Senate committees debate reinsurance legislation

This week the Senate Commerce and Health and Human Services Committees heard a bill that would establish a reinsurance program in Minnesota. Reinsurance is similar to what Minnesota used to do with the Minnesota Comprehensive Health Association (MCHA) with the goal of removing high-cost, high-risk enrollees from the individual market to keep rates low for the remaining individual market enrollees. While the goal of the legislation is well-intentioned, this proposal takes funding that is intended to be spent on health care for low income Minnesotans to help insurance companies.

Under the bill, when an enrollee with insurance purchased on the state’s individual market reaches $45,000 in insurance claims, 80% of claims would be paid by the state’s reinsurance program until those claims hit $250,000. So health insurance companies would cover all claims up to $45,000, 20% of claims from $45,000 to $250,000, and all claims over $250,000.

To fund the reinsurance program, the bill imposes a reinsurance tax on hospitals, surgical centers, and wholesale drug distributors equal to 1% of their gross revenues. The reinsurance tax expires on Jan. 1, 2020, so would only fund the program for two years. For these same entities the bill reduces the current provider tax from 2% to 1% of gross revenues effective Jan. 1, 2018. In other words, the bill takes funding that would go into the Health Care Access Fund (HCAF) for MinnesotaCare and uses it to fund the reinsurance program.

This is another GOP “fix” that will only last two years. The HCAF is intended to be spent on health care for low income Minnesotans – not to help insurance companies. Paying for a reinsurance program should not be at the expense of low income Minnesotans. Despite two committee hearings this week, there are still several unanswered questions about the proposal and it is unclear whether or not this approach would help stabilize Minnesota’s individual health insurance market. Under the bill, insurance companies get paid for high cost claims, but there is no assurance from insurance companies that they will make their rates more affordable or expand their provider networks and there is nothing in the bill that prevents them from offering the same expensive and limited plans. (SF 720)