves are not sustainable, or of insufficient marketplace leadership. But that kind of rush to judgment is misplaced, at least in this circumstance. Long before the ACA was passed, insurers have been entering new markets and departing other markets. These are business decisions made by the companies based on a wide range of factors, from enrollment and revenue, to risk selection and cost structure, to regulatory oversight. That’s why all states have had longstanding rules for orderly market withdrawals on their books. The ACA doesn’t change this dynamic – insurers will continue to have the freedom to make these market entries and withdrawals for many years to come.
Only PreferredOne executives know all the reasons they’ve decided to exit MNSure. They were new entrants to the nongroup market; their focus to date has been on the employer-based market. They could have miscalculated their price point – by all accounts they offered some of the lowest prices in the country; they could also have miscalculated the number and risk profile of people who enrolled in their plans. To be sure, entering a new market with no prior experience is not for the faint of heart.
What does this mean for consumers enrolled in PreferredOne plans?
Consumers enrolled in PreferredOne plans will have to return to MNSure, update their income and household information, get a new eligibility determination, and shop for a new plan from a different insurer. But the truth is, they would probably have to do this anyway, even if they weren’t losing their plan, and even if they’ve had no income or household changes. Most consumer advocates are advising all current enrollees to actively renew their coverage and shop for plans. This is because, in most markets, the cost of the benchmark plan (to which premium assistance is pegged) will have changed for 2015, meaning that all consumers will need to get an updated determination of the tax credits for which they are eligible. Once they get a new determination of eligibility, they also may need to switch plans to ensure they’re getting the best deal possible.
The challenge for marketplaces nationwide – for MNSure, healthcare.gov, and other state-based marketplaces – is to ensure that their IT systems have the capacity to handle these active renewals, and that they have robust online, telephone, and in-person assistance trained and available to help consumers through the process.
Stay tuned: As part of an ongoing project for the Commonwealth Fund to monitor implementation of the health insurance marketplaces, CHIR researchers will soon publish state-by-state data on marketplace plan participation for 2015.
4 Comments
Hi Sabrina – nicely put in context. My theory is that PreferredOne pulled out of MNsure because of the exchange’s ongoing operational problems. The handoff from exchange to health plans of apps and enrollment data has to be done manually and the info is often incorrect. On top of that, the MNsure exchange will extract a percentage of the premium to finance its operations. PreferredOne has well developed agent relationships and in-house sales, which were the channels for most of its new members this year. Its second quarter NAIC shows losses but not anything special.
P.S. I think that by announcing now, PreferredOne may have done a big favor to Minnesotans. The five exchange plans filed their rates in June, and the other four were probably trying to find the price point just above where they thought PreferredOne would be. As I understand it, the remaining four plans are locked into those rates now for 2015.
Good point!
PreferredOne was not new to the individual market in 2014. They sold individual plans in 2013 and earlier. They were new to the ACA mandates but so was everyone else. Did they underestimate premiums? Yes. On the flip side, Medica over estimated premiums by so much that they lost half of their individual business. PreferredOne’s statement to brokers was “Our reasons for exiting MNsure are due to MNsure’s administrative inefficiencies and how it impacts PreferredOne in delivering quality services to all our members. This past year we enrolled over 70% of our individual members directly and not through MNsure. We feel we can better serve PreferredOne members when we enroll them directly.” I agree. MNSure has been a nightmare to work with and a 3-4 month delay for them to transmit correct enrollment data is unacceptable. All the while, people have no access to use the insurance they purchased. On the bright side, without PreferredOne’s cheap benchmark plan, everyone’s advanced premium tax credits should increase!