With MNsure's second open enrollment period now complete, the outlook for Minnesota's health insurance exchange likely involves more taxpayer money and less spending on customer service.

That's the emerging budget ­picture at MNsure, where enrollment in private health plans has lagged for two years and struggles continue with the exchange's IT system.

Final budget details won't become public until the middle of this month, when MNsure officials are scheduled to present their financial plan to the Legislature.

Changes could be coming in the next few weeks, since the current budget plan includes a goal of more than doubling private enrollment by 2017 to roughly 150,000 sign-ups. To some, that doesn't look likely.

"It's the next two years that I worry about, as they go after people who are harder and harder to get," said Roger Feldman, a health insurance expert at the University of Minnesota. On the chances of MNsure reaching the 2017 target, Feldman said: "I put the probability at less than 50 percent."

In February, Legislative Auditor James Nobles issued the most definitive government report thus far on problems at MNsure, concluding that failures during the first year of ­operations at the exchange outweighed achievements.

Over the past two weeks, Nobles presented audit findings at a series of legislative hearings and the ­commentary became more forward-looking — and not a lot rosier. Major work remains on the back end of the MNsure IT system, Nobles says, so it can efficiently transmit information to insurance companies, and let state and county workers help those with public insurance coverage.

"The past was not good. But frankly, where we sit today is not either," Nobles told one legislative committee.

In another committee, the auditor was asked if MNsure is sustainable.

"It depends on how much better they are in selling commercial insurance, and how much you're willing to put in from the public dollar," Nobles replied.

"It can be viable if you continue to have less revenue than expected, and you meet that challenge by cutting your expenditures," he added. "But what is MNsure at that point? Is it viable as a customer service deliverer? Is it viable as an online shopping experience? I guess only time will tell."

At the outset of MNsure's first open enrollment in 2013, exchange officials hoped about 70,000 people would enroll in private health plans over a six-month period. In the end, about 50,000 signed up.

At the start of its second open enrollment period in November, the exchange had a goal of connecting 100,000 people with private coverage over the three-month period. By closing time on Feb. 15, the tally was about 60,000.

MNsure backers say there's reason to think private enrollment numbers will improve.

As premiums get more expensive, the value of tax credits through the exchange become more important, they say. The health law's penalty for people who lack coverage gets steeper in 2016. And MNsure's consumer website should continue to improve.

Small pool

But Minnesota has a long history of employers providing health insurance to workers, and state government providing expansive public health insurance benefits. Both factors mean the pool of uninsured people who might turn to the exchange here is relatively small.

Enrollment shortfalls have budget implications because MNsure withholds 3.5 percent of premiums sold through the exchange to help fund operations. With reduced revenue from commercial premiums, MNsure is becoming more reliant on funds from the state Department of Human Services, which uses MNsure to enroll people in the ­Medicaid and MinnesotaCare public health insurance programs.

In January, Gov. Mark Dayton proposed an extra $11.7 million in DHS funding for MNsure. The proposal would boost the department's spending on MNsure during the two-year period that starts in July to a total of $25.5 million.

"It was anticipated that public enrollees would be about two-thirds of the people coming through MNsure," said Lucinda Jesson, the state Human Services Commissioner, in an interview. "Now, they're projecting that in the next biennium it will be like 90 percent or 91 percent. Because of that … the ­public programs end up picking up more of the bill."

Low commercial enrollment explains part of the increased taxpayer funding, said Scott Leitz, the MNsure chief executive. In addition, the state in January announced another $34 million in federal grants to improve MNsure, with much of the money going to IT fixes.

Medicaid is jointly funded by the state and federal governments, and the IT work triggers more federal Medicaid spending on MNsure. The plan right now has federal Medicaid funds for MNsure growing to $59.3 million over the next two years.

"To draw down large ­federal dollars, we need to have what's relatively a small state share for these IT development ­dollars," Jesson said.

On the spending side, MNsure's current budget plan anticipates about $11.8 million less for business operations in 2017 than lawmakers expected when the exchange was ­created. The reduction is driven in part by less spending on customer service including the MNsure call center and overall spending for ­"navigators" who help people enroll in coverage.

"As you insure more people, a lot of those people will renew back into their policies, and so you don't need to reach out to them again," Leitz said. "We do anticipate that the pressure on the call center over time starts to diminish some."

Debate has started

While the budget talk formally moves to the Capitol in a few weeks, the debate already started as Nobles presented his audit findings to legislative committees in late February.

"We go from lousy, rotten, terrible customer service, and so we're going to cut customer service reps — what could possibly go wrong there?" asked Rep. Greg Davids, R-Preston, during one committee hearing.

"Personally, I don't think there's any fix to this," said Davids, who is chair of the tax committee in the House. "We have some huge decisions to make as a Legislature on how we let this thing go away peacefully, and get something else in place."

But Sen. Tony Lourey, DFL-Kerrick, argued that pulling the plug on MNsure is not a viable option.

Most states use the federal government's HealthCare.gov website for a health insurance exchange, but doing so in Minnesota would bring new costs, Lourey said. Plus, the state still would need to make large investments, he said, in the portion of the MNsure system used for public health insurance programs.

Noting a pending legal challenge to subsidies provided through HealthCare.gov, Lourey added: "Pulling the plug means a federal exchange that's tied up in the U.S. Supreme Court right now, unclear whether taxpayers can get the tax credits."

County and state workers who use MNsure to connect people with Medicaid and MinnesotaCare coverage have identified 69 priority fixes for the MNsure system. Even with additional funds from state and federal taxpayers, Jesson told the committee that not all repairs will get done in 2015.

The outlook prompted Rep. Matt Dean, R-Dellwood, to ask: "The light at the end of the tunnel — is that a light, or is it a train?"

Jesson replied: "I don't think it's a train. But sometimes that light is fleeting, and we have a lot of hard work."

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck