Minnesota Lawyer
On almost strict party lines, the House and Senate late Thursday approved a $542 million reinsurance plan aimed at stabilizing the health insurance market for individual purchasers. Just one Democrat in each chamber voted with majority Republicans.
The measure was on Gov. Mark Dayton’s desk for signing at press time. Sam Fettig, the governor’s spokesman, said early Friday that the governor, who has expressed concerns about the bill’s costs and funding mechanisms, would study it with agency commissioners and staff over the weekend. His decision would come Monday, Fettig said.
Despite his reservations, the governor indicated on March 28 that reinsurance was a “necessary short-term” step toward stabilizing the marketplace. The bill aims to do that by protecting carriers from the medical expenses of the unhealthiest individual health plan purchasers. Runaway costs on the individual market last year nearly pushed the few remaining carriers off the state’s online MNsure health exchange.
As passed, the program’s activation would be contingent on a federal “innovation waiver.” If that is granted, the state could begin building out its reinsurance program without putting at risk hundreds of millions worth of federal health care subsidies and tax credits.
The contingency approach is not terribly popular with insurance companies, however.
“I don’t think anyone likes contingencies on their face,” Jim Schowalter, president of the Minnesota Council of Health Plans, said during a March 24 conference committee hearing. “The key thing is being practical and making absolutely sure that this program works.”
The problem, from the insurers’ perspective, is that waiver contingency means reinsurance would not get rolling until — and only if — the feds give the green light. Any delay could impede premium rate-setting for 2018, which carriers need to complete quickly.
“We are concerned a little bit with some of the language in here,” Kathryn Kmit, the Council of Health Plans’ government affairs director, reiterated just before the conference committee vote Wednesday. The contingency option, she said, “makes us very nervous.”
Still, it no longer troubles Rep. Greg Davids, R-Preston, author of the reinsurance bill, House File 5. He said that in the last 24 hours of negotiations, Dayton’s staff and several conference committee members coordinated closely with the U.S. Centers for Medicare and Medicaid Services to finalize the bill’s language in ways that Davids said would allay the feds’ concerns.
That gives Davids renewed confidence that a waiver is forthcoming. “It is a very big deal,” he said.
If the bill becomes law, the state will pay an 80 percent co-insurance rate for individually insured patients whose medical costs rise above $50,000. Co-insurance would “blink off” once the patient’s expenses exceed $250,000. After that, the insurer would pick up the tab.
By opting for a waiver, the state stands to attract about $100 million in federal funds to help defray the program’s costs, said Commerce Commissioner Mike Rothman.
Could be a gamble
Despite Davids’ optimism, the contingency option might be a roll of the dice.
The federal government could deny the state’s waiver application. Or it might grant the wavier too late for insurers to take reinsurance into account while setting their 2018 premium rates.
Dayton told reporters on March 28 that federal rules allow regulators to wait six months before approving or rejecting a waiver application. “Which obviously would be way too long,” Dayton said.
The other possibility being considered prior to Wednesday’s conference committee vote would have forgone the federal waiver. In that case, the state would have paid the program’s full costs — at least for the first year, Davids said.
Insurers preferred that idea because it would eliminate any possibility of a waiver’s delay or denial. But it would have created its own set of problems, said Sen. Tony Lourey, DFL-Kerrick, a conference committee minority member.
If the conference committee had chosen that option, Lourey said, the state might have lost between $300 million and $350 million in federal subsidies, on top of its two-year, $542 million reinsurance plan investment.
That’s because, by instituting a program without federal approval, the state might have disqualified itself from $150 million a year in federal Basic Health Plan subsidies. That money helps fund MinnesotaCare for low-income Minnesotans.
“So it’s about 50 cents on the dollar that you put in that goes out the back door to the feds, if we don’t get a waiver,” Lourey said.
That was not the only risk. About another $50 million a year in Advanced Premium Tax Credits might also have been lost, Lourey said. Those credits are available to low-income Minnesotans under the Affordable Care Act to help them purchase individual plans.
“So if we just do it on our own, it seems like we could lose $350 million,” Sen. Jim Abeler, R-Anoka, a conference committee member, said during the March 24 conference committee hearing.
Speaking that same day, Davids agreed. But he warned Abeler that the consequences might be equally grave if the state decided to go after a federal waiver.
“The other side of that, Senator Abeler, is if we don’t fund it first year and the department is not successful obtaining waivers, we don’t have a market in 2018,” Davids said.
Good, not perfect
By the time the bill passed conference committee Wednesday, Davids had changed his mind about the waiver.
Davids said Wednesday that if the governor signs the bill, Davids’ bet is that reinsurance will lower premiums. More insurers likely would enter the Minnesota marketplace as well, he said.
Insurers themselves offered no such assurances over days of conference committee testimony. “The simple fact of the matter is that there are no guarantees in life,” Schowalter told conferees on March 24.
Dayton, speaking to reporters on March 28, was at least slightly more skeptical than Davids, though he agreed that reinsurance is needed.
“I think it is a necessary short-term step to keep the participating insurers in the market,” Dayton said, “And to hopefully keep the rates without increases or hopefully very small increases for 2018. We will have to see.”
The bill calls for $200 million to be drawn each year from the state’s Health Care Access Fund in 2018 and 2019, and deposited into a new Premium Security Plan Account. Another $71 million would be drawn from the general fund in both 2018 and 2019, and placed into the same account.
Two other one-time deposits — $750,000 from the Health Care Access Fund and $155,000 from the general fund — would be made in 2018.
Davids argued that it was better to pass the bill than to have insurers abandon the Minnesota marketplace en masse as they threatened to do last year.
“I think it is a good bill that is not perfect,” Davids said. “There are some things that may be changed along the way. But we have to get this going.”
In his March 28 press conference, Dayton suggested one such potential change. He said that if the bill becomes law, he plans to work with Minnesota’s congressional delegation in lobbying Health and Human Services Secretary Tom Price to grant waivers within the month.
If, by the first week of May, the state has no assurances that a waiver is granted, Dayton said, the Legislature would need to revisit the issue.
“Then we could insert something into a subsequent bill amendment that would withdraw that contingency on our part,” Dayton said. “And we would have to pay the freight.”
