Dayton won't block $542M for insurance companies, but withholds signature

The state of Minnesota will spend as much as $542 million over the next two years to help health insurance companies cover the cost of particularly high claims, after Gov. Mark Dayton announced Monday he'd let the Legislature's "reinsurance" plan become law without his signature.

Despite qualms about the measure, which House and Senate Republican majorities approved last week, Dayton said he feared that vetoing it would further destabilize Minnesota's insurance market just as providers finalize plans and rates for 2018. But the DFL governor said he remains concerned about turning over hundreds of millions of dollars in public money with no guarantees that insurance companies will stay in the state's individual insurance market or drive down surging premiums.

So Dayton chose another option: taking no action at all. In that case, the measure after three days automatically becomes law, in this case at midnight on Monday.

"Without this legislation, we give the insurance companies the pretext to pull out of the individual market entirely … or to raise rates even more unconscionably higher than they have before," Dayton said.

Republican lawmakers called the measure a necessary second step toward strengthening an individual market that has seen insurance companies leave and premiums rise by an average 50 percent or more in recent years. Together with the $326 million premium relief bill approved earlier this year, the state is poised to spend $868 million over the next two years to help the 190,000 people who buy insurance on the individual market.

The new reinsurance program will be operated by a 13-member panel, with representatives from the state and from the insurance companies. That group will give money to insurance companies to help pay for individual claims of more than $50,000 but less than $250,000. The state would cover between 50 percent and 80 percent of those claims, but would not pay for claims over $250,000.

The money would come from two sources. As much as $200 million in each of the next two years would come from the fund that pays for MinnesotaCare, the state's subsidized health insurance program for low-income residents. Another $71 million in each of the next two years would come from the state's general fund, but some of the total cost could be covered with federal money.

The entire program hinges on continued federal support without risk of penalty if the reinsurance fund is successful.

Senate Majority Leader Paul Gazelka, R-Nisswa, said he's optimistic that individual market premiums will drop by 20 percent, as state commerce officials have estimated. But he cautioned that the new program's benefits are still largely unknown.

"They know [premiums are] going to be lower than they would have been without it, 20 percent lower, but what we don't know is what group of people stayed in the market," he said. "We just can't predict everything and neither can the plans."

During a news conference on Monday, Dayton blasted the leaders of insurance companies, who did not respond to his questions on how they would spend the state's money and whether they'd pledge to continue to offer individual-market plans at lower rates.

"My regard for the insurance companies has been decimated by their lack of having even the decency to respond to my letter," Dayton said.

The Minnesota Council of Health Plans, meanwhile, released a report Monday that said insurance companies in the state lost more than $680 million in 2016. The association of health insurers pointed to growing gaps between health care costs and premiums paid by those on the individual market.

In a statement, the group's president, Jim Schowalter, said insurers will know more about their plans "once all the health insurance rules for 2018 are known."

"We share Gov. Dayton's frustration around wanting guarantees. The work by legislative leaders and the administration will go a long way toward helping Minnesotans who buy health insurance on their own," Schowalter said.

House Speaker Kurt Daudt, R-Crown, said Dayton's requests for more rules and more guarantees for the insurance industry could make it difficult for them to reduce premiums. He suggested that if insurance companies leave or don't reduce their costs, it will be the fault of the governor — not the insurance companies.

"This problem is so bad, and the individual marketplace has basically collapsed," Daudt said. "It's going to take us more than a year to get out of this."

Erin Golden • 612-673-4790