REGIONAL— Gov. Mark Dayton says he plans to call a special session after next week’s election to address the spike in health insurance premiums in the individual market. The governor is proposing a state rebate that would equal 25 percent of an individual’s or family’s health insurance premium in order to reduce the impact of the sharp increase in insurance rates for those who don’t qualify for federal health insurance subsidies through the Affordable Care Act.

Individual health insurance premiums in Minnesota are increasing next year by as much as 86 percent, which is expected to place enormous financial burdens on the estimated 123,000 Minnesotans who don’t qualify for the federal subsidies. The governor is proposing to tap $313 million from the state’s general fund surplus to provide up-front rebates to those insurance ratepayers whose incomes exceed 400 percent of the federal poverty rate, which is the cutoff for insurance subsidies under the ACA, otherwise known as Obamacare. Currently, those health insurance subsidies limit the cost of insurance premiums to 9.6 percent of an individual’s income, but for those who don’t qualify for the assistance, insurance costs may reach 25 percent of their income, based on rates recently announced by the handful of insurers in Minnesota still providing individual private coverage.

Minnesotans can only obtain the federal subsidies— assuming they meet the income qualifications— if they purchase their health insurance through the MNsure exchange, which was established under the auspices of the ACA. The open enrollment period for selecting an insurance plan for 2017 began Nov. 1, and state officials have been scrambling to respond to the public outcry over the sharp increase in premiums scheduled for next year by adopting a cost reduction plan before the enrollment period ends. “There have been bipartisan calls for some kind of relief,” said Gov. Dayton.

The rebate plan is a temporary fix, acknowledges Dayton, which he said would give state and federal officials more time to come up with a more permanent solution.

Senate Majority Leader Tom Bakk said the governor’s rebate idea isn’t his first choice, but he is willing to support it as a stopgap measure. He said conversations he has had in recent days with Republican House Speaker Kurt Daudt suggested the speaker is willing to seriously consider the idea as well.

“The one clinker that I see is the source of the funding,” said Bakk. The governor wants to use general fund dollars to pay for the rebates, while Daudt has called for using the surplus in the state’s healthcare access fund to cover the cost. “We’re going to have to figure that piece out,” said Bakk, who indicated he’s open to either option. But, he said, neither the governor nor the speaker appear to be so flexible. “Both sides are pretty dug in on that point,” he said.

Bakk said the Senate passed legislation during the last session which would have extended premium subsidies to many more Minnesotans, by eliminating the current cutoff of 400 percent of the poverty level for such assistance. Instead, the measure would have capped the cost of a basic silver-level health insurance plan at 9.6 percent of an individual’s or family’s annual income. Bakk said the Republican-led House didn’t take up the proposal, which never made it to the governor’s desk.

“That’s what I’d like to pursue,” he said.

Gov. Dayton said a long-term solution is best crafted at the federal level, and he suggested that federal offices explore creation of a reinsurance system, which would, in effect, cap the top-end liability for health insurers, which would allow them to lower premiums. But the prospect of implementing any changes would appear to be slim as long as Republicans control the Congress. Republicans have been unwilling to modify the ACA in any way, indicating that they will only support a full repeal of the law, something the Democrats are unlikely to support.

Rising health care costs driving rates

While consumers have been quick to blame insurers or agencies like MNsure for the sharp jump in premiums, Minnesota Commerce Commissioner Mike Rothman said it is the high demand for medical services from those within the individual insurance market that is pushing premiums higher. “The individual markets are experiencing very high claim costs,” said Rothman. That’s prompted some insurers to drop out of the individual exchanges and is forcing those that remain to adjust their premiums in order to stem losses.

Perhaps the biggest single factor affecting Minnesota’s individual market is the elimination of the Minnesota Comprehensive Health Association, or MCHA, a state-managed high risk pool for residents who were not able to purchase private insurance in the past due to costly pre-existing conditions. Implementation of the ACA prohibited insurers from denying coverage to those high-need patients, and most have since migrated to the individual insurance pool. Rothman said it’s basic math that’s driving the cost spiral. “We have a disproportionate percentage of people with high need whose costs have to be absorbed by a relatively small pool,” he said.

In the past, those patients either suffered with the extraordinarily high insurance premiums charged by MCHA, or lived without insurance, often forgoing treatment for chronic conditions or facing bankruptcy due to medical bills.

Bakk said the ACA has provided help to many who didn’t have health care access in the past, but it hasn’t done a good job of keeping the costs of care in check. And he agreed that a solution, in the end, must come at the federal level. “I’m a fan of Medicare for all,” said Bakk. “We have to address these costs. Health care is bankrupting our economy.”