MN Gov. Tim Walz expressed concern over ongoing threats to federal health care programs, particularly in light of recent actions in Washington. He emphasized the importance of maintaining access to affordable health care, especially for the state's working-class families.

About 163,000 Minnesotans have purchased health insurance through the marketplace, most of which was sold through the MNsure exchange. Enhanced federal subsidies during the pandemic temporarily raised the income cap for qualifying for financial assistance through the Affordable Care Act, significantly lowering monthly premiums for private plans purchased on MNsure. If these subsidies are lifted, many Minnesotans, including farm families and younger retirees, could see their premiums increase beyond their means.

Stabilizing costs through reinsurance

The governor's proposal centers on the state's existing reinsurance program, which has been crucial in keeping premiums down for individuals buying insurance on the Affordable Care Act (ACA) marketplace. Minnesota was the first state to establish this reinsurance program, which has since been adopted by other states.

The program helps lower premiums by providing subsidies to health insurance companies, reducing their costs.

Under the Governor's proposal, a surcharge on health-related premiums across the state would be increased from 0.6 percent to 1.25 percent. This surcharge, paid by the state's large health insurance companies, would help fund the reinsurance program, freeing up approximately $500 million in the state's general fund. The money saved from this shift could then be redirected to cover expected Medicaid cuts.

"We're not just talking about shifting costs around. This is about keeping costs down for over 200,000 Minnesotans who rely on this market," Walz said. "We're going to make sure this program continues, and that Minnesotans have access to the care they need, no matter what happens in Washington."

Funding shift: Spreading the burden more evenly

A key component of the proposal involves shifting the funding source for the reinsurance program from the state general fund to private insurers. This means that instead of relying entirely on state funds to support the program, the financial burden will be shared by insurance companies.

It's unclear if health insurers plan to pass those costs on to consumers. The state plans to raise an estimated $235 million in the first year of the new program and $276 million in the second year.

Grace Arnold, commissioner of the Minnesota Department of Commerce, explained the shift, noting that other states have adopted similar funding models. "We've long had a large program that has relied heavily on state dollars. With the budget situation now, we looked at other states' programs and borrowed from those to make the system more fair," Arnold said. "Now, we're looking to the insurers to help fund it, much like other states have done."

The shift to funding through an assessment on insurers, instead of relying solely on the state's general fund, is intended to make the program more sustainable. Arnold further clarified that this approach helps spread the financial burden more evenly and ensures that the program remains financially stable.

Support despite costs

While Walz initially opposed the reinsurance program when he took office, he acknowledged its effectiveness in reducing premiums. "I think there are better ways to manage health care," Walz said.

Walz noted that he preferred a public option but knew that would fail to pass a divided legislature. "But this program works, and if we can find a way to make it more sustainable, we need to take that chance."

However, the program remains costly. "It's basically subsidizing the health care companies to be able to provide this insurance at a super expensive rate," Walz said. "And while I think there are better solutions, this works for now."

Despite his earlier reservations, Walz noted bipartisan support for the reinsurance program, particularly from Republicans, who have previously backed it. "There should be no reason Republicans shouldn't help us get this thing done," Walz said. "It's just a matter of looking at what it does in the end."

Future sustainability

Ahna Minge, Minnesota's budget director, clarified that the reinsurance program will be supported by both state and federal funds. She noted that, in addition to the surcharge paid by insurers, the federal government will also contribute to the program's funding.

"We're making sure this program is financially sustainable," Minge said. "By increasing the surcharge and securing federal funding, we can keep premiums affordable and continue to provide quality care to Minnesotans."

"We're taking action here in Minnesota," Walz said. "As the federal government makes its decisions, we are securing the future of healthcare for Minnesotans."