MNsure shoppers will see extra $70 million in tax credits

Minnesota's health insurance exchange is estimating that this week's federal stimulus legislation will deliver more than $70 million in new tax credits to discount premium costs for subscribers.

The savings come through enhanced tax credits for the roughly 54,000 people who buy coverage through MNsure and qualify for income-based subsidies.

In addition, the law expands eligibility for subsidies to people with incomes above 400% of the federal poverty threshold, which works out to about $51,000 for an individual or $104,800 for a family of four. That means another 54,000 people at those income levels who currently buy through MNsure will qualify for tax credits.

"The value of subsidies enrolled members are going to receive is just above $70 million," said Nate Clark, the MNsure chief executive, in an interview. "So premiums are going to go down — the average statewide premium impact is a 19% savings."

It's not yet clear exactly when consumers will see the savings. Tax credits through MNsure typically are available to consumers in advance, so they can discount current premium expenses rather than refund the money during the following year's tax season.

"Timing is still [to be determined] on when consumers will see the tax credits advanced for plan year 2021," MNsure said in a statement. "We should know more soon."

The federal-stimulus legislation significantly expands for two years health insurance subsidies provided under the federal Affordable Care Act (ACA). Minnesota launched the MNsure health exchange to implement the ACA, which transformed the individual health insurance market by providing income-based tax credits to those who buy coverage through a government-run exchange.

The individual market includes people who aren't covered by employer-based health plans, and don't qualify for the government-run Medicare and Medicaid insurance programs. In April 2020, about 160,000 people in Minnesota were covered through individual market health plans.

Starting in 2014, people who bought through MNsure have been able to tap federal tax credits to discount their premium costs, so long as they meet income requirements. The law signed this week lowers the share of income that current tax-credit recipients must pay in premiums to satisfy ACA rules, a change that results in higher subsidies.

In one example, a two-adult household in Ramsey County (both age 35) with earnings just above 200% of poverty would see the value of their tax credit grow from $4,080 to $5,664, according to MNsure.

The savings are more dramatic for households with incomes just above the previous income cutoff for tax credits. To illustrate this, MNsure said a hypothetical two-person household in Mower County in southeastern Minnesota (ages 61 and 59) earning about $75,000 would go from receiving no subsidies to a tax credit worth about $18,000.

Previously, such families were described as falling over a "cliff" with the ACA, since they had to pay a much larger share of income for health insurance than households that qualified for tax credits.

The new law "eliminates the subsidy cliff," Clark said.

The legislation also makes available subsidies to consumers who don't currently buy through MNsure, so long as they switch to private coverage sold via the exchange during open enrollment or a special enrollment period. An estimated 53,000 people buy individual coverage in the "off-exchange" market. MNsure has a special enrollment period that runs through May 17.

MNsure officials said they don't have a projection for how many people will switch, or how much those consumers will receive in subsidy dollars.

The net effect of all the changes should help reduce the number of people who lack health coverage altogether, said Cynthia Cox, a vice president at the California-based Kaiser Family Foundation who studies issues related to the ACA.

"Just over half of the uninsured before this law were already eligible for some form of assistance," she said, "but it might not have been enough assistance to get them to buy."

New tax credits are retroactive to Jan. 1 or the first month of their 2021 coverage, whichever is later, MNsure said. Those retroactive benefits will be collected during next year's tax filing.

Christopher Snowbeck • 612-673-4744