Federal cuts leave future of Minnesota's low-income health insurance program, MinnesotaCare, in question

The last time legislators convened in St. Paul, the state's groundbreaking health insurance program for the working poor, Minnesota­Care, had stable and adequate funding.

But all that changed last fall, after the Trump administration made two unexpected decisions that will cut the program's federal funding by 30 percent — more than $800 million — over the next four years. Because federal funds pay for about 90 percent of Minnesota­Care, its long-term future is now an open question.

Addressing that problem could emerge as a question in the upcoming legislative session, and Gov. Mark Dayton, meanwhile, is expected soon to announce his own plan to revamp the program for the future.

"I think there are ways to generate revenue to support MinnesotaCare," said Rep. Jennifer Schultz, DFL-Duluth. "It covers a very small percentage of our population, and these are folks that really cannot afford health care on their own."

The program covers people like Mike Orbeck, a dairy farmer in Stearns County. Orbeck, 57, signed up for MinnesotaCare in 2016, after private insurance coverage became unaffordable.

"It is the best health insurance I've had since 1979, when I started buying my own," Orbeck said.

Orbeck pays $71 a month in MinnesotaCare premiums, with very small co-payments for clinic visits and no deductible. By comparison, the last private plan he had cost $560 a month with an annual deductible of $6,800. "If I had gotten sick, I wouldn't have had anything left," Orbeck said.

The coverage from Minnesota­Care has helped him stay in the dairy business.

"With the way the ... industry is right now, our bottom lines are getting to be very thin," he said. "Without insurance you are kind of sticking your neck out on the line."

Orbeck is like thousands of other Minnesotans caught in the middle — earning too much money to qualify for Medical Assistance, which serves the poorest residents, but not covered under an employer and struggling to pay rising premiums for private coverage. Eligibility is limited to those with incomes up twice the federal poverty level; a family of four qualifies if they make less than $49,200 a year and have no access to employer health coverage.

MinnesotaCare, which was first created in 1992 with bipartisan support, serves about 90,000 people. Premiums are based on income and are capped at $80 a month.

More than 25 years later, and in a polarized political environment on most things health care, any discussion at the Capitol is likely to center on MinnesotaCare's philosophy as well as funding.

Rep. Matt Dean, Dellwood, considered a GOP expert on health care, said lawmakers need to take a close look at MinnesotaCare's future.

"The funding resource for that, federally, has been put into question," Dean said. "It is one of the things that we are really looking at this session."

When MinnesotaCare was first enacted, it was funded by a dedicated 2 percent tax on Minnesotans' medical bills intended to be paid by providers and a 1 percent tax on health insurance premiums.

Under the 2010 Affordable Care Act, also known as Obama­care, the federal government agreed to support state programs like Minnesota­Care because they were already helping meet one of its goals — reducing the number of uninsured Americans. It awarded Minnesota an amount equal to 95 percent of what it would have paid out in premium tax credits had Minnesota­Care enrollees signed up for a private health plan on an insurance exchange.

As individual premiums increased in the Minnesota market in recent years, so did the federal payments to MinnesotaCare. But then, when individual premiums decreased for 2018 after Minnesota passed a reinsurance bill to support the insurance industry, federal support to MinnesotaCare also dropped.

The state had asked the federal government to keep MinnesotaCare support at the higher levels, and the state had even gotten assurances from federal regulators that support would not be cut. But in a surprise move, the final federal decision went the other way, costing Minnesota $277 million for the two years that the reinsurance program was authorized.

MinnesotaCare also was receiving a second source of federal funds, this one equal to 95 percent of federal payments known as cost-sharing reductions, which are paid to insurance companies across the nation to keep deductibles and other consumer costs low.

But last fall the Trump administration decided to cancel those payments altogether as part of its larger argument against Obamacare. That cost the state another $530 million over four years.

In late January, Minnesota Attorney General Lori Swanson sued the federal government seeking restoration of the payments, arguing that the decision was made outside of normal regulatory channels and that Congress had explicitly authorized the payments.

Adding to the long-term challenge, the provider and premium taxes that used to pay for most of MinnesotaCare will sunset at the end of 2019.

Even setting Minnesota­Care aside, "I do think that we are going to need to not allow the provider tax to expire," said Sen. Tony Lourey, DFL-Kerrick. Noting that the taxes provide $1.5 billion per biennium, Lourey said the taxes help pay for other needed health programs.

"It doesn't matter who is in charge; nobody is going to be able to balance the health and human services spreadsheet if we erase $1.5 billion," he said.

The Minnesota Medical Association, the state's largest doctor's association, has long opposed the provider tax, but the organization said it does support MinnesotaCare and wants to see a long-term funding solution.

"Our belief is that all people should have access to quality care," said Dr. George Schoephoerster, a St. Cloud-based geriatrician and president of the association. "We hope that there is some solution to keeping to the funding."

The state's hospital industry supports both MinnesotaCare and the provider tax. The Minnesota Hospital Association said it's concerned about the funding shortfalls and wants to preserve MinnesotaCare because "it has provided affordable, meaningful coverage for low-income Minnesotans."

At the same time, DFLers, including Gov. Mark Dayton, are expected to continue to push for a "MinnesotaCare buy-in" proposal that would allow anyone to sign up for the insurance, paying premiums that are not subsidized. Republicans have generally opposed the idea, saying it would crowd out private insurance companies and create financial problems for clinics and hospitals because of the plan's low reimbursement rates.

For now, MinnesotaCare has healthy reserves, and state financial projections show that it is fully funded through 2019.

Because enrollees won't lose coverage in the near term, legislators might postpone a solution to MinnesotaCare's funding issues until the 2019 session — especially with a new governor taking office next year. But, lawmakers said, 2019 will come fast.

"There is enough money left to pay for the program into 2019, but it is something that the 2019 Legislature and the new governor will have to figure out," said Dean.

Glenn Howatt • 612-673-7192