Pawlenty does about-face on insurance exchange idea

Gov. Tim Pawlenty
Gov. Tim Pawlenty addressed the media following the special session in St. Paul, Minn. Monday, May 17, 2010.
MPR Photo/Jeffrey Thompson

Gov. Tim Pawlenty repeated his opposition Friday to so-called "insurance exchanges," a key piece of health care reform. He said exchanges amount to government interfering with the free market. That's a reversal from 2007, when Pawlenty proposed his own insurance exchange program for Minnesota businesses.

Pawlenty is standing by his decision to ignore a federal request for input on insurance exchanges, which are meant to be online marketplaces for consumers to buy insurance.

U.S. Health and Human Services Secretary Kathleen Sebelius had asked states for suggestions and concerns about creating such a system.

Pawlenty has refused to allow the state to respond to Sebelius' request. During his radio show Friday, Pawlenty expanded on why he decided against sending in the Health Department report about health insurance exchanges. He said the best insurance exchange is the free market.

"We studied it, and said these exchanges wouldn't really make health care more affordable in terms of the cost of health care overall," said Pawlenty. "These exchanges -- where the government will direct how and when you buy your insurance if you're an individual or small businessperson. The government will determine what your benefit sets look like. The government will manage it and administrate it, either directly or indirectly."

But three and a half years ago, Pawlenty advocated for a similar idea he called the non-profit Minnesota Insurance Exchange. The goal was to connect employers and workers with more affordable health coverage options.

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Through the exchange, the governor would have required all employers with more than 10 workers to establish a "Section 125 plan," so their employees could buy cheaper health insurance with pre-tax dollars.

In 2007, Pawlenty advocated for a similar idea he called the nonprofit Minnesota Insurance Exchange.

During a 2007 news conference touting the plan, Pawlenty said the system would only cost employers about $300 to set up.

"If just two of your employees go out and buy insurance through the exchange, the benefits to the employer on a pre-tax basis -- because of their payments to Social Security and otherwise into the 125 plan -- more than cover the cost of setting up the plan."

When asked why Pawlenty has changed his position on health insurance exchanges, the governor's spokesman said "the exchange would likely have only a minimal impact on the cost of health insurance coverage" in Minnesota.

That response is based on a 2008 analysis of the governor's exchange proposal, which was conducted by the Minnesota Health Department. However, the analysis goes on to say that "in combination with other reforms [which are included in the federal health care law], the exchange idea could have significant impacts on the cost of coverage."

"If you put in place only an exchange, that's not enough to have a big impact," said Deborah Chollet, one of the authors of the report and an analyst with the independent consulting firm, Mathematica that prepared the study.

"If you put in an exchange with a range of other changes that lead people to coverage, emphasize personal responsibility for having coverage, it improves the quality of care and the efficiency of care. Then you get big impacts," Chollet added.

The Minnesota Health Department recently prepared a written response to the federal government's request for recommendations on exchanges, but Pawlenty refused to submit it.

So three groups -- the Minnesota Medical Association, the Minnesota Hospital Association, and the Minnesota Council of Health Plans -- acquired the response through a data practices request and submitted it anyway earlier this week.

"This is federal law. And whether we agree with all of it or we disagree with all of it, we have to comply with it," said Julie Brunner of the Minnesota Council of Health Plans.

"None of this is about the governor himself. It's about the fact that we have a new federal health law that is going to implement exchanges in Minnesota and throughout the country in a couple of years," she said.

Former U.S. Sen. Dave Durenberger of Minnesota, a Republican and an expert on health policy, said the health care groups' action was unprecedented, but understandable, given Pawlenty's opposition to the health reform law.

"I can see why the hospitals, the doctors and the health plans would say, 'We're going to do something totally unusual, because we can't live with a political dictator getting in the way of a potential for getting this thing right, rather than having it potentially go in a direction that doesn't help Minnesota,'" said Durenberger.

Pawlenty's opposition to any voluntary participation in health reform by the state has drawn flack in the past. He's been criticized by Republican friendly groups for refusing to accept federal funding to help the state prepare for exchanges.