Minnesota would have the federal government cover a big part of the tab for a new "reinsurance" program in the troubled individual health insurance market, according to state documents released Friday.

Earlier this month, lawmakers pledged to spend up to $271 million in each of the next two years on a reinsurance program that would help health plans cover expenses for patients with high-cost conditions.

The statute makes operation of the reinsurance program contingent on federal approval of a waiver under the federal Affordable Care Act (ACA) that would effectively help subsidize the program.

The state Commerce Department on Friday released a draft application for the waiver and announced public hearings on the proposal and a public comment period. Minnesota and a few other states are using the waiver process to seek help from the Trump administration in fixing local health insurance markets.

"If granted, the State Innovation Waiver would allow Minnesota to secure partial federal funding for the [reinsurance program], while preventing a loss of federal funding that helps support the MinnesotaCare public health insurance program," the Commerce Department said in a public notice issued Friday.

In the draft waiver application, Commerce says the reinsurance program should lower by 20 percent premiums in the individual market from what they otherwise would be. The individual market primarily serves self-employed people and those who don't get health insurance from their employer or the government.

Under the ACA, the federal government provides tax credit subsidies to many individual market shoppers, so Commerce projects lower premiums via reinsurance would result in savings to the federal government of anywhere from $139 million to $167 million next year.

The draft application released Friday is the first public document that suggests the size of federal support the state might be looking to tap, said Sen. Michelle Benson, R-Ham Lake.

"The waiver was released for 30-day review," Benson said. "[The federal government] has been working very closely with us."

The federal government — not the state — will have the final say on how much federal funding might come to Minnesota for the reinsurance program, said Sen. Tony Lourey, DFL-Kerrick. While the potential amount of reinsurance funding through the federal waiver is significant, Lourey said there's even more money at stake in terms of MinnesotaCare funding.

Section 1332 of the ACA lets states seek waivers to pursue innovative strategies for providing health insurance to residents. In November, Alaska applied for what's known as a "1332 waiver" to secure federal funds to back its reinsurance program. Oklahoma also is exploring options via an innovation waiver to shore up the individual market in that state.

The ACA brought fundamental changes to the individual market by eliminating preexisting condition exclusions that helped insurers control costs but were widely unpopular with consumers. Without the exclusions, many insurers have lost money in the market and boosted premiums or dropped out as a result.

In the draft waiver application, Commerce says the ACA helped Minnesota lower its uninsured rate to a historic low of 4.3 percent in 2015. But the uninsured rate could start moving the other way, Commerce says, because of "extraordinary premium escalation in the individual market."

"Given the decrease in individual market enrollment since 2015, Minnesota's uninsured rate may grow to 5.5 percent in 2017," Commerce says in the draft. "Commerce estimates that the [reinsurance program] will attract at least 20,000 more Minnesotans to purchase individual market insurance than would have otherwise."

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck