2020 OPEN ENROLLMENT ENDS (most states)

Time: D H M S

Minnesota: In the end, #TeamReinsurance wins out over #TeamSubsidies

Back in March, I noted that Democratic Minnesota Governor Tim Walz had put forth a pretty ambitious budget proposal, which included two pretty eyebrow-raising ACA-related funding proposals:

The Governor will take immediate action by creating a subsidy program to reduce by 20 percent the monthly premiums for Minnesotans who receive their insurance through MNSure. This subsidy will be applied directly against a consumer’s premiums. This proposal provides relief to Minnesotans with incomes over 400 percent of the federal poverty level do not qualify for the federal premium tax credit which helps lower the costs of health insurance premiums. Up to 80,000 people could participate in the program, reducing the out-of-pocket costs of their health insurance premiums.

The Governor’s proposal establishes a State Based Health Insurance Tax Credit to help ensure Minnesotans on the individual market pay no more than roughly 10 percent of their income on health care. This proposal also provides relief for consumers who do not qualify for the federal tax credit or other state-based health coverage programs. Minnesotans will be able to qualify for the credit beginning with plan year 2021 coverage. Almost 50,000 Minnesotans could be eligible to receive the State Based Health Insurance Tax Credit and see a reduction in their health insurance premium costs by 2023.

As I noted at the time, the first item (20% reduction) would be a one-time thing for this year, similar to something Minnesota did in 2016. The second item (state-based tax credits extending beyond the 400% FPL APTC income cap) would've been a much bigger deal. If it had happened, this would basically amount to replacing Minnesota's existing reinsurance program (which has resulted in ACA premiums being around 20% lower than they'd otherwise be without it) with state-based subsidies. Instead of the unsubsidized premium for a given plan being, say, $500 instead of $600, the premium would be $600...but with a 20% subsidy (actually 16.7%...percentages are an interesting thing) to knock it back down to $500.

On the surface, this might seem like a difference without a distinction, but it would have actually had other positive consequences for enrollees:

...the higher the APTC subsidies are, the more federal dollars are available for funding the Basic Health Program, since the formula for that program is based on 95% of the combined APTC/CSR funding which BHP enrollees would otherwise be entitled to. The reinsurance program effectively reduces the amount of BHP funding because it has the effect of lowering APTC thresholds...whereas the state-based subsidy route increases BHP funding by increasing APTC subsidy levels.

...Second, as Rep. Liebling notes in the article above, there's a human perception factor here as well: If you give $280 million to an insurance carrier, it's seen as a corporate giveway. If you give the same money to the enrollees, it's seen as helping out the little guy...even if the money is still going to the insurance carrier either way.

...Finally, because they run their own ACA exchange, using only their own funds for the expanded subsidies means that Minnesota wouldn't be subject to the whims of federal waiver approval. This is especially important in light of the MinnesotaCare double-cross I noted above.

Well, Gov. Walz and the MN state Republicans slugged it out, and in the end, I'm afraid the reinsurance program won out after all:

  • The state’s provider tax — currently set to sunset at year’s end — will remain in place, but at 1.8 percent instead of 2 percent. That is a major concession by Senate Republicans, who had called the sunset provision one of their major victories coming out of the 2011 state government shutdown.
  • The provider tax renewal relieves funding pressure on health programs and insurance plans, such as Medicaid and MinnesotaCare. But the GOP gets a concession with the creation of a blue-ribbon panel to look for waste and abuse in social service delivery programs.
  • A GOP plan from 2017 called reinsurance will be continued for two more years. The plan helps health insurance companies offering individual and small employer plans with higher-than-average users of health services. Walz has wanted a system of tax credits and subsidies to help premium payers rather than insurance companies.

...Hortman and Walz seemed especially relieved that the provider tax will not be going away. That provides $700 million a year for health programs, including MinnesotaCare, Medicaid and the individual market reinsurance plan. “The total removal of the provider tax we felt would have put too many people at risk,” Walz said. “These are compromises that work.”

Ah, well. It sounds like no real improvements over the status quo...but nothing will be any worse either, which I guess is the best Walz could've hoped for under the circumstances.