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Health Law Wrinkle Could Penalize Minn. Insurers

By Christopher Snowbeck, Pioneer Press, St. Paul, Minn.
McClatchy-Tribune Information Services

Jan. 12--Without a change in proposed federal rules, the continuation of a Minnesota health insurance program for people with costly illnesses could cost health plans and their subscribers more than $60 million next year, state officials say.

The issue involves a long-standing program called the Minnesota Comprehensive Health Association, which the Legislature created in 1976. It helps provide coverage for Minnesotans who can't find insurance on the open market, often because of a costly pre-existing health condition.

One of the key changes coming in 2014 with the federal Affordable Care Act is that insurers no longer will be able to deny people coverage based on pre-existing conditions. To make sure that the expense of covering these patients is evenly spread among insurers, the federal law will give health plans a chance to receive "reinsurance" payments if they happen to attract many patients with costly conditions.

The money will come from a fund that insurers across the country will pay into, but health plans in Minnesota likely won't collect much money from it, said Kirby Erickson, executive director of the Minnesota Comprehensive Health Association. That's because many Minnesota residents with pre-existing conditions are covered through MCHA, and current plans would let people maintain that coverage in 2014 and beyond.

Minnesota officials argued in a Dec. 31 letter to the federal government that MCHA should be able to collect reinsurance payments, but current

regulations wouldn't allow it.

"The money that's going to be deposited by insurers in Minnesota probably won't end up here -- it will end up elsewhere in the country," Erickson said in an interview. "It's kind of like getting double-billed."

Health plans in Minnesota provide a large chunk of the funding for patients covered through MCHA. The costs are passed along to individuals and small employers through the premiums they pay for health insurance.

Federal officials are reviewing concerns from Minnesota and other parties about the reinsurance program. Unless the issue is remedied, state officials say it will be a costly example of Minnesota being penalized for having been ahead of the curve.

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"What are the chances the feds will do the right thing and be fair to Minnesota?" asked state Rep. Jim Abeler, a Republican from Anoka who focuses on health issues. "I'm not optimistic."

MCHA is what's known as a "high-risk pool," and Minnesota was one of the first two states in the country to create such a program. It stands as the largest high-risk pool in the country, Erickson said, with 26,000 members.

Although the Legislature called for the creation of MCHA more than 30 years ago, the nonprofit group is not funded by taxpayer money.

The program is one of the reasons that Minnesota traditionally has had one of the nation's lowest rates of residents who lack health insurance. Like the federal health care law itself, the Minnesota program tries to solve one of the thorniest problems in the current health insurance market -- getting coverage for individuals with serious health problems.

"If high-risk pools are not allowed to participate in the transitional reinsurance program and they continue to exist for some period of time, carriers would pay both the federal reinsurance assessments as well as assessments for the MCHA program," state officials wrote in the Dec. 31 letter.

"An analysis by MCHA of their members whose annual claims exceed $60,000 suggests that Minnesota carriers would pay over $60 million in 2014 to care for members of MCHA that could be paid for by the Federal Reinsurance Program," the letter stated.

The problem could go away if Minnesota simply closes MCHA by 2014. People covered by the program could move to Minnesota's health insurance exchange, a new marketplace called for by the federal health law where individuals can start shopping for coverage late this year.

Health plans in Minnesota that cover former MCHA members through the exchange would be able to tap funds from the federal reinsurance program; those insurers and their subscribers, meanwhile, would be spared the expense of helping fund MCHA, which in 2011 assessed health plans $136.5 million.

But Minnesota officials are reluctant to force all people covered through MCHA into the health exchange next year.

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Some people like their MCHA coverage, Erickson said, and might prefer to stay out of the health exchange for a year or two until they are familiar with the new marketplace. Health insurers, meanwhile, say that if all 26,000 members of MCHA immediately moved into the health exchange in 2014, it could cause premiums to skyrocket. That, in turn, could prompt some people to drop coverage altogether -- including some people currently covered by MCHA who have serious health problems.

"Our concern is that you don't want people losing coverage," said Julie Brunner, executive director of the Minnesota Council of Health Plans, a trade group for nonprofit insurers in the state. "You have to have a smooth transition."

Still, some think there could be problems if high-risk pools continue to operate.

A December letter to federal officials from the American Academy of Actuaries, for example, notes that the transitional reinsurance program has the most funds to help health plans during 2014. So, delaying the transition of patients with large medical bills until later means health plans would have less chance of tapping the money, the group says. The Affordable Care Act will offer $10 billion in reinsurance payments during 2014, $6 billion in 2015 and $4 billion in 2016.

Buying coverage on the exchange could be a good deal for some covered through MCHA if they fall within certain income limits for federal subsidies.

"Individuals in high-risk pools will have the greatest financial incentives to participate in an exchange," wrote the American Academy of Actuaries in its December letter. "Prohibiting this population from participating immediately in the individual market, particularly in an exchange, could be unfairly discriminatory."

It's unclear whether individuals who don't qualify for subsidies and are covered by MCHA would be better off buying on the exchange.

On Wednesday, Jan. 9, leaders of the Minnesota Democratic-Farmer-Labor Party introduced legislation backed by Gov. Mark Dayton, a DFLer, to create a state-based health exchange. Because of the reinsurance issue, the legislation would give the state Commerce Department and the MCHA board the authority to develop and implement the phasing out and eventual termination of the program, said state Sen. Tony Lourey, DFL-Kerrick.

Lourey, who is chief author of the bill in the Senate, said most people in the state would rather allow for a gradual phase out of MCHA over a few years. In that respect, he added, the MCHA issue is one of the least-controversial items for state leaders in the health exchange bill.

But if the federal government doesn't let the MCHA program collect reinsurance payments, the state might need to close the program sooner, Lourey said.

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"If that phased, gradual approach costs us $60 million, we're going to have to rethink things," he said. "We're leaving open the possibility that we may need to find some other supports to help people transition much quicker."

Christopher Snowbeck can be reached at 651-228-5479. Follow him at twitter.com/chrissnowbeck and facebook.com/PioneerPress Politics.

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(c)2013 the Pioneer Press (St. Paul, Minn.)

Visit the Pioneer Press (St. Paul, Minn.) at www.twincities.com

Distributed by MCT Information Services

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