A Minnesota health insurance company didn't expect to offer some of the nation's lowest premiums — it just turned out that way for PreferredOne.

A Minnesota health insurance company didn't expect to offer some of the nation's lowest premiums — it just turned out that way for PreferredOne.

PreferredOne had been just a small player in Minnesota's market for individuals who buy health insurance without help from their employers. So the company figured it had to offer competitive prices. The strategy seems to be working on Minnesota's online health care marketplace, MNsure. PreferredOne has about 59 percent of the MNsure market, while Eagan-based Blue Cross and Blue Shield of Minnesota has about 24 percent.

"We were, frankly, as surprised as anybody," Marcus Merz, CEO of the Golden Valley-based company, told the St. Paul Pioneer Press.

PreferredOne's "Select" network allows consumers to save about 10 percent on their premiums because it steers them to a limited number of doctors and hospitals. It also offers "Choice" policies with higher premiums but broader networks. A 40-year-old who enrolled in a PreferredOne Accent Select silver plan during open enrollment got a premium of $154 per month, compared with $172 per month for the broader silver plan.

Individuals can bypass MNsure and purchase policies directly from insurance companies, so it's not clear yet how each company's overall share of the individual market stands. PreferredOne had just 2 percent of Minnesota's individual market in 2012 — before the federal Affordable Care Act made health insurance mandatory — compared with the 65 percent share held by Blue Cross.

Blue Cross spokesman Jim McManus said enrollments via MNsure accounted for less than 10 percent of his company's overall individual market business.

PreferredOne's strategy seems part of a national trend.

"The folks who are gaining market share and making a splash in the exchange markets tend to have very low costs and tighter networks," said Tim Michaels with PwC in Minneapolis.

"People are not necessarily looking for a name-brand insurer," Michaels said. "They're looking for a plan with benefits that meets their needs with an affordable price."

PreferredOne is 50 percent owned by Fairview Health Services, a large nonprofit network of hospitals, clinics and pharmacies based in Minneapolis. Its Select network in the Twin Cities steers patients toward hospitals in the Fairview, HealthEast and North Memorial systems plus Hennepin County Medical Center.

The Affordable Care Act requires that insurance companies categorize policies as bronze, silver, gold and platinum, depending on how much of a patient's bill they cover.

About 41 percent of policies sold by PreferredOne via MNsure provide platinum benefits, which Merz acknowledged could be a financial risk for the company, though he thinks the company's patient pool provides a large enough base to spread out that risk. Across all companies, only 28 percent of MNsure shoppers chose platinum.