Last December I wrote about the steps Minnesota was taking to save its individual insurance market. The state’s commissioner of commerce negotiated enrollment caps with five insurers in response to the decision of Blue Cross Blue Shield (BCBS) to leave the market, dropping 103,000 individuals from coverage — representing about one-third of Minnesota’s individual market. Because of BCBS’s broad networks and comprehensive benefits, there was concern that a sizeable portion of the group newly seeking coverage would be higher risk on average. Capping enrollment was an attempt by Minnesota’s policy makers to assist those who purchased coverage in Minnesota’s individual market without a subsidy — by getting five of the insurers offering individual market plans to stay in the state and take at least a limited number of former BCBS enrollees. At the same time, capping enrollment offered some protection to insurers who feared getting inundated by high-risk applicants. To date, there is limited information on the impact of the caps, and it’s not clear that any of the plans have hit their caps.

After capping enrollment, the Minnesota legislature also passed a premium relief rebate bill during the first week of the legislative session, and a reinsurance bill was allowed to become law on April 3, 2017, without Governor Mark Dayton’s signature. With these actions, Minnesota is emerging as one of the most active states in terms of moving ahead on reform in lieu of federal action.

How Minnesota Is Supporting Its Individual Market

Rebate And Premium Relief

The Health Insurance Premium Relief bill became law on January 26, 2017, providing enrollees with rebates to health plans, with the requirement that quoted premium prices would be reduced by 25 percent. To be eligible, an individual applying for coverage must be a Minnesota resident, must not be enrolled in Medicaid or MinnesotaCare (the state’s Affordable Care Act Basic Health Program), and must not be receiving federal advanced premium tax credits (APTC). The state legislature appropriated $312 million for the emergency relief bill from the state’s budget reserve account — an account reserved for state emergencies. The funding goes directly to insurers, who apply for rebates with documentation of eligibility, with discounts to enrollees retroactive to the first day of coverage.

The first rebates to health plans are expected to go out in mid-April with both the state and the health plans setting up systems for processing. Early indications and a report by the state’s Council of Health Plans, suggest that between 50,000 and 70,000 individuals did not come back into the market to purchase coverage. It is estimated that Minnesota’s uninsured rates will increase accordingly — by about 20 percent.

There are several reasons for this drop in the numbers purchasing coverage in Minnesota’s individual market. First, the rebate agreement was highly political and, while the initial proposal by the governor was made in October, the final deal was not reached until late January, with only five days of open enrollment left. Enrollment was extended for one week, but there was limited publicity and outreach, leaving many consumers unaware or possibly confused about the details of the agreement.

Second, there did appear to be an increase in employer-sponsored insurance provided by small employers in the state. Limited data exists, but given that small employer premiums stayed relatively stable, it is anticipated that several small employers offered or returned to offering employer-sponsored insurance. Finally, given uncertainty in the policy direction at the federal level and the Trump administration’s messaging that the individual mandate might not be enforced, many individuals—likely healthy individuals—may have stayed out of the market and waited for more clarity on discounts and/or a further reduction in premiums the following year.

Included in the Health Insurance Premium Relief bill was language removing the previous requirement that health plans licensed as health maintenance organizations in Minnesota be not-for-profit. With a simple striking out of five references to nonprofit corporations, Minnesota’s decades-old (since 1973) requirement was lifted with the hope of increasing offerings in the individual market. Many of the health economists I work with think there will be limited impact from this change, at least in the short term, due to the tight markets and strong provider networks that are not likely to give the deep discounts needed for new carriers to enter the market. It will be interesting to see if, in the long run, any of the existing nonprofit plans convert to for-profit status. Stay tuned.

State-Funded Reinsurance

Minnesota’s Premium Security Plan, a state-funded individual market reinsurance plan, provides additional premium relief and stabilize the premiums in the individual market. The model is based on a traditional reinsurance approach with an attachment point of $50,000 and a cap of $250,000 with payment of claims at an 80/20 percent rate. The governor offered an alternative approach, the MinnesotaCare Buy-In plan, that would have allowed for those in the individual market to pay the full premium for Minnesota’s public program based on the ACA’s Basic Health Plan. This plan, however, was not able to move out of either the state’s Republican-controlled House or Senate. There were two main issues debated with the reinsurance proposal: the source of state funds and contingency language related to the state’s 1332 waiver application.

Source Of Funding

There was discussion about the source of funds, including the lack of health plan contributions, which is the traditional mechanism by which reinsurance is financed. Plan contributions financed reinsurance in the ACA and also funded the reinsurance plan being implemented in Alaska. The governor of Minnesota wanted to use plan contributions, while the state legislature wanted to use a combination of general fund dollars, funds from the Health Care Access Fund (HCAF), which is financed by a 2 percent provider tax, and budget reserves.

The HCAF has been Minnesota’s stable fund source for funding health care access programs since 1992. Minnesota provided state-only funding for public programs for low-income populations before the ACA provided federal financing for these populations through the ACA. Minnesota provided MinnesotaCare for populations at rates up to 275 percent of poverty at one point in time and coverage of low-income adults without children. Because of the federal financial participation in these programs, the fund has grown and is almost too much of a temptation for the legislators looking for revenue. The eventual agreement was a combination of funding from the HCAF and the general fund for $540 million over the two-year biennium budget period.

Contingency Language

There was much discussion of whether the use of state funds should be contingent on the Department of Health and Human Services’ approval of a state 1332 waiver. The 1332 waiver would request federal funding for some of the reinsurance cost and request that federal funding for Minnesota’s Basic Health Program be retained at current levels. (Basic Health Program funding is based on 95 percent of what the cost would have been for individuals if they had purchased the second-lowest-cost silver plan in the individual market.) If reinsurance has the effect of reducing premiums, then there would be potential for a reduction in the federal support of the Basic Health Program, which would require the state to pick up the funding shortfall. The final agreement did include contingency language such that Minnesota’s Premium Security Plan is contingent on approval of the 1332 waiver request.

Next Steps For Minnesota

Minnesota has moved quickly to shore up its flailing individual health insurance market with almost $1 billion in state funds available through appropriations for a one-time premium rebate plan for those purchasing coverage in the individual market without federal APTCs and through a state-funded two-year reinsurance program. The health plans were reluctant to make any commitments to either stay in the market or lower premiums, which irked many legislators on both sides of the aisle. The governor and then Senate Democratic-Farmer-Labor Party leader Tony Lourey would have preferred that public funds be targeted to individuals through a MinnesotaCare buy-in with compromise language to target this option to rural areas with one or zero plan options. A key issue raised by the governor in his letter to the Republican Speaker of the House was the lack of commitment by the health plans to commit to a reduction in premiums or to offer plans in all areas of the state. If the plans do not significantly lower premiums and establish options throughout the state, the public option will be back on the table. MinnesotaCare is a well-liked program, especially in rural areas—it was designed for those not eligible for Medicaid but still unable to afford private coverage. This may still be a viable option if the private sector is unable to meet the needs of all Minnesotans purchasing coverage in the private market.