The average tax credit to MNsure shoppers for 2017 coverage is running three times the value of this year's subsidies, a jump that fits with skyrocketing premiums for people who buy health insurance on their own.
The average monthly subsidy for next year is coming in at $637, up from $210 for the average person who bought a health plan through MNsure for 2016 coverage, according to a Tuesday announcement from the state's health insurance exchange.
Minnesotans were expected to receive more subsidy money for 2017, since premiums in the state's individual market are increasing by an average of at least 50 percent. Just as benchmark premiums next year in the state's individual market will exceed the national average, Minnesotans will be more likely to get a big subsidy, too.
"The significant premium increases have been such a shock to everyone, but this is news that helps offset that," said Allison O'Toole, the MNsure chief executive. "Three times is a huge increase — an increase [in subsidies] that we haven't seen before."
The tax credits are made available by the federal Affordable Care Act (ACA), which requires almost all Americans to have health insurance or pay a tax penalty. The future of the subsidies, along with the health law itself, is uncertain.
"We know that the president-elect and this Congress have pledged to repeal the Affordable Care Act, and with it the premium subsidies that have helped make insurance premiums more affordable," said Sabrina Corlette, a research professor at the Center on Health Insurance Reforms at Georgetown University.
The federal health law called for the creation of new state-level online marketplaces like MNsure, where consumers could pick a health plan and qualify for tax credits.
The subsidies are available only in the individual market, where about 250,000 Minnesotans buy coverage. It's the health insurance market for people who are self-employed or don't get coverage from an employer or government program such as Medicare.
Subsidies are available to those who enroll through MNsure depending on their income. Individuals who earn up to $47,520 per year, and families of four earning up to $97,200 per year, can qualify.
In September, state regulators granted big rate increases to health insurers that have been losing money in the individual market. The state Commerce Department said that without the premium spikes and other measures to limit financial losses, the individual market would have collapsed entirely.
With the premium increases, benchmark rates in Minnesota's individual market will exceed the national average by 28 percent in at least one enrollment scenario, according to a federal report this fall. That's a reversal from 2014 when individual market rates in much of Minnesota were among the lowest in the nation.
The benchmark premium for a 40-year-old in Minneapolis is jumping from $235 per month this year to $366 per month in 2017. If that consumer has an annual income of $30,000 per year, the tax credit of $27 per month this year grows to $159 per month next year — an increase of 481 percent, according to a recent Kaiser Family Foundation analysis.
"The new rates are jarring," said Jim Schowalter, chief executive of the Minnesota Council of Health Plans, a trade group for insurers. "But they bring along help in paying premiums that people in other states had all along."
Since major health law reforms kicked in during 2014, Minnesotans have been less likely than peers in other states to obtain tax credits because premiums here started out so low. In addition, a lot of people who get the subsidies in other states are covered here by the MinnesotaCare program, which taps federal Affordable Care Act dollars in a different way.
During the open enrollment period that started Nov. 1, about 17,000 of the nearly 30,000 people who've signed up for 2017 coverage through MNsure have qualified for tax credits.
Big premium jumps for 2017 prompted DFL Gov. Mark Dayton to propose one-time financial relief for individual market consumers who don't qualify for subsidies — a group of some 123,000 Minnesotans, state officials say. Dayton said Tuesday's news about bigger tax credits doesn't eliminate the need for the rebates he's proposed, but shows the striking contrast "between those people who qualify for help and those who don't under the current ACA."
Tax credits in the health law are financed through a series of new taxes plus spending cuts, particularly to health care providers in the federal Medicare and Medicaid programs, said Corlette, the Georgetown researcher.
President-elect Donald Trump along with Republicans who control Congress have vowed to repeal the Affordable Care Act. While they haven't agreed on a replacement plan, Corlette said tax credits would get smaller under legislation that was previously put forward by Trump's newly named nominee for secretary of the U.S. Department of Health and Human Services.
The plan from U.S. Rep. Tom Price, a Republican from Georgia, would give people age 50 and older a tax credit of $3,000 per year, with lesser subsidies for younger people, Corlette said. The cost of coverage itself might be lower, too, since Republican plans have fewer benefit mandates.
Whereas tax credits under the ACA are limited to people at certain income levels, Corlette said there would be no such limits under some Republican plans where "you could be a millionaire and you would get the same tax credit as somebody who is right above the poverty line."
"In the ACA," she said, "the subsidy that you get is more generous the more lower-income that you are."
Staff writer Patrick Condon contributed to this report.
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