The federal government on Friday approved a state program to drive down health insurance premiums next year for people who buy coverage in the state's troubled market for individuals.

Gov. Mark Dayton called the approval "very good news" on Friday, although it wasn't clear what impact the ruling might have on funding for the state's MinnesotaCare health insurance program.

Called "reinsurance," the state program would reduce individual market premiums by an average 20 percent or more compared with what consumers might otherwise pay. Dayton blasted federal officials earlier this week for suggesting that as part of the reinsurance approval, the state would see a much larger hit in funding for MinnesotaCare.

"That's a debate, discussion for a future week," Dayton said during the news conference when asked about the final approval's impact on MinnesotaCare. "I've told the Department of Commerce and MNsure to go ahead and load into MNsure's system the lower rates from the insurance companies."

Reinsurance provides a financial cushion to insurers that happen to attract subscribers with expensive medical conditions. Whereas proposed average premiums statewide would increase anywhere from 3 percent to 32 percent without the program, the range shifts downward significantly with reinsurance and includes double-digit premium reductions in some cases.

The premium reductions come in the state's individual market, where about 5 percent of Minnesotans purchase health insurance either through the state's MNsure health insurance exchange or directly from carriers. The market primarily serves people under age 65 who are self-employed or work for a company that doesn't provide health insurance.

MinnesotaCare serves a group of lower-income Minnesotans sometimes described as the "working poor."

Earlier this year, Minnesota lawmakers called for spending $542 million on reinsurance over two years to stabilize the individual market, which has seen premium spikes and pullbacks by private health insurers. The program is contingent on federal approval, however, of a waiver to certain federal rules.

By law, state regulators must release individual market rates by Oct. 2. Before the federal approval on Friday, it wasn't clear what set of numbers the state should publicize — higher rates assuming no approval for reinsurance, or lower rates that factor in the program.

Dayton told reporters this week that he was frustrated by his inability to get Tom Price, secretary of the U.S. Department of Health and Human Services, on the phone to discuss the situation. On Friday, Dayton said Price personally gave him the word about the reinsurance program during a phone call.

"You can consider that matter resolved based on the assurances of the secretary, and so we'll proceed accordingly," Dayton said.

The federal government posted online a copy of the approval letter. Among other things, the letter states that Minnesota's plan would have the effect of lower federal funding of MinnesotaCare, but also estimates "pass-through" funding to the state of $323 million in 2018 and 2019. That's a higher funding level than the $208 million that Dayton's office previously said was proposed by federal officials.

"Upon first glance, it looks like they're giving us a little extra in the pass-through calculation, so we might be somewhere in the middle when it comes to [MinnesotaCare]," said Sen. Michelle Benson, R-Ham Lake.

But Sen. Tony Lourey, DFL-Kerrick, said the state still hasn't accepted the terms of the deal put forward by the federal government. He said the approval letter "does not look like a good deal for Minnesota."

Using public money

"Loading rates is making an assumption that we're going to accept, but that hasn't been done," Lourey said. "We'll keep working on it."

With the reinsurance program, Minnesota will use public money to help offset the cost of the individual market plans sold through MNsure and the broader individual market. Without federal approval, much of the savings would simply go to the federal government, since lower premiums would result in smaller federal tax credits that MNsure consumers receive under the federal Affordable Care Act (ACA).

Minnesota's waiver application sought to "hold harmless" not only funding for consumers buying individual health insurance policies, but also for the state's MinnesotaCare program. Under the ACA, Minnesota has been funding the program in part by tapping the value of tax credits that MinnesotaCare enrollees would receive if they bought through MNsure.

Twitter: @chrissnowbeck