Minnesota Senate approves $600 million reinsurance plan

The Minnesota Senate on Wednesday evening followed the House in approving hundreds of millions of dollars in spending on a new program aimed at stabilizing the state's individual health insurance market by protecting insurers from major risks.

All Senate Republicans and three DFLers voted in favor of the nearly $600 million "reinsurance" plan, which would use state money to help insurers cover unusually expensive claims.

Republican backers said the bill will help attract more insurance providers to the market and drive down soaring premium costs. Minnesotans who buy insurance on the individual market, rather than getting it from their employers, have seen their premiums rise by more than 50 percent in recent years.

Sen. Jim Abeler, R-Anoka, said that while the bill may not fix all of the problems with the insurance market, it was likely to help the people who depend on it.

"This bill as being presented is a good start in trying to make a difference," he said.

The plan was roundly challenged by DFLers, who were concerned about the bill's funding sources. In each of the next two years, $180 million would come from the pot of money that pays for MinnesotaCare, the state's subsidized health program for low-income residents.

Lawmakers hope to use federal funds to cover another $100 million each year, but if that money doesn't come through, the state would spend up to $120 million in rainy day funds each year.

Sen. Jeff Hayden, DFL-Minneapolis, said the state should be protective of the Health Care Access Fund, which pays for MinnesotaCare and would be tapped to pay for the reinsurance program, particularly because shifts in federal health care policy could mean less money coming to Minnesota.

"We're going to need every nickel of the Health Care Access Fund," he said.

DFL lawmakers also questioned spending so much on a program that does not require insurance companies to make any guarantees about lowering insurance premiums.

The bill's author, Sen. Gary Dahms, R-Redwood Falls, said his estimates show that rates could drop by 18 to 23 percent, though they could rise first.

"I'm not going to stand here and say that we can guarantee this," he said. "There's no guarantees in this business ... I think [lower premiums] are going to happen, but I'm also going to have this caveat."

Under the Senate plan, an appointed board would administer the program, determining which claims would trigger a state payment and making sure the money gets to the insurance companies. The reinsurance program would kick in only for claims that pass a specific cost threshold.

The Senate also debated, but did not pass, a public-option health plan originally proposed by DFL Gov. Mark Dayton.

Under that plan, the state would open its MinnesotaCare program to people with higher incomes. Those people would pay the full cost of premiums. DFLers said such an offering would guarantee an insurance option to people in parts of the state that have been abandoned by private insurance companies. Republicans said it would drive small clinics out of business, because public health programs pay lower reimbursement costs.

A similar plan was rejected by the House on Monday, when that chamber approved its own reinsurance bill. The house plan would cost $384 million over the next two years, funded primarily by money otherwise designated for MinnesotaCare.

The Senate bill will be sent into conference with members of the House to refine it into single proposal and submit it for the governor's approval.

Erin Golden • 612-673-4790