There’s good news for those who buy health insurance on their own. State insurers are proposing lower prices next year for the 162,000 Minnesotans who shop on the individual market. Consumers could see rates dropping by 7 to 12 percent.
Minnesota lawmakers ought to pat themselves on the back for their role in this, but only for a moment. A two-year program subsidizing state health insurers with public dollars — the “reinsurance” program passed in 2017 by Republican legislative majorities — played a lead role in keeping rates down.
But those inclined to rest on these laurels during the 2018 campaign season shouldn’t. A different and far more daunting health care challenge looms: a towering state funding cliff that could weaken Minnesota’s health-care-driven economy and undermine coverage for 982,000 Minnesotans relying on public programs.
To prevent disruption on all fronts, the search for solutions must begin now. Political leaders lacked the will during the past legislative session to fix this. The state’s business and academic communities must fill that leadership vacuum. They’ll have to step up to address the massive funding shortfalls that lie ahead due to federal funding uncertainties and the 2019 sunset of the state’s medical provider tax. A new gubernatorial administration and a Legislature with many new faces needs ready-to-go remedies with stakeholder support. There’s no time for them to start from scratch.
The provider tax switch-off is a key driver and would put an end to nearly three decades of dedicated health care funding. It was passed in 1992 under Republican Gov. Arne Carlson to pay for the MinnesotaCare program, which aids people who make too much to qualify for state Medical Assistance but too little to comfortably afford private insurance. Proceeds from a 2 percent tax on the gross revenue of health care providers, hospitals, surgical centers and wholesale drug distributors goes into the state’s Health Care Access Fund (HCAF), generating $635 million in revenue in 2017. A 1 percent gross health insurance premium tax also funds HCAF, contributing $94 million in 2017.
In 2011, end-of-session bargaining resulted in an agreement to let the provider portion of the tax sunset on Dec. 31, 2019. That decision was driven largely by anti-tax fervor and was ill-advised. Dedicated dollars are still needed even though the federal government now picks up much of MinnesotaCare’s costs. Legislators tap HCAF to help pay for the medical assistance program, with 47 percent of HCAF dollars expected to go toward that in 2018-19. They also siphon the fund for other uses — such as the expiring reinsurance program that is now keeping private insurance rates low.
What happens when HCAF’s biggest funding stream goes away? The February 2018 forecast document spells it out: “Following the sunset, the HCAF will have a structural deficit of more than $500 million per year. Remaining revenue will not be sufficient to support existing expenditure levels beyond FY2021.”
Adding to concerns about this fund drying up: the federal commitment to shoulder the cost of MinnesotaCare (the feds will pay $818 million in fiscal years 2018-19) is uncertain at best because the Trump administration sees cutting it as a way to undermine the Affordable Care Act. Minnesota may have to reassume a much greater share of the program’s costs. And if state leaders want to extend Minnesota’s reinsurance program, where will they turn for the dollars to pay for it? Around $400 million in HCAF dollars was transferred to this program.
A dedicated funding stream is critical to delivering care at the levels Minnesotans expect. It’s also important for the state’s economy. Medical providers’ bottom lines will suffer if funding cuts affect payment rates for patients in public programs.
Nearly 30 years have passed since the provider tax’s passage. It has served the state well. But if there’s an alternative way to sustain these programs, or if the tax rate could be reduced without cutting service, let’s discuss it. Business leaders, let’s get going.