Road Trip

Minnesota: A Health Care Island Scrambles To Stay Afloat

The Democratic governor and the Republican legislature have moved to shore up the individual market, but Minnesotans are leaving it in droves.

% in the individual market: 8%
% uninsured: 6%
Per capita health expenditures (rank): $7,409 (16)
Rankings include the District of Columbia
Source for all data: Kaiser Family Foundation

This state is known for its 10,000 lakes (and hockey and the accents on Fargo). But when it comes to health care, Minnesota is more insular than limnic.

“We’re not an island,” says Jim Schowalter, president of the Minnesota Council of Health Plans. “But from a health care perspective we are kind of like one.”

Prosperous (the seasonally adjusted unemployment rate is 3.7%) and socially cohesive (at least on the surface; google “Minnesota nice”), Minnesota has a sui generis health care landscape.

The state has had a subsidized a insurance program for low-income residents who don’t quality for Medicaid since the ’90s; this year, about 89,000 Minnesotans are getting health insurance through MinnesotaCare, as the program is called. HealthPartners, Medica, and other not-for-profit HMOs have large roles, partly because of a 40-year-old law that requires insurers licensed as HMOs to be not-for-profits. Other states had such prohibitions but got rid of them years ago.

Under the ACA, Minnesota health care continued to evolve in its own niche in a (relatively) singular way.

MinnesotaCare was recast as a Basic Health Program for people with incomes between 133% and 200% of the federal poverty level. Only Minnesota and New York have taken advantage of the Basic Health Program provision of the ACA. The ACA exchange plans, MinnesotaCare, and the state’s Medicaid program combined to bring the uninsured rate down to 6%.

Earlier this year, Gov. Mark Dayton, a Democrat, proposed letting residents buy into MinnesotaCare, which would have put Minnesota on the map as one of the states experimenting with a state-level version of the public option. The legislature nixed that idea.

Instead of MinnesotaCare-for-all, Dayton and the Republican-controlled legislature ended up negotiating a deal that allocated $326 million in state funds for “premium relief”—in the form of a 25% rebate on premiums—for Minnesotans in the individual market who are not eligible for receiving ACA premium subsidies because their income is too high.

The legislature also created a $540 million reinsurance program to prop up the shaky individual market, although the program is contingent upon the state getting a 1332 Medicaid waiver.

In other ways, Minnesota is not so distinctive. After setting their premium prices low—in fact, the lowest in the country in 2014 by some tallies—health plans in the state have dialed up premiums as the claims exceeded the money they were taking in. “The ACA did not reduce the cost of care,” notes Schowalter a little ruefully.

One of the consequences of the premium hikes is that the number of Minnesotans buying coverage in the individual market is dwindling; according to Schowalter, about 167,000 Minnesotans bought coverage this year, compared with 270,000 in 2016. Whether this year’s effort to stabilize the individual market will reverse that trend will be something to watch.

Meanwhile, as elsewhere, providers are consolidating, which tends to lead to higher prices. In March, two of the largest health systems in the Twin Cities, Fairview Health Services and HealthEast, announced plans to merge.

Republicans have argued Minnesota would benefit from a healthy dose of competition, and the premium relief legislation included a provision that would have ended the prohibition on for-profit HMOs. More recently, the brakes were applied to “conversion”: Dayton signed legislation that put a two-year moratorium on any of the state’s not-for-profit HMOs being sold to a for-profit company.

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