Minnesota's Biggest Obamacare Insurer Leaves Exchange

PreferredOne was the least expensive insurer in the Minnesota's state-run Obamacare exchange last year. It was also the most successful at signing up customers, capturing 59 percent of the state's market for private plans, according to CBS Minnesota. 

And now it's leaving the exchange, and the 30,000 people who had enrolled in its coverage. 

As Jed Graham from Investor's Business Daily explains, this was due to an unusual feature of Obamacare in Minnesota—the existence of a "basic health program" option for lower-income households. 

In 2015, well more than half of MNsure exchange subsidies won't go to insurers on the exchange, but to a public program serving households that fall between the cut-off for Medicaid and 200% of the poverty level.

To date, this MinnesotaCare program for households above 138% of the poverty level has signed up 72,000 people vs. just 55,000 for the subsidized exchange.

The state was the first to embrace the Affordable Care Act's little-known basic health program option, allowing for subsidies to be used in this way. New York state's 2015 budget authorized the creation of a basic health program, so it may be the second to take the plunge.

Given PreferredOne's dominant position on Minnesota's exchange, it stands to reason that the insurer sees no great opportunity to be had.

The state's embrace of the basic health program has not only narrowed the potential exchange pool to households above 200% of the poverty level, but it seems it may have skewed the demographics somewhat older.

A statement from the company indicated that support costs for the exchange plan were too high. "Continuing on MNsure [the state exchange] was not sustainable," the statement said. 

The basic health plans were supposed to mitigate "churn" in the health insurance market, where income changes throughout the year often mean that low-income individuals end up switching back and forth between various forms of insurance as their incomes move up and down across eligibility borders. But they may end up turning off insurers from participating by limiting the number of people who end up looking to buy private insurance.