Saying they cannot afford to wait for a congressional rewrite of the nation's health laws, House and Senate negotiators announced a deal on a bill that aims to rein in soaring health insurance costs in Minnesota.
The proposal would prop up the individual insurance market by creating a reinsurance program to help insurers cover expensive medical claims.
Lawmakers are expected to finalized the legislation later Wednesday.
Insurers have experienced hundreds of millions of dollars in losses in the individual market, prompting the largest, Blue Cross Blue Shield of Minnesota, to drop out this year.
Republican Sen. Gary Dahms of Redwood Falls warned more insurers might do the same — if the state doesn't provide the reinsurance safety net.
"So now we have a marketplace that's collapsed and we need to do something to bring that marketplace back," said Dahms. "And this one of the ways we can do that."
The bill has a price tag of $271 million in each of the next two years. Some funding would come from the state's general treasury and some from a special health account fed by medical-related taxes. More could come from a pending legal case with insurers, if that is resolved in the state's favor.
Plus, there's a chance federal grants might take some of the load off state taxpayers. But Gov. Mark Dayton expects the state to shoulder most of the tab.
"It would be great if the federal government would face up this need for reinsurance and use its much deeper pockets to provide for all of the states," said Dayton. "But I don't see that happening at this point."
Dayton says the state has no choice but to do what it can to prevent further erosion of the individual insurance market.
The reinsurance bill applies only to a small slice of the overall insurance market, specifically policies sold to people who don't get coverage from an employer or a government program.
The individual insurance market serves about 5 percent of Minnesota's insured population, and they're the ones who have experienced especially sharp increases in costs the past couple of years.
Already this year, state lawmakers approved more than $300 million in one-year discounts for individual policy-holders who don't qualify for other subsidies available through the federal Affordable Care Act.
Here's how the reinsurance idea would work starting next year: The backup insurance wouldn't be available until an individual's claims exceed $50,000. Beyond that threshold, the state program would pay 50 percent or more of the costs. Once claims exceed $250,000 the primary insurer would be back on its own.
The thinking is that if the state provides a financial buffer for insurers they won't have to jack up premiums as high.
Customers themselves won't have to do anything. It's a largely back-office program.
Commerce Commissioner Mike Rothman says he expects the program will help ease premiums for consumers.
"In terms of the annual premium relief target, again it's an approximation based on the estimates, of about 20 percent," he said.
There's actually a requirement in the bill to make insurance companies report how much they would have charged in premiums absent the reinsurance plan. The information will be included in annual rate filings with state regulators.
Republican Sen. Jim Abeler of Anoka questioned whether the requirement will amount to relief that consumers can bank on.
"There's no guarantee of anybody doing anything in this bill," said Abeler. "They're just guaranteed to get the money and do the best they can."
DFL Sen. Tony Lourey of Kerrick said the bill doesn't appear to give commerce officials the authority to challenge insurer projections over how much consumers will save on premiums.
The reinsurance system will be managed by a 13-member board of directors. That will be made up of mostly of health industry representatives, but there must be two plan enrollees on the board.
The bill could come to a vote as soon as Wednesday in the House. Passage there would send it to the Senate and eventually on to Dayton.
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