The state spotlight for this week is on Minnesota, where a divided government is taking its toll on healthcare legislation. Two major pieces of legislation that are not receiving bipartisan support include the renewal of the reinsurance program and the sunset of a two-percent healthcare provider tax.|
In May 2017, Governor Mark Dayton submitted a 1332 waiver proposal to CMS for a reinsurance program. The reinsurance plan was based off H.F. 5, which created the Minnesota Premium Security Plan. The reinsurance program took effect in 2018, and covers claims between $50,000 and $250,000 at 80%. After reinsurance was instituted, Minnesota saw significant rate decreases.
However, the Minnesota legislature has been having heated discussions on the effectiveness of reinsurance this session. There are two primary arguments that are being made, and they tend to be on party lines. Many Republicans are arguing that the reinsurance program has stabilized the insurance market and decreased premiums, while others, primarily in the Democratic-Farmer-Labor (DFL) Party, are arguing that reinsurance simply gives money to insurance companies and the benefits do not transfer back to Minnesotans.
Governor Tim Walz (DFL) has proposed a plan to lower premiums as an alternative to reinsurance, which is called the “ONECare” plan. This is a buy-in option that would allow all Minnesotans to buy in to a public option on the MNsure state individual insurance marketplace and pay monthly premiums. Individuals could buy in to ONECare at the platinum level, with the option to buy in to silver or gold plans if certain events occur, including “market failure” or no plans being available on the marketplace in a certain area. Walz has met resistance on this plan from the Republican Senate.
The other big healthcare-related topic that Minnesota has been debating lately is the two-percent healthcare provider tax. This tax was created in 1992 by a bipartisan group of legislators to fund MinnesotaCare, a healthcare program for low-income workers. The tax brings in about $700 million per year, or $1.4 billion per biennium. It is set to sunset at the end of this year.
While lawmakers agree that Minnesota’s public healthcare programs should continue to be funded, they do not agree on the tax itself. The DFL, which controls the House and the governor’s office, wants to repeal the sunset, so the tax will continue and the funding stream will remain constant. The Republicans, who control the Senate, want the tax to sunset because they believe that keeping the tax in place is akin to a tax increase, though the DFL argues that the tax is already being collected so it should not be considered a tax increase. There are strong indications that the DFL will reinstate the tax in the House Tax bill when it is released. The Senate bill is expected to be released next week and is not likely to include a plan to reinstate the tax.
On March 28, a bipartisan group of senators, including Jim Abeler (R), Melisa Franzen (DFL), Scott Jensen (R) and Matt Klein (DFL), released an op-ed advocating a bill they introduced regarding this tax in the Star Tribune. The bill suggests a third option: a new Claims Expenditure Assessment. The CEA is essentially a tax that would be “processed by health plans and third-party administrators as an alternative to the provider tax.” Because it is tied to the paid claims, it will be a stable source of funding for MinnesotaCare. The tax, according to this group of senators, would be less regressive because it will not apply to those who pay out-of-pocket for healthcare. It would also be easier to administer because there would be fewer actors that would need to collect and pay the assessment. This plan is based on research from the Minnesota Medical Association, will not increase the cost of healthcare and is a tax reduction in comparison to what is currently in place, but is still projected to provide enough funding. This bill will not be proposed in the initial Senate tax bill, but could be inplay for the final negotiations as a potential compromise between the Republicans and the DFL.Overall, Minnesota’s divided government is complicating healthcare legislation in the state. With the important issues of reinsurance and the healthcare provider tax needing to be addressed this session, it will be interesting to see how the remainder of session plays out.