Today, Minnesota’s House of Representatives is set to take up a bill that would help Minnesotans whose health insurance premiums are skyrocketing.
Republicans and Democrats agree that rising premiums for people buying health insurance on the individual insurance market is a problem: Between 2016 and 2017, people who buy their own health insurance — rather than getting it through their employer or through a state or federal program — saw their premiums jump, on average, between 50 percent and 67 percent.
Those rate increases were announced in September of last year, and immediately led to calls from state leaders for a special session to provide some kind of relief to consumers hit with such dramatic increases — specifically the estimated 123,000 Minnesotans not eligible for federal tax credits to offset the cost. But, as with all potential special sessions last year, negotiations between legislators and the governor fell short. Now, as the Jan. 31 deadline for open enrollment nears, members of the two parties have proposed different ways of providing relief.
Though they don’t agree on the details of how to fix the problem, politicians from both parties are united in tackling health insurance premium relief as one of the Legislature’s first priorities. But how did we get into such an urgent situation, and what do lawmakers propose to do to solve the problem?
Who’s on the individual market?
More than half of Minnesotans get their health insurance through employer-based plans. A third have their health costs paid through government programs like Medicare or Minnesota Care. And about five percent of Minnesotans aren’t covered by any kind of health insurance. The remaining five percent — about 250,000 Minnesotans — buy their insurance plans on the individual market, either via MNsure, the state’s health insurance marketplace, or directly from insurers. It’s those consumers that were hit with the 50 percent plus premium increases for the coming year.
An informal standard for health insurance premiums and out-of-pocket payments is that they should cost between 5 and 10 percent of income, said Lynn Blewett, the director of the University of Minnesota School of Public Health’s State Health Access Data Assistance Center, which helps states measure and monitor health insurance coverage.
For people covered on employer plans, insurance premiums have also increased, but that market has been more stable, Blewett said: cost is generally split between employers and employees, and price increases have been slow since 2012, (though reports find deductibles and copays under some of these plans have increased).
Things have been tougher for those on the individual market. The Star Tribune reported Tuesday that a Zimmerman interpreter saw a $350 per month increase, from $500 to $850, with a $3,800 deductible in the new year. A Mendota Heights dental assistant’s premiums jumped from $660 to $940 a month, causing her to dip into retirement savings to cover the cost.
“People who are most impacted by this are really at the heart of our economy — they are small business owners, they are farmers, they are people who work consulting jobs, they are people who aren’t on employer coverage,” Sen. Michelle Benson (R-Ham Lake), who chairs the Senate health and human services finance and policy committee, told MinnPost. “They aren’t on public programs, they ask very little of the state.”
Why did premiums go up so much?
The first thing to know is that the problem is not that premiums are so high in Minnesota — actually they’re about average among states, Blewett said. The problem is that premiums here are increasing faster than in most states — in part because they started lower in the first place.
There are other, more specific reasons for the premium increases, too: For starters, the number of people purchasing health insurance in Minnesota’s individual market is relatively small, Blewett said: 250,000 people (compared to more than 1.3 million in California). And that small group of people can be expensive to cover.
Before the Affordable Care Act prevented insurance companies from denying coverage because of pre-existing conditions, people who were considered uninsurable or were very expensive to insure used to go into a subsidized risk pool, and insurance companies split the cost of covering them. Now, many people who are expensive to insure buy insurance on the individual market, making that group of people relatively more expensive to provide insurance for.
Likewise, the ACA’s provision to allow young adults to stay on their parents’ insurance until age 26 took some young, healthy people who might have otherwise sought health insurance on the individual market out of it and put them on their parents’ employers’ plans, Blewett said. Meanwhile, some companies (including 3M) stopped covering early retirees on company plans and started offering them subsidies to buy insurance on the individual market, which brought more older people into the market, too.
The ACA also removed insurance companies’ ability to rate people based on gender and health, and charge them accordingly.
“That put a lot of pressure on the plans because they weren’t able to charge more for sicker people, and it was difficult to attract a lot of younger people because a lot of younger people — up to 26 — were on their parents’ plans,” Blewett said.
So that’s the situation Minnesota finds itself in. Here’s how lawmakers propose to fix it.
Republicans, who now hold majorities in both the House and the Senate, have two proposals up for discussion at the Legislature: One in the House (HF1) and another that passed in the Senate (SF1) last week.
Both would cover people earning an annual income between 300 and 800 percent of the federally designated poverty level who don't receive federal tax credits to offset their costs. The Senate bill would reduce premiums by 25 percent for the first three months, then for the remainder of 2017, reduce them by between 20 percent and 30 percent, depending on income. The House bill would reduce premiums by 25 percent for everyone eligible for the year. Households with the following modified adjusted gross income buying on the individual market would qualify:
- A single person making between $35,640 and $95,040 per year
- A household of two making between $48,060 and $128,160 per year
- A household of three making between $60,480 and $161,280 per year
- A household of four making between $79,200 and $194,400 per year
- A household of five making between $85,320 and $227,520 per year
- A household of six making between $97,740 and $260,640 per year
- Etc. for larger households
Eligible Minnesotans would pay the cost of their premiums, then receive a rebate from the state that reimburses them for the prescribed amount.
