Gov. Mark Dayton and legislators are reacting today to a crisis in the individual health-insurance marketplace that has been years in the making. Imposing solutions that respond only to immediate political pressure points without fixing the underlying causes will only perpetuate the challenges.
A one-time subsidy for consumers or other temporary patches won’t change the stubborn arithmetic that is making premiums unaffordable for many. While emergency assistance for some is needed, spending up to $300 million in subsidies, as the governor has proposed, is possible only because Minnesota has a huge budget surplus.
If emergency relief for those paying high premiums is the only solution, the crisis will continue but the extra budget dollars will be gone. What then?
There are two core challenges. The first is that a small group of Minnesotans — the 5 percent of people who purchase insurance in the individual market — is being asked to cover the health costs of many of the 27,000 people who, before the Affordable Care Act, purchased insurance through a state program, the Minnesota Comprehensive Health Association. While MCHA enrollees paid insurance premiums, their costs were subsidized by other sources, mostly a tax on health plans.
A Minnesota Department of Health study shows just how significant it is when even a few people in a small insurance pool have huge costs. MDH found that health spending for a person with just a single chronic condition (for example, diabetes or asthma) is eight times that of a person without a chronic illness. The MCHA enrollees brought with them an average of 3.3 chronic conditions per person when they enrolled in individual health plans through MNSure.
The result is that the 250,000 Minnesotans buying individual coverage are being asked to pay premiums high enough to cover not just their own health care, but the expenses of some of the state’s most vulnerable and high-cost people.
The second challenge is the rapidly rising cost of health care for everyone. University of Minnesota health-policy professor Ezra Golberstein put it succinctly earlier this year: “We’re starting to learn now that Minnesota is actually a pretty expensive place for private insurance to be purchasing health-care services. Private insurers just pay more for health care than they do in other places in the country.”
Both of these challenges underscore the reality that insurance premiums aren’t the cost of health care, they are a reflection of the marketplace. Immediate assistance needs to be coupled with long-term reforms, including the following:
Share the cost of the vulnerable. Sen. Jim Abeler, R-Anoka, and others have proposed spreading the medical costs of vulnerable Minnesotans through reinsurance. Instead of 5 percent of the entire insurance marketplace subsidizing the high health costs of those most vulnerable, a state program would be created to pay expenses above a pre-set ceiling.
Stop those gaming the system. Plans offered through MNSure should be for Minnesotans, and fair to all. That’s not always the case. Non-residents have taken advantage of Minnesota’s lower premiums. In other cases, people sign up for insurance, use the benefits, then drop the coverage, sometimes before ever paying a premium.
Assure a fair share of tax subsidies. Fewer Minnesotans receive tax support for plans purchased through an exchange than residents of any other state. Of all Minnesotans who purchase individual insurance either through MNSure or directly from a health plan or through a broker, only about 1 in 4 receives a tax subsidy. More effective outreach could help connect more economically deserving insurance consumers to tax-funded support.
Equal treatment for individual buyers. Minnesotans who receive their health insurance from an employer receive a tax-free benefit. The premiums paid are not taxed as income. But most Minnesotans who buy insurance as individuals receive no comparable tax break. They pay premiums with after-tax dollars. That discriminatory tax policy should change.
Ultimately, the best solution for everyone is to slow the growth in health spending. Minnesota’s health providers, employers and consumer groups are having conversations that could produce meaningful solutions to control health costs.
All this is a tall order and goes well beyond the scope of a special legislative session. But just as the first rule of medical care is to do no harm, policymakers should do only what is absolutely vital, then make the commitment to have a thoughtful, fact-based debate on long-term solutions when the regular legislative session convenes.
Tom Horner is a public-relations consultant and was the Independence Party of Minnesota’s 2010 candidate for governor.