Wednesday, September 17, 2014

Pall Bunion

If an insurer falls in the MNsure forest, does it make a sound? Oh yeah:
The top-selling insurer on the state’s MNsure exchange has pulled out of the online marketplace just two months before this year’s open enrollment period begins.

Golden Valley-based PreferredOne had set the lowest premium prices in the nation last year and signed up nearly 6 in 10 consumers who shopped on the MNsure exchange.

But the insurer’s CEO, Marcus Merz, said this week in a letter to the exchange’s leaders that “continuing to provide this coverage through MNsure is not sustainable.”
Not sustainable? Fancy that. Why would that be? One guess, from the Star Tribune article, make sense to me:
But Caroline Pearson of health consulting firm Avalere Health, who has followed exchanges and the health reform rollout, said it was surprising to see an insurer drop out.

“Everyone was heading into 2014 with limited data about the true health demands,” she said. “My guess is they may be seeing premium prices that can’t sustain the medical costs they experienced with their enrollees.”
The point of being in the insurance business is to avoid paying out premiums wherever possible. The goal of the customer is to maximize the premiums they receive while minimizing the costs involved. It would hardly be surprising that the pool of enrollees that MNsure attracts would include a lot of people who haven't been receiving medical care in the past and would have underlying health issues. It's always been a dubious model.

The timing of this announcement doesn't work so well for Mark Dayton, which explains why he was more interested in talking about Adrian Peterson than about this issue. Jeff Johnson was less reticent:
“This is yet another example of everyday, middle-class Minnesotans paying the price for Mark Dayton’s incompetence,” said Hennepin County Commissioner Jeff Johnson, who is challenging Dayton for the governor’s seat. “Six out of 10 people who’ve purchased insurance through MNsure will now have to go through the nightmare process of purchasing another plan all over again — thanks to Mark Dayton.”
Stay tuned, folks. This story isn't going away.

1 comment:

R.A. Crankbait said...

A small note: the point of being in the insurance business is not to avoid paying out premiums whenever possible; insurance companies know they will pay claims.It's the reason they exist.

The key is to pay no more in claims than what you take in, including operating costs. Insurance companies employ a lot of actuaries to figure out - well into the future - what the expected costs are going to be and how much the premiums need to be today in order to pay these amounts in the future. Further, in ever state the insurers are required to hold reserves in order to do this (another job for actuaries). To further support this, most carriers also buy reinsurance to cap their risk year-to-year. Once the claims reach an agreed upon point, the insurer is off the hook and the reinsurer pays the claims over that attachment point. If the reinsurer (who has its own actuaries, of course) pays more claims than they expected, they raise the reinsurance premiums to the carrier, or raise the attachment point.

Carriers knew they were going to have high claim volume in the initial years of these plans given the number of previously uninsurable clients joining the rolls. This was anticipated and priced for. When the experience (likely) outpaced the expectations the insurer and reinsurer both likely looked at the projections (and the State's tardiness in providing reimbursements or quality information) and decided this was going to be a death spiral if they didn't pull out.