The Senate plan would cost $450 million, while the House plan would cost $300 million. (In addition to $300 million for premium-relief subsidies, the Senate plan includes $150 million for a reinsurance plan, described below, and other provisions.) Each would provide premium relief to an estimated 99,000 people, according to Minnesota Management and Budget.
The DFL plan
On Tuesday, Gov. Mark Dayton, whose signature would be required to enact a premium relief law, urged the Legislature to adopt his own premium relief proposal.
Dayton’s plan would give all Minnesotans on the individual insurance market who do not qualify for federal tax credits 25 percent off their health insurance premiums for the duration of 2017. The plan would apply to households with annual incomes more than 400 percent of the poverty level, which is the cutoff for federal tax credits.
Why 25 percent?
“We came up with 25 percent because that’s what we felt we could afford,” said Minnesota Management and Budget Commissioner Myron Frans.
The governor’s plan would cover the following individual market insurance buyers:
- A single person making more than $47,520
- A household of two making more than $64,080
- A household of three making more than $80,640
- A household of four making more than $97,200
- A household of five making more than $113,760
- A household of six making more than $130,320
- Etc. for larger households
- People who are eligible for the federal subsidy but don’t claim it
Under this plan, eligible Minnesotans would pay a reduced premium to their insurer up front, and the state would cut a check to the insurance company for the 25 percent discount. It would cost taxpayers about $313 million and cover an estimated 123,000 people.
Per Frans, the income caps in the Republican proposal would require a system verifying income, or means testing, which he said would cost $20 million and take up to a year to get up and running.
“We want it to work correctly. The last thing we want to do is set up another government program that doesn’t work or has problems,” Frans said, alluding to the messy rollout of MNsure, another “big IT project under a political timeline.”
Dayton’s proposal, Frans said, could be rolled out quickly: Identifying who is and who isn’t eligible for a federal subsidy is a matter of checking with MNsure, and doesn’t require setting up a system to verify income, Frans said.
Some Republicans have criticized Dayton’s plan for not having an income cap: people who are far above the poverty level and buy insurance on the individual market would receive subsidies.
“The Dayton position is quite indefensible in that you will be giving this money to millionaires,” said House Tax Committee Chairman Greg Davids.
Frans acknowledged that, but said strengthening the individual market is in the interest of everyone.
These details may not be the biggest sticking point when it comes time to work out a deal both parties can agree on.
Benson said the numbers that dictate who qualifies for premium relief are negotiable.
“It would be nice to do means testing, but (we’re) willing to work with Commissioner Frans on premium relief,” she told MinnPost.
What’s critical, she said, is passing measures to stabilize the individual insurance market. That’s why a reinsurance provision is included in the Senate bill (neither the House nor governor’s bills addresses reinsurance). Reinsurance helps insurance companies manage their risk by sharing it across multiple parties.
The Senate plan includes $150 million to, among other things, fund a new state reinsurance program, administered by the Minnesota Comprehensive Health Association, the agency that ran Minnesota’s high-risk insurance pool until late 2014.
“I have put reinsurance in the bill (but) there could be different attachment points,” Benson said. “I’m interested in whatever factors we can use to send a clear signal to the market that this is a healthy individual insurance market that encourages young people to come in and buy that foundational coverage; that gives families more choice in this individual market. Those are the ideas I’m looking for.”
Dayton has said last week he would not sign any short-term relief bills that include reinsurance provisions, insisting instead he wants to work on reforms separately from short-term relief.
An urgent matter
The open enrollment deadline, the date by which Minnesotans are required to sign up for health insurance, is less than two weeks away, which puts pressure on lawmakers to come up with a solution quickly. The Affordable Care Act requires most Americans to have health insurance or pay a fee, which amounts to: 2.5 percent of household income (with a limit) or about $700 per adult and $350 per child (up to $2,085 in a household), whichever is larger. Knowing whether or not they qualify for a subsidy could influence Minnesotans’ plans to purchase health insurance.
Of course, these premium relief proposals are just a temporary solution to a specific problem. Large-scale health care reform could come soon — or later.
In Washington, D.C., Republicans are working out plans to repeal and replace the Affordable Care Act, though exactly what that might look like isn’t clear. In Minnesota, apart from the reinsurance provisions in the Senate premium-relief bill, discussions of longer term market reforms lay ahead.
Blewett stressed that the problem with premiums affects a relatively small portion of the population — the 123,000-or-so people who buy insurance on the individual market and don’t qualify for subsidies.
“For the short term, we should be able to fix that, especially when we have a ($1.4 billion surplus) in our budget,” Blewett said.