Health insurance companies would divvy up $542 million in money from the state of Minnesota to protect against high claims, under a measure the state House and Senate passed Thursday.
Republican lawmakers pushing the bill said it would keep insurers in Minnesota’s individual market, and drive down premiums. They said it’s critical to act quickly in order to affect prices in the 2018 insurance market.
Gov. Mark Dayton and DFL legislators, while also supporting state action to stabilize the individual market, take issue with aspects of the GOP plan, including how much to spend, where it should come from, and what kind of commitments insurance companies should make if they want a slice of the subsidy.
The measure is bound for Dayton’s desk after the House and Senate approved it mostly along partisan lines. A spokesman said Dayton, who has repeatedly expressed concerns about the GOP’s plan, will review the bill over the weekend with his commissioners and staff and announce his intentions for it on Monday.
Customers in Minnesota’s individual insurance market have seen premiums jump by more than 50 percent in recent years, even as their health plan options dwindle.
“This was a step to preserve the market,” said Senate Majority Leader Paul Gazelka, R-Nisswa. “And it was a costly step I wish we didn’t have to make.”
If Dayton signs the bill, the state will spend $868 million over the next two years on the individual market: $542 million on the so-called “reinsurance” plan, plus $326 million in premium relief approved in January for individual market customers. About 190,000 Minnesotans buy insurance on the individual market, mostly people who aren’t covered by an employer.
Insurance companies are on board with the plan. Eileen Smith, a spokeswoman for the Minnesota Council of Health Plans, an insurance-company association, said insurers hope Dayton will move quickly on the bill.
In 2015, Smith said, about 1.6 percent of the people on the individual market had medical bills higher than $50,000, amounting to $630 million in costs.
“All Minnesotans will now help pay these bills, instead of just the 190,000 who buy their own,” she said.
Dayton expressed concern at the way Republicans would draw $400 million in the next two years from the fund that pays for MinnesotaCare, the state’s subsidized health insurance program for low-income residents. Another $71 million in each of the next two years would come from the state’s general fund.
Lawmakers expect to be able to cover a large portion of the cost with federal grants, and the entire reinsurance program is contingent on the federal government continuing to provide health care funding to Minnesota, even if rates drop.
Dayton has also worried that the GOP measure doesn’t go far enough in prescribing how insurance companies use the state money.
A new 13-member panel, including representatives from the state and insurance companies, would hand out the money to help insurance companies with individual claims that top $50,000 but are below $250,000. The state would cover between 50 percent and 80 percent of those claims. It would not pay for claims over $250,000.
DFL lawmakers argued Thursday that the measure puts low-income Minnesotans at risk by drawing on the funding source for their health insurance. Some criticized their Republican colleagues for funneling money to health insurance companies instead of directly to people who buy insurance on the individual market, and said they were doubtful those companies would keep customers’ best interests in mind.
State commerce officials estimate that the reinsurance program could help reduce rates by about 20 percent, though lawmakers from both parties said it’s hard to tell exactly what impact the program will have on the market.
“If the past behavior of insurance companies predicts the future of how they’re going to behave, we’re in big trouble,” said Sen. Jeff Hayden, DFL-Minneapolis.
Roger Feldman, a University of Minnesota professor of health policy and management, said he doesn’t expect the earlier premium-relief bill will have a long-term effect on the market. But he said the reinsurance bill moves the state closer to long-term reform, and could make a difference for insurers trying to decide if they should keep operating in the state.
Still, Feldman expressed concern that higher subsidies can give insurance companies less reason to push drug companies and other medical industries to drive down costs.
“When you reinsure these high-cost cases, it reduces the plans’ incentive to manage costs up to that level,” he said.
As insurers and lawmakers await Dayton’s approval or veto, many outside Minnesota are paying attention. Cynthia Cox, a health reform researcher at the Kaiser Family Foundation, said the state’s approach is a different twist on reinsurance plans that have operated in other areas. Different forms of reinsurance have won fans in both parties, so she said Minnesota’s results could impact other states’ decisions.
“It is something that has some bipartisan support, or at least it had in the past,” she said.