Statistics explain the MNsure crisis

David Montgomery of the Pi-Press has done Minnesotans a great service with this article. Specifically, he dug into some statistics that explain why MNsure is failing. These statistics fit into 3 categories in Montgomery’s article: too many sick people, costs vary widely and the “premium cliff.”

Starting with the category titled too many sick people, I was astonished when Montgomery wrote “In Minnesota, for example, the most expensive 20 percent of the population paid about 83 percent of total costs, a 2014 study by the Minnesota Department of Health found, a typical figure for the U.S. The most expensive 2 percent alone accounted for 24 percent of spending.” That’s just the start of the statistics.

Next, he cited the statistic that “But Minnesota’s individual market takes this into overdrive. Just 2.2 percent of the roughly 267,000 Minnesotans on the individual market in 2015 caused almost 50 percent of health costs, a Department of Commerce study found.” Here’s why that last statistic is important:

This 2.2 percent, about 6,000 people, averaged about $100,000 per person per year — a total of $600 million.

The ratio of healthy people to unhealthy people means that insurance companies are paying out huge payments to hospitals. The bad news for these health insurance providers is that they aren’t getting the revenue they expected from policies sold to healthy people. That imbalance creates a crisis that’s impossible to overcome.

The other thing that’s contributing to the crisis many people are feeling is called the “premium cliff”:

So while a 60-year-old St. Paul resident earning $45,000 a year might pay 9.5 percent of his or her income in premiums, that person could pay almost 20 percent of their income in premiums if they earned $50,000 per year, according to data from the Department of Commerce.

It’s even starker for a Rochester resident, subject to that region’s higher premiums. The Department of Commerce data shows a 60-year-old on the individual market could face premiums nearing 30 percent of their income if they’re just over the poverty line.

Remember that this just takes into account the premiums being paid by these individuals. It isn’t factoring in these people’s deductibles. Their deductibles would put these people one catastrophe away from financial hardship.

This isn’t affordable care. It’s expensive care. Think about this: a healthy person living in Rochester making $50,000 a year would pay $18,300 in premiums before factoring in his deductible. That individual is better off paying the fine and saving the money they’d spend on the premiums. If they stay healthy, they’ve saved more than $15,000 by not buying health insurance.

The individual with health issues can’t afford to not buy health insurance. That individual is likely to purchase a gold plan with a modest co-pay rather than dealing with an expensive deductible. This post isn’t complete without this graphic:

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Authored By Let Freedom Ring Blog