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Legislation to establish a Minnesota health insurance exchange is nearing the end of its grueling committee march. The House version has cleared six committees, with stops at Taxes and Ways and Means still ahead. In the Senate, where the bill has also cleared six committees, it awaits only a stop in Rules and Administration before moving to the floor.

HIX bills draw closer to floor debate

Rep. Joe Atkins, DFL-Inver Grove Heights, the lead sponsor of the House insurance exchange bill, is not enthusiastic about the Senate’s financing proposal. “Any use of general fund (money) in a time when we have a $1 billion deficit is going to be a challenge,” he said. (staff photo: peter bartz-gallagher)

Exchange’s funding source, ‘active purchaser’ approach remain at issue

Legislation to establish a Minnesota health insurance exchange is nearing the end of its grueling committee march. The House version has cleared six committees, with stops at Taxes and Ways and Means still ahead. In the Senate, where the bill has also cleared six committees, it awaits only a stop in Rules and Administration before moving to the floor.

Despite vociferous protests from Republicans, and numerous proposed amendments at each committee stop, the bill has remained largely intact. It appears on course to be enacted in time to meet a March 31 federal deadline to be in compliance with the Affordable Care Act. Minnesota is one of just 18 states opting to implement its own exchange instead of allowing the federal government to impose its own version of a state marketplace for purchasing health insurance online.

Despite the rapid legislative progress, there remain areas of contention to be worked out in the coming weeks. Most notably, the two bills now diverge on how to pay for operations of the exchange, which is expected to cost roughly $60 million annually.

Earlier this month, Sen. Chris Eaton, DFL-Brooklyn Center, successfully amended the bill in the Taxes Committee to change the funding mechanism for the exchange. Under her proposal, the operations of the online marketplace would no longer be paid for through a withholding charge of up to 3.5 percent on premiums purchased through the exchange. Instead it would rely on tobacco taxes, which are part of the general fund.

Eaton indicated that she offered the amendment at the behest of Sen. Rod Skoe, DFL-Clearbrook, and Sen. Ann Rest, DFL-New Hope, the top two DFLers on the Taxes Committee. Sen. Tony Lourey, DFL-Kerrick, the lead sponsor of the exchange bill, was not notified beforehand that the amendment was coming. He indicated that he was “neutral” on the proposal. But he also allowed at a subsequent hearing that he’d “grown quite attached” to the 3.5 percent premium withhold as a funding mechanism.

Minnesota Management and Budget Commissioner Jim Schowalter spoke against the amendment, citing concerns about using general fund dollars to pay for the exchange. In addition, Sen. John Marty, DFL-Roseville, broke party ranks to vote against the funding change. It was the first sign of dissent within DFL ranks over the proposed exchange bill.

Business, consumer groups at odds

Consumer advocacy groups are also largely opposed to scuttling the 3.5 percent withhold. “The premium withhold is a self-sustaining revenue source,” noted Liz Doyle, associate director of TakeAction Minnesota. “Essentially it allows the exchange to stand on its own two feet, which is what it’s supposed to do. That’s a better alternative than creating a hole in the general fund.”

But the change in the funding mechanism has drawn plaudits from business interests, which have repeatedly voiced opposition to the exchange bills in their current formats. Both the Minnesota Council of Health Plans and the Minnesota Chamber of Commerce have testified in favor of using general fund dollars to cover the operating costs of the exchange.

Kate Johansen, the chamber’s lead lobbyist on health care issues, calls it a “vast improvement” over the prior funding scheme. “What would be positive about it is there would be accountability,” Johansen said. “This is going to be a substantial new state agency with a tremendous amount of money, a substantial workforce, and not a lot of oversight in other traditional ways.”

The Senate bill is now at odds with the House version, meaning a conference committee will almost certainly be needed to settle differences. Rep. Joe Atkins, DFL-Inver Grove Heights, the lead sponsor of the House bill, is not enthusiastic about the Senate’s financing proposal. “I have concerns about that,” Atkins said. “Any use of general fund [money] in a time when we have a $1 billion deficit is going to be a challenge. I also happen to like the connection — the nexus, if you will — between the current funding source and the exchange.”

‘Active purchaser’ controversy

Paying for the exchange isn’t the only point of contention that has developed as the bills have made their way through committee. Business interests have repeatedly complained about what’s known as “active purchaser” language in the bills. Basically it means that the seven-member board charged with overseeing the exchange will have the authority to determine which health insurance plans are offered in the marketplace. The chamber and the health plans would prefer a model that would allow all insurance products that meet a certain threshold to be sold on the exchange.

“Our folks, our small businesses, tell us they want a variety of choices,” Johansen said. “They don’t want someone else to choose their health plan for them.”

But Christina Wessel, deputy director of the Minnesota Budget Project (an initiative of the Minnesota Council of Nonprofits), argues that the exchange board should have the authority to engage in competitive bidding on behalf of consumers in order to secure better products and prices. “Our bottom line is, we want an exchange that works on behalf of the consumer,” Wessel said. “That’s the whole point of creating this exchange.”

The divide over active purchasing recently surfaced within the DFL House caucus. At a hearing before the Health and Human Services Finance Committee on Tuesday, Rep. Jim Abeler, R-Anoka, offered an amendment that would have prohibited the exchange board from restricting which insurance plans can be offered through the marketplace for two years. That proposal was opposed by Atkins. But two swing-district DFLers — Kim Norton of Rochester and Laurie Halverson of Eagan — supported the amendment. It ultimately failed on a 10-9 vote.

Norton argues that a better means of ensuring that only quality products are offered through the exchange is by establishing strict rules for admission, rather than giving the exchange board that authority. “My hope is that we set a very high bar, and by setting that high bar and high expectations through the rulemaking process, that we can let in anyone who wants to come in,” Norton said. “The more choices people have, and the more competition there is, the better the options will be, in my opinion. That’s where I’m coming from. We’re not quite there yet.”
Atkins remains supportive of the active purchaser model, but isn’t shutting the door on further discussions. “That’s one way to address it,” he said. “I think there might be others, and I’m open-minded to what other possibilities might be as well.”

Despite these differences, the health exchange bill looks certain to pass the House and Senate in the coming weeks. But that won’t be the end of discussions on the issue at the Capitol. That’s because the Legislature must also pass legislation establishing rules for the online marketplace.

That process is not subject to a March 31 deadline, but bills on the subject are expected to surface as early as next week. “This is going to be a very contentious bill,” Johansen said. “Some of the problems with it might be simply that it is so complex that very few people will be able to question it and evaluate its contents in a meaningful way. So there’s a lot of education to be done.”

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