The reinsurance program was established in 2017 to stabilize spiking premiums on MNsure, the state’s individual insurance marketplace. (Glen Stubbe, Star Tribune/The Minnesota Star Tribune)

Minnesota lawmakers have struck a deal to continue a state program credited with stabilizing the cost of health care premiums on the individual insurance marketplace.

The agreement announced Thursday between the divided Legislature comes just one day ahead of a deadline from the federal government to start processing a waiver to continue Minnesota's reinsurance program.

"It took a little bit longer than I was hoping for, but at the end of the day this is how the process is supposed to work," said Senate Majority Leader Jeremy Miller, R-Winona. "This is a good compromise agreement."

Under the deal, reinsurance will be extended for another three years at a cost of more than $700 million from state coffers and $173 million shifted from a state health care fund. It also requires insurers to provide postnatal care to some enrollees on the marketplace.

Lawmakers were motivated to strike a deal before the deadline, worried about the possibility of premiums spiking while inflation and rising costs are already hitting Minnesota households.

"Minnesotans all over the state are relying upon us to make sure their premiums don't rise out of control, and the reforms that we adopted are also important and will help Minnesotans," said Rep. Zack Stephenson, DFL-Coon Rapids, who carried the reinsurance bill in the House.

First passed in 2017, reinsurance was designed as a way to combat double-digit premium hikes on the individual marketplace by helping health insurers cover some of the most expensive medical bills from enrollees. Roughly 163,000 Minnesotans are on the individual marketplace — also known as MNsure — and 235,000 people are insured through small group plans, according to the Department of Commerce.

But over the years, Republicans and Democrats disagreed about how much money to continue to funnel toward reinsurance, which was intended to be a temporary solution to spiking premiums.

Senate Republicans originally proposed spending $1 billion to continue the program for five years, while Democrats in the House wanted to reauthorize the program and debate funding as part of end-of-session negotiations on how to spend a $9.25 billion budget surplus.

"It's tough for a lot of the health industry folks to manage their plans if they don't know what the next year brings," said Sen. Gary Dahms, R-Redwood Falls, the sponsor of the Senate's bill. "With this we have stability in the marketplace."

The deal does not include a provision from Democrats to require the state to develop a proposal for a public option. Democrats have proposed allowing Minnesotans on the individual marketplace to buy into MinnesotaCare, a subsidized program meant to cover low-income people who don't work but don't qualify for Medical Assistance.

Some DFL legislators and progressive groups spoke out against the deal, arguing reinsurance has propped up the state's health care system to the cost of $1 billion over the last five years while not tackling rising health care and prescription drug costs.

"Reinsurance is just a bridge to nowhere. We keep reauthorizing and keep refunding it. Right now it looks like that's all we're ever going to do, just keep giving money to insurance companies so they don't have to carry all the risk," said Rep. Tina Liebling, DFL-Rochester, who chairs a top health care committee in the chamber. "Instead we're putting that on to the taxpayers."

The House and Senate passed the compromise plan off the chamber floors Thursday night, sending the bill to the desk of Gov. Tim Walz, who is expected to sign it.