Minnesota extends 'reinsurance' program

Lawmakers have agreed to continue a state program for "reinsurance" that's been credited with helping keep a lid on premiums in the state's market where individuals buy health insurance.

The program extension won't require additional money, state officials said, since the initial $542 million appropriation hasn't yet been exhausted.

Called the Minnesota Premium Security Plan, reinsurance provides a financial backstop for health insurers that happen to attract enrollees with unusually expensive health conditions by covering a large chunk of those medical bills.

"The legislation pushes back the date that unexpended state dollars would be returned to [a state health care fund] at the end of the program," the state Commerce Department said in a statement. "If the Legislature had not acted to continue the reinsurance program, per current law, the dollars would have been transferred back to the [fund]."

The reinsurance program helps the Minnesota health insurance market where people under age 65 who are self-employed or lack job-based health benefits buy coverage. In 2017, about 149,000 Minnesotans were buying coverage in the market, which has been the focus of intense political debate following changes brought by the federal Affordable Care Act (ACA).

The ACA outlawed health insurers from denying coverage to people with pre-existing health conditions in the individual market beginning in 2014. The law also created government-run "exchange" websites where consumers could buy coverage and provided tax credits to many who purchased policies through one of the exchanges.

In Minnesota, health insurers set premiums that were too low for 2014 and failed to catch up with the cost of medical services for enrollees despite big rate hikes for 2015 and 2016.

The market in Minnesota was on the verge of collapse heading into 2017, which prompted lawmakers to provide one-time consumer rebates as well as the program for reinsurance. Other states have created reinsurance programs for their individual health insurance markets, as well.

The Minnesota program initially provided $271 million for costs in 2018 and the same amount for this year. A February report to the Minnesota Comprehensive Health Association, however, estimated that reinsurance costs for 2018 were running lower than projected at $138.9 million because the market has become so small — about 291,000 people in the state were buying the coverage in 2015.

The program starts covering 80% of medical costs for individuals once their accumulated health care expenses exceed $50,000. The program keeps covering 80% of the costs until the medical bills hit $250,000 — after which point the health insurance company is responsible for all costs.

The February estimate was based on $120.5 million in claims paid through December for 2,660 individuals — a sum that was adjusted upward to account for claims expected to arrive at health insurers after Jan. 1. Most of those individuals (2,459 people) had medical bills between $50,000 and $245,222, according to the February report, while 179 people had medical claims between $245,222 and $647,250.

The report found 22 people with claims in excess of $647,250, with average incurred claims per enrollee coming in about $1 million.

The Minnesota Council of Health Plans, the trade group for nonprofit health insurers in the state, said extending the program is good news for individual market consumers.

"It means expensive medical bills don't have to be added to the premiums people pay each month because the state will be paying part of the bill," said Patsy Riley, interim president of the trade group, in a statement.

But the state Department of Human Services (DHS), which runs Minnesota's public health insurance programs, estimates that extending the reinsurance program will reduce federal funding for MinnesotaCare by about $188 million over two years. MinnesotaCare provides coverage to lower-income state residents whose incomes exceed the poverty line.

"This will shift more costs to the state," DHS said in a statement.

Christopher Snowbeck • 612-673-4744 Twitter: @chrissnowbeck