Future of Health Reform: Minnesota reinsurance program is a model to followDecember 21, 2017
Minnesota is one of only two states— the other being Alaska— that has been able to implement a state-based program known as reinsurance to keep premiums under control for people who buy insurance in the individual market.
At the recent Blue Cross and Blue Shield Association State Legislative Conference, Lin Nelson, director of legislative affairs and chief lobbyist at Blue Cross and Blue Shield of Minnesota, spoke on a panel with legislative leaders from Alaska and Oklahoma (where an attempt to create a similar program was unsuccessful), about how Blue Cross worked with other Minnesota stakeholders to get legislative approval of a state-based reinsurance program.
We sat down with Nelson to get a recap of how this model, which other states are looking to follow, came to be.
Can you give a quick recap of why the individual market has been so rocky in Minnesota over the last few years?
From 2014 to 2016, the health carriers in the individual market in Minnesota had collectively lost about $750 million. About $500 million of that was lost by Blue Cross alone. These losses required the market to make significant adjustments to premium rates to cover claims, which caused a lot of shock to the system.
The market needed stability. We had to make an immediate change for 2017, while working on a long-term solution. That’s what we were trying to quickly solve for.
What were the changes made to begin to provide stability?
We were fortunate that the Minnesota Legislature made this need for stability a top priority and that the state had a budget surplus to help fund the relief program.
A bill was quickly passed to provide a 25 percent premium subsidy to people in the individual market who were not be eligible for federal tax credits. The health plans were able to get these dollars to members by May, quickly offering them much needed relief.
Also during this time, the legislature introduced a bill for a state-based reinsurance program. The proposed bill was modeled after an existing federal program and built upon the success of Minnesota’s high-risk pool. This familiar template made it much easier for the actuaries and regulators to review and approve the program.
Blue Cross also worked with the Minnesota Council of Health Plans members and other stakeholders to generate support. The bill became law at the end of March. Achieving this was a very important to provide market stability for the 2018 plan year.
What exactly is reinsurance and how did it come to be in Minnesota?
Reinsurance is a program that offsets the cost of unusually expensive claims. The state and federal dollars that the health plans received are used solely to pay medical bills for the care that people receive.
Through this program, health plans receive an 80 percent reimbursement for claims that fall between $50,000 and $250,000. Anything above or below that range is the sole responsibility of the plans. This program is invisible to consumers, so they do not experience any disruption.
How did this help provide market stability?
Reinsurance was critical to allow insurance companies to stay in the market and keep rates stable. Blue Cross was able to keep the rate increase for 2018 to 2.8 percent. Without reinsurance dollars, it would have needed to be more than 20 percent.
Without the reinsurance program, more health insurance companies probably would have dropped out of the individual market because it wouldn’t have been sustainable. All five Minnesota health plans that participated in 2017 will remain in the market in 2018. That’s a huge win right there.
Does reinsurance affect all Minnesotans or just those with individual health plans?
While a lot of the conversation is centered around the individual market, it does affect everyone. If we don’t keep underlying health care costs down, ultimately costs will shift and be felt by other members. That’s why we’re working hard on several initiatives that will help control health care costs.
You mentioned long-term solutions. Is this about managing the cost of health care?
Yes, this is critical to have long-term stability. First, price variation among providers must be reduced, which comes with hard negotiations. We want to pay for the best quality of care at a fair price. To achieve that, we’re having tough conversations, but they’re important. Finding ways to keep costs down is one of our roles in the health care system.
There are many other factors that go into managing costs. Ultimately, we need to work together to improve overall affordability of health care for the members and patients we serve.
About the Future of Health Reform series
The Future of Health Reform is an ongoing series focused on the many changes taking place throughout the health insurance industry. Through this series, Blue Cross looks at various policy issues that are rapidly shaping the transformation of health care across Minnesota and the nation.
Previous posts in this series include: