Feds paying $17.2 million in MinnesotaCare lawsuit

May 12--The federal government is paying the state $17.2 million as part of a lawsuit over MinnesotaCare funding, but state officials said the core dispute is far from settled.

Earlier this month, a federal judge signed off on an agreement that dismisses the state's lawsuit and directs federal officials to consult with Minnesota and New York over a new funding formula for what is called a Basic Health Plan (BHP) under the federal Affordable Care Act.

Starting in 2014, Minnesota converted its MinnesotaCare health insurance program for some 89,000 lower-income, working residents into a Basic Health Plan. New York has a similar program.

The judge's order said if the states disagree with the new formula developed by the Trump administration, they have until Aug. 1 to ask that a court reopen the case for litigation.

"This is not a resolution of the case," said Chuck Johnson, the acting commissioner at the state Department of Human Services (DHS), in a statement. "The $17.2 million is a supplemental payment, representing only a portion of Minnesota's projected loss of federal funding."

In January, Minnesota Attorney General Lori Swanson filed suit to stop a Trump administration decision that would terminate an estimated $130 million in annual payments to the state. Federal funds, including those targeted by Swanson's lawsuit, have been covering most of MinnesotaCare's costs with the rest coming from enrollee premiums and state funding.

The Affordable Care Act (ACA) provides tax credits for individuals at certain income levels who buy private health insurance via government-run exchanges like Minnesota's MNsure. States that create a Basic Health Plan as an alternative for these consumers can tap a large chunk of the value of tax credits individuals would receive to purchase coverage on the exchange.

The federal government also has been funding the BHPs in recognition of the cost-sharing reduction (CSR) dollars under the ACA that beneficiaries also would effectively use if they bought private coverage through an exchange. This "CSR component" was expected to provide $32 million to Minnesota in the first quarter of 2018, the state said, but the Trump administration decided last year to stop making payments to private insurers for CSR benefits -- and then extended the decision to the state BHPs.

The Trump administration halted CSR payments to insurers based on the "conclusion that there was no congressional appropriation for CSR payments," the state said in its January lawsuit.

In a statement this week, DHS said it did not receive the $32 million it expected from the federal government during the first quarter.

The state said the $17.2 million payment is smaller than what the state proposed as a revised payment methodology.

DHS officials said there are sufficient funds in a trust fund for the Basic Health Plan to cover expected expenses this year.

Minnesota's U.S. senators issued a joint statement calling on the U.S. Department of Health and Human Services to restore what they called "full federal funding" to the state's program.

"According to the [DHS], CSR payments have funded approximately 20 percent of the cost of MinnesotaCare before the Administration's decision to discontinue these payments," said U.S. Sens. Amy Klobuchar and Tina Smith in a statement. "As a result, our state may lose approximately $529 million in federal funding between 2018 and 2021."

Swanson issued a statement saying, "We are hopeful that state and federal governments will be able to work out a positive resolution."

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