Yesterday evening, Minnesota Governor Mark Dayton signed into law a bill granting a 25 percent premium reduction to individuals buying insurance through the individual health market in Minnesota in 2017, who are not receiving a federal income tax subsidy. While some details are still sketchy, here is our initial understanding of how this will work:
This premium relief will be available to every Minnesotan not receiving a federal subsidy who purchased their coverage in the individual market. The individual market is where you buy health insurance when you are not insured through your employer, through Medicare or through a state sponsored health plan (Minnesota Care or Medical Assistance). Approximately five percent of Minnesotans are insured in the individual market.
The 25 percent reduction will reduce the amount you are billed each month. For example, if your premium is $1000 per month, the insurance company will only bill you for $750. Or on $200 premium, your bill will be reduced to $150. The state of Minnesota will reimburse your insurance company for the difference.
Unfortunately, you won't see this reduction until your March or April invoice. The good news is that the reduction will be retroactive once it kicks in. This means that if your premium is $1000 a month in January through March, in April you will receive an extra $750 credit, reducing your April bill to zero. Starting then in May, you would pay your new reduced amount of $750 a month. Likewise, if you pay $200 a month for January through March, nothing will be due in April and you will pay $150 starting in May.
Unlike the federal tax subsidy which requires you to buy your insurance through MNsure, this premium reduction is available when you buy your insurance from us - so you can avoid the hassles of MNsure! Also, there are no income minimums or maximums to qualify for relief.
Please note this premium reduction is for 2017 only, to provide time for reforms to be adopted in hopes of improving the individual health insurance system for 2018. Also, please be aware that you cannot receive both a federal subsidy and also this state-paid premium reduction.
One side-note is that there is a cap on how much the state of Minnesota can pay under this relief program. The state of Minnesota will determine in July whether there are enough funds to cover a full 25 percent reduction for the entire year. If not, they will reduce the percentage of relief from 25 percent to a lower percentage for the final four months of the year.
Many Minnesotans may have been waiting to see if the relief would occur before buying insurance for 2017, simply because they can't afford the sky-high premiums. If this is your situation, it is very important for you to be aware that open enrollment ends Wednesday, February 8. If you don't apply for coverage by this date, you will be locked out for the end of the year (except in the case of a qualifying life events and certain other exemptions). Click here to get started - so we can help you before time runs out.
...It Probably Is. (Deceptive marketing of health plans)
It's bound to happen when rates go up. Unscrupulous sales agents or insurance plans are going to reach out to you with an offer for coverage that, to the untrained eye or ear, sounds similar but is way cheaper. To someone struggling to afford yet another round of large rate increases, it sounds like the solution they desperately need.
Let's start by talking about what most would agree you should be looking for in health insurance, a Major Medical policy. In addition to covering more routine health care needs (subject to cost sharing), the most important job of Major Medical insurance is to make sure you are protected in the event of a major health event which could cost tens of thousands (or even hundreds of thousands or more) to treat or cure.
Unfortunately, individual Major Medical insurance has gone up significantly since Obamacare implementation in 2014. Now health plans must accept everyone regardless of health history during annual open enrollment. While this change was cheered nearly universally, it came with a price tag, as it has certainly raised the average annual cost of care per member. In addition, Obamacare mandates a number of costly additional benefits. Together, these factors have increased pricing significantly.
With these kinds of increases, Americans on a budget have been searching for somewhere to turn to get a plan they can better afford. Enter Short Term and Defined Benefit plans. To the average consumer, both of these plans may sound similar to Major Medical insurance at first glance - and they are significantly less expensive. Unfortunately, neither of these are a reasonable substitute for a Major Medical policy.
Short Term health plans are designed to do what their name implies - fill a coverage gap between two Major Medical plans. They are considerably less expensive because they don't cover pre-existing conditions, and the insurance company can gamble that they won't be in force long enough to cover a new health condition that might arise.
Defined Benefit plans typically pay a schedule of benefits for specified health treatments or conditions. While such coverage is better than no coverage at all, it would likely be woefully inadequate to cover a major health event - which is the most important reason to buy health coverage in the first place.
Neither Short Term or Defined Benefit plans comply with the coverage requirements of Obamacare. They will not necessarily cover all the essential health services that Major Medical insurance covers. And since they are not qualified plans under Obamacare, they do not protect you against paying a tax penalty for being uninsured.
Unfortunately, this author has spoken with consumers who have been deceived by advertising for both Short Term and Defined Benefit plans, thinking they had found a plan that would provide them the coverage they needed at a better price. In one case, an uninsured consumer had just had a surgery and purchased coverage from a convincing telemarketer, unknowingly buying a Short Term policy thinking it would cover her follow-up care, only to find out later that her policy did not cover pre-existing conditions.
Let's face it: Major Medical insurance is plain expensive. It is natural that consumers are going to look around trying to find a more affordable option. But know this: There are currently only three organizations offering individual Major Medical insurance in northern Minnesota: Blue Cross, Health Partners and Medica. If you live around here and are being offered an individual or family plan from someone else, it's not Major Medical insurance; it must be something else. And, unfortunately, if it sounds to good to be true... it probably is.
Ken Cobb is owner of Pine Country Insurance and has been active in the insurance industry for over 15 years. Meet Ken.
Coverage descriptions found in this blog are summaries provided for general educational purposes and cannot fully detail the terms, conditions, limitations or exclusions of a specific insurance policy. Please read your policy carefully.