Neither PreferredOne nor Fairview would comment for this article. A PreferredOne spokesman told KSTP-TV in St. Paul that selling plans through MNsure is “taking a significant amount of our resources to support administratively.”
PreferredOne’s move comes as HealthCare.gov and state exchanges across the country have seen an increase in participating insurers and number of plans being offered for 2015. According a report this month from McKinsey & Co., nearly every insurer offering plans on the exchanges in 19 states for which information is available is returning to sell plans for 2015; 30 additional insurers have requested entrance into the marketplaces, and there will be 60% more individual products offered on the exchanges than there were in 2014.
Roger Feldman, a University of Minnesota public health professor, said PreferredOne may have made a mistake by offering too-low premiums in 2014 to attract market share. He has studied what he calls the “lowball bidding phenomenon” and says fast enrollment growth can strain a smaller insurer and raise costs rather than reducing them. “In my experience this never works,” he said. “I’m actually not surprised that (PreferredOne) left.”
Exchange officials at a news conference Tuesday said they were disappointed about the insurer’s exit. They said it demonstrated that MNsure was operating as a competitive marketplace.
In announcing the exit from the MNsure marketplace for 2015, Merz and MNsure CEO Scott Leitz called the exchange an “evolving partnership.” They also acknowledged that PreferredOne’s decision would affect 2015 enrollment.
The vast majority of exchange plan enrollees in Minnesota and across the country have income below 400% of the federal poverty level and are receiving federal premium tax credits to make coverage more affordable. PreferredOne’s exchange customers will have to switch to a plan sold on MNsure if they want to keep their premium subsidies, which are only available for plans offered through the exchange.
Leitz and Merz said both organizations would work to minimize the move’s effect on enrollees.
“A major player like this leaving is most likely to raise premiums,” said Jonathan Gruber, an economist at the Massachusetts Institute of Technology who consulted for MNsure and helped draft the Patient Protection and Affordable Care Act. PreferredOne’s decision to leave MNsure is “unusual” among insurers across the country, as the federal and state exchanges have seen an increase in insurers offering plans for 2015, he added.
PreferredOne, which reports that it has a total of 350,000 enrollees, serves about 24,000 individual-market customers through MNsure, according to a company spokesman. Roughly 327,000 Minnesotans have enrolled for coverage through MNsure, including about 55,000 in private non-Medicaid plans.
Representatives from the other four insurers selling plans on Minnesota’s exchange told Modern Healthcare Tuesday that they intend to continue offering products for 2015.
Finalized premiums for the 2015 enrollment period aren’t yet available in Minnesota. It’s unlikely that the other four insurers will be able to make changes in plan offerings and rates in reaction to PreferredOne’s exit from the marketplace because there is not enough time to file new products or rates with the state, according to a Minnesota Commerce Department spokeswoman.
MNsure suffered significant technical and enrollment hurdles throughout its first open-enrollment period. Eligibility determination issues and inaccurate consumer information files forced both the state and insurers to do extensive manual work to enroll Minnesotans.
But PreferredOne appears to be an outlier in exiting the exchange market. “Nationally, the picture is not that bad, but in some states—and I guess Minnesota is going to be one of those—we’re in for a rougher ride,” Feldman said.
James Nord is a freelance writer in Minneapolis.