Health insurance premium relief passed by state Senate, but conflict with Dayton looms

The Minnesota Senate voted Thursday to send $300 million in state relief to people struggling with surging health insurance bills, but the party-line vote has the Legislature's Republican majority headed for conflict with Gov. Mark Dayton and DFLers.

As many as 123,000 Minnesotans who buy insurance on the state's individual market but whose income makes them ineligible for subsidies are facing premium increases of 50 percent or more this year. Republicans who took charge of the Legislature last week put a relief package on the fast track, with a rapid series of packed hearings culminating in a lengthy floor debate. "What I hear from my constituents is: number one, immediate relief — no question," said Sen. Mary Kiffmeyer, R-Big Lake. "However, they're equally terrified at the thought we would not make these reforms and be in the same situation next year."

The House is expected to vote on its premium relief measure in the coming days, after which lawmakers would collaborate on a final plan to send to Dayton.

The Senate approved the measure on a nearly party-line vote of 35 to 31, with Republicans in support and DFLers opposed. Dayton, who has been pushing for several months for the Legislature to approve premium relief, took issue with the GOP bill. While his own premium relief proposal comes with a similar price tag, $313 million, he said he's opposed to a late add to the Senate measure: roughly $150 million in additional state spending to create a "reinsurance" program with an aim of helping cover insurance providers' costs for people with particularly large health care bills.

"While a reinsurance program could benefit the 2018 health insurance market, it will not bring relief to Minnesotans who must pay their 2017 health insurance premium bills today," Dayton wrote.

The Senate bill would spend $300 million from the state's reserve fund to provide rebates to people who buy insurance on the individual market, and continuing coverage for people with serious health conditions who lose their insurance. It also contains other reforms, including allowing for-profit health maintenance organizations, or HMOs, to operate in Minnesota. The reinsurance provision was a late addition to the bill.

While the parties agree on fast-tracking premium relief, the GOP plan added other changes that Republican lawmakers said are equally critical to fixing problems in the state's health care system.

Under the Senate bill, the state would send out rebate checks to some of the approximately 123,000 individual market customers who make too much to qualify for federal subsidies. For the first three months, some — but not all — of the people in that group would get a 25 percent rebate.

For the rest of 2017, the rebates would range from 20 to 30 percent, depending on income. The state would be responsible for determining who qualifies for the rebates and mailing out checks. That would mean additional expenses for the state, Dayton's budget chief has warned.

DFL senators asked questions about the cost and tax implications of the Republican proposal, which some lawmakers warned would result in recipients getting taxed on their premium rebates.

Sen. Dan Schoen, DFL-Cottage Grove, warned that an overcomplicated rebate process could force people to wait months before getting any help — all while continuing to pay big bills.

"Writing that check ahead of time: that's pain," Schoen said. "And then we're going to tax that income when we give them the relief as well?"

That proposal, at $313 million, would offer 25 percent rebates to all of those 123,000 people affected by rate hikes but ineligible for subsidies. The discounts would be passed on directly through health insurance companies, which would include the deductions on individual customers' bills.

"The deadline for February 1st coverage is January 15th and open enrollment ends on January 31st," Dayton wrote to lawmakers. "I encourage you to move quickly to pass my workable plan that brings premium relief to Minnesotans for 2017."

Also Thursday, the Senate unanimously passed a bill that will bring state tax law into agreement with the federal tax code, saving Minnesotans an estimated $21 million on items like tax a deduction for mortgage insurance premiums; $250 tax deduction for teachers' classroom expenses; veteran combat pay; and short sales of homes.

Star Tribune staff writer J. Patrick Coolican contributed to this report.