How to give health insurance relief? Lawmakers must weigh speed vs. control

ST. PAUL-Finding $300 million to help Minnesotans struggling with health insurance premiums was the easy part.

The part that's been tying Minnesota leaders in knots this month is how to get the money to the people who need it. Lawmakers want to spend the money quickly, accurately and fairly - and may have to choose which of those priorities they care about.

The basic concept is simple: give a state-funded discount of around 25 percent on 2017 premiums to the roughly 120,000 Minnesotans in the individual market who are facing soaring health insurance premiums without federal subsidies to offset them.

Getting money out the door quickly could require the state to give some money to people who don't need it. A finely tuned system could cost more to implement but stretch the state's relief dollars further.

As lawmakers weigh these priorities, they're considering two basic proposals for how to get premium relief to the right people: either the state can send out checks directly, or health plans can give people discounts directly and get reimbursed by the state.

OPTION ONE: STATE-RUN

One way to administer the relief is to have state agencies manage it. Though Minnesota doesn't do anything exactly like the proposed relief package, several agencies do similar tasks: the Department of Revenue collects tax returns and issues rebates, MNsure processes income data and administers federal insurance subsidies, and Minnesota Management and Budget routinely pays state vendors.

How it would work: Under this proposal, Minnesotans could apply to the state for a rebate check. State agencies would have to build software to process these applications and compare them against existing state data, such as tax returns on file at the Department of Revenue. Minnesotans who were found to be eligible would have checks sent out.

Advantages: This lets the relief be more finely distributed. Because the state has access to information about Minnesotans' income, a state-run system could exclude rich Minnesotans from the relief.

This could have two benefits. First, it would focus more of the relief on people who need it most, and less on Minnesotans who need help least, which many lawmakers believe is a fairer system. Second, excluding high-earners from the subsidies could let the state's money go further.

Disadvantages: It could take a lot of effort for the state to build computer systems to handle a rebate program. State agencies would need to develop a secure website where Minnesotans could file sensitive information, a database to store that submitted information, and systems to match it with other databases on income and residency. All this would have to be integrated with the state's existing payment system to send out checks.

Some of these steps could be simplified if the state hires a contractor, though going through the process of soliciting bids would add its own delays.

Lawmakers who back this proposal proposed giving the state $8.5 million and three months to build such a system. Management and Budget Commissioner Myron Frans said it might take $20 million and as long as 10 months.

Sending out thousands of checks could create more potential for fraud. And state officials have suggested that these rebates - unlike plan-run discounts - might be subject to federal taxes.

OPTION TWO: INSURER-RUN

The state could give insurance premium relief by using the organizations that are collecting those premiums in the first place: insurance companies.

This could be simpler and faster to administer - but with more limitations.

How it would work: The health insurers selling on the individual market would have to modify their existing billing systems to apply a discount to people eligible for relief. Those people would then get premium bills 25 percent smaller than they ordinarily would pay.

No one has to apply for relief under this option, and no one has to mail out thousands of checks. Instead customers just pay smaller premiums, and the state reimburses insurers later.

The Minnesota Council of Health Plans says it would take each insurance carrier between eight and 12 weeks for plans to implement such a system. The date is uncertain in part because the plans send out bills in the middle of every month. If the development misses the bill-release by a single day, it pushes back the relief by a full month.

Additionally, some carriers have older computer systems that could take longer to modify.

Advantages: This approach could be considerably cheaper than a state-run program. Kathryn Knit of the Minnesota Council of Health Plans estimates a total implementation cost of $1 million for all the carriers combined - a cost that the carriers will bear themselves. This compares to anywhere from $8 million to $20 million for a state-run option.

A plan-run program would also likely be faster than a state-run alternative.

Disadvantages: The benefits in speed and cost come with several significant limitations.

If health plans administer the relief, they'd be unable to alter the rebates based on Minnesotans' income, because that's not information carriers have. What they do have is a single piece of information: whether or not a customer received federal tax credits for their health insurance.

That means the plans could direct the money to people who aren't getting the federal subsidies, but couldn't, for example, exclude people earning more than $100,000 per year.

To provide rebates swiftly, plans need the rebates to be as simple as possible: a flat percentage discount on every eligible Minnesotans' premium.

The insurers also have logistical concerns. They want assurