About $100 million in unused health premium rebates headed back to state

Roughly one-third of the money set aside by lawmakers for a premium rebate program in 2017 will be returned to the state budget, according to a report from the state's nonprofit health insurers.

The rebates were meant to help cushion individual market consumers against spiking premiums, but the job didn't require the full $312 million set aside by the Legislature.

The report from the Minnesota Council of Health Plans said the program was challenging to implement, but ultimately worked by helping 100,000 people handle premium jumps.

"The fact that fewer people bought health insurance on their own in 2017 than in the previous years is one reason the state spent less than projected," the report stated. "Overall, about 190,000 Minnesotans bought on their own in 2017 — 60,000 fewer than 2016 and about 100,000 fewer than 2015."

Lawmakers created the premium rebate program as one of several responses to the near collapse of the state's individual market in 2016.

After Eagan-based Blue Cross and Blue Shield of Minnesota announced it was pulling all but its HMO products from the market, regulators said that all other carriers nearly bolted. In the end, insurers were allowed to hike premiums by 50 percent or more and limit enrollment, in many cases.

The rebate program provides a 25 percent discount on insurance premiums throughout 2017 for certain people who buy coverage in the state's individual health insurance market. Fewer than 5 percent of state residents buy individual policies, which are primarily sold to people under age 65 who are either self-employed or don't get coverage from an employer.

Uptake was limited by the fact that more people qualified for federal tax credits this year, and therefore didn't qualify for or require the rebates, Frans said. The timeline of the program's launch was a factor, he added, since it came at the end of the open enrollment period for 2017 coverage.

Talk of an earlier launch for the program fizzled in December 2016 when negotiations for handling the rebates and other issues in a special session of the Legislature broke down during a public summit between DFL Gov. Mark Dayton and Republican House Speaker Kurt Daudt.

Overall, Frans said he believed the program was a success, since it helped keep people in an individual market that's been shrinking since 2014. Some who bought early in the open-enrollment period likely did so, he said, on the assumption that the rebate program would be adopted.

"We felt that it was a success," Frans said. "You never know what would have happened had we not done it."

The premium rebate program was part of legislation passed by the Republican-controlled House and Senate in January, and signed into law by Dayton. Rep. Joe Hoppe, R-Chaska, said the legislation "was no one's perfect solution," but got results.

Sen. Tony Lourey, DFL-Kerrick, reiterated his earlier criticism that "Republican intransigence" limited the number of people who could benefit from rebates, but said overall that the program "was worth doing."

MMB said that 115,049 people had used rebates as of November. A final accounting is not yet available.

Extra funds will be distributed according to the Health and Human Services budget bill from the 2017 legislative session, MMB says. Up to $16.5 million goes to the Department of Human Services for efforts to better manage human services; up to $82.3 million will fund anticipated managed care costs. After the first two steps, any remaining funds will go to the state's reserve fund, according to MMB.

Insurers charged premiums that reflected the rebate before the state determined if an enrollee was eligible. In cases where an enrollee was deemed ineligible — perhaps because they qualified instead for a public health insurance program — carriers had the option of trying to collect the difference.

After factoring those collection efforts, "about $600,000 in subsidies ended up not being reimbursed," the Minnesota Council of Health Plans said in its report.

MMB said health plans were reimbursed only for rebates, and not administrative costs, on the theory that insurers benefited from the one-time subsidies for their customers.

"We provided a lot of support for the health insurance market," Frans said, "and felt that any costs [running] this program should be borne by them."

The program stops providing rebates with the new year, and there have been questions about whether subscribers might drop out once the subsidies are gone. There's not yet full information about 2018 enrollment in the market, but James Schowalter, chief executive of the Minnesota Council of Health Plans, said in a statement: "With much more stable premiums, people have a much better opportunity to figure out what they want to do for 2018."

While 190,000 people have purchased individual health plans at different times in 2017, the overall enrollment tally is lower at any one point in time since people come in and out of the market.

The trade group said individual market enrollment at the end of the third quarter stood at 156,868 — about 12,000 less than at the end of the first quarter. The individual market typically shrinks over the course of the year, as people find other sources of coverage, such as from an employer, or opt to go without insurance.