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Montana Insurers Propose Lower Individual Premiums

The federal government's Healthcare.gov marketplace

Montanans who buy individual health care plans through the federal government’s Healthcare.gov marketplace will pay less for it next year, at least partially due to a new state law.

State Auditor Matt Rosendale today announced that the three companies providing insurance under the Affordable Care Act exchange expect to cut average premiums on policies for individuals by 8 to 14% for 2020.

University of Montana economist Bryce Ward says that’s rare in a country where health care costs generally increase faster than inflation.

"What it means is, hey, for people who are trying to get health insurance through the exchange, things are going to be a little cheaper this year," he says.

Like most things health care, though, it’s a bit more complicated than that.

Rosendale attributes most of the premium percent decreases to the state’s new reinsurance program, which the Legislature passed this year.

Funded by federal dollars and a tax on major medical plans sold in Montana, reinsurance provides a backstop for health insurance companies, reimbursing them for high-cost claims between $40,000 and $1 million. That prevents the often unpredictable high costs from driving up customer prices the next year.

That’s significant in Montana, where a couple of people can drastically affect a small insurance pool. Ward references his sister, who worked at a small bank. Two employees each had micro premature babies one year, which drove costs up for everyone the next cycle.

“And the reasons had names; you could point to them. It wasn’t just the random fluctuations of the market,” Ward says.

In Montana, roughly 50,000 people are covered in the individual marketplace by Blue Cross and Blue Shield, PacificSource and the Montana Health CO-OP.

But Ward says not everyone should expect an 8 to 14% rate decrease. Those are averages, and other funding mechanisms complicate the picture.

Reinsurance also doesn’t address underlying factors that have bloated health care costs the last several decades, including new drug prices, provider concentration in markets, and the side effects of an aging population.

“In some sense this may be clawing back some really high rates of increase that we’ve seen in the last couple years, but health insurance is still ultimately an aggregate, expensive," Ward says.

"It’s a good sign but you would need to see this happen year over year for a lot of years for us to reverse a lot of the massive increases we’ve seen in the cost of health insurance.”

Instead, Ward says reinsurance in Montana will likely take a year or two to level out, then customers shouldn’t be surprised to see rates increase again.

In the meantime, marketplace enrollment opens in November.

Kevin is a UM Journalism graduate student and reporter for MTPR.