The state Senate signed off late Thursday on sweeping changes to the way more than 1 million Minnesotans will buy their health insurance.

The new Minnesota Health Insurance Exchange, an online marketplace where one out every five Minnesotans could shop for health insurance next year, passed about 11:30 p.m. on a vote of 37-28 after a tense 12-hour debate. The exchange, which Gov. Mark Dayton described as a "gargantuan undertaking," cleared the House on Monday.

Minnesota is racing the clock to create the exchange before the end of March. If it misses that federal deadline, it will have to use a system created by, and run out of, Washington.

"We have a bill that will work for industry in Minnesota and also ... will work for consumers in the state of Minnesota," said Sen. Tony Lourey, DFL-Kerrick, who has shepherded the exchange bill through nine committees and 27 hours of debate over the past two months.

By next year, all Americans will be required to have health insurance. State-based exchanges are a cornerstone of the federal Affordable Care Act health care reforms.

Opponents see exchanges as an expensive, intrusive government overreach into private health decisions. They worry about how an exchange would safeguard consumer privacy, about how its $60 million annual budget would be financed and about the power its seven-member board would have to include or exclude health plans from the online marketplace.

Members of a group of insurance agents and companies visiting the Capitol for the day to meet with legislators got up and left the Senate gallery after an amendment they supported was defeated. The amendment would have prevented the health insurance exchange board from excluding insurance company plans even though they meet guidelines set up by the exchange. Thursday, March 7, 2013. ] GLEN STUBBE * gstubbe@startribune.com

"I'm very concerned," said Sen. Julie Rosen, R-Fairmont, who made the first attempt to amend the bill. "We are creating the most powerful board in the state of Minnesota, and if we don't have measures to keep them accountable going forward, we will be back."

"I'm heavy-hearted, I truly am," said Sen. Roger Chamberlain, R-Lino Lakes. "In a week, real people will see the impact of your decisions, and in a year, everybody is going to know what you've done here tonight."

Expanding access to care

But Sen. Scott Dibble, DFL-Minneapolis, questioned Republican nostalgia for the current health insurance system. An estimated 9 percent of Minnesotans are uninsured, he said, including two of his siblings. And Dibble said his husband, a small-business man, struggles to cover the high cost of insuring his workers.

The exchange, Lourey said, will have a "profound impact" on Minnesota's economy. Not only will 300,000 uninsured Minnesotans have access to health coverage, he said, but the state's health care providers no longer will have to shoulder $150 million in uncompensated costs from treating people without health insurance. At least 1.3 million consumers and small businesses are expected to use the exchange, starting next January.

Before the Senate could vote on the bill, it had to deal with more than 150 attempts to amend it, many authored by Republicans staunchly opposed to the exchange.

"Everybody is jockeying for position, so everybody is promising catastrophe if they don't get this or get that," Dayton said. "There are going to be some glitches initially, and it will take some time to iron that out."

The state has already spent millions, mostly subsidized by federal grants, to set up the technology infrastructure for the system. If it works as planned, consumers will be able to log on and choose among health plans the way they can currently shop online for plane fares and hotel rates.

Health insurers waiting

Minnesota would have gotten an insurance exchange one way or the other.

"We had two choices. One is to set up this health exchange ourselves and employ the best minds we could find in Minnesota, which is a lot," Dayton said. "Or let the federal government [create a] one-size-fits-all. … We decided early on that we'd be better if Minnesota decided its own plan."

Minnesota's private health insurers have been working in the dark for much of the past year as they try to develop new benefit plans to sell on the exchange.

The plans are barreling toward their own May 17 deadline to submit their premium rates to the Commerce Department for review.

Staff writers Rachel E. Stassen-Berger and Jackie Crosby contributed to this report. jennifer.brooks@startribune.com 651-925-5049