Federal government reduces estimate for Minnesota's reinsurance funding

State lawmakers raised alarm Wednesday over a reduced estimate on federal funding for the state's reinsurance program, which has helped stabilize premiums in the market where individuals buy health insurance.

The change has no impact on the current program, which is helping slow the rate of growth in premiums for 2018 and 2019. But it sets the stage for a debate in the Legislature about whether to extend the reinsurance program to 2020 and beyond.

Minnesota had been expecting about $184 million in federal funding for the program in 2019, but state Sen. Tony Lourey, DFL-Kerrick, said during a committee hearing that the estimate was cut to about $84 million.

Since premiums declined for 2019, "some loss of federal support for our reinsurance program might have been expected but not of this magnitude," Lourey said.

"We have no visibility as to why they decided to make that change," said Sen. Michelle Benson, R-Ham Lake. "This change significantly impacts the conversation about reinsurance going forward."

In 2017, lawmakers agreed to spend up to $542 million per year on the two-year program, which covers a portion of health insurer expenses for people who incur unusually high medical bills. The state created the program to shore up the state's individual market, which nearly collapsed in 2017 as health insurers sustained big financial losses.

The federal government agreed to help fund the program, which saves the federal government money by reducing the amount of tax credit subsidies needed for individuals to find affordable coverage.

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck