While the new Minnesota health insurance exchange, called MNsure, starts enrolling in just five months, many short and long-term structural decisions have yet to be made.
For instance, the MNsure Board of Directors will not have the authority to create more rigorous standards for insurer participation beyond minimum ACA requirements until 2015. Looking forward, early users and the board should bear in mind that an unregulated insurer free-for-all without significant quality-vetting on the exchange will negatively impact consumers.
A study by Health Services Research, a medical industry journal, found that when looking at seniors choosing Medicare Part D plans, seniors offered few options were more likely to identify cost-effective plans than those offered many options. As options increased, the selection process became too difficult and confusing for participants to meaningfully evaluate plans. This matches polling data showing seniors would prefer Medicare sort through Part D options and only present the best plans.
The conundrum of excess choice is magnified by the “inertia” problem: people buying health insurance rarely reevaluate their decisions, even as better options become available later. It is critical, therefore, that MNsure facilitates cost-effective decisions the first time consumers come to the exchange by thoroughly screening the plans buyers choose from.
Minnesota should embrace an “active-purchasing model” and negotiate with insurers on behalf of its citizens, selecting no more than 14 high-value plans total for the exchange.
Limiting the number of options could also substantially dampen rising premium costs. In Minnesota there are approximately 490,000 uninsured individuals, most qualifying for federal subsidies on the exchange, who have to buy insurance starting in 2014 due to the ACA individual mandate. This huge swath of new demand will leave insurers eager to offer a plan on the exchange. As insurers compete for a limited number of spots, they will lower premiums while still offering at least the Essential Health Benefits required by the ACA, if not more generous coverage.
California serves as a perfect anecdote for the cost-cutting capability of active purchasing. The state is currently offering only 13 plans on its exchange and premiums are coming in far below initial projections; insurers that won spots on the exchange offered plans with just 2% to 3% profit margins.
As Minnesota finalizes the MNsure Exchange, the state must embrace the unique leverage it currently has and create an exchange that works for the benefit of its citizens. A competitive selection process for plans on the MNsure Exchange will lower premiums and encourage cost-effective decision making among consumers, ultimately leading to a healthier Minnesota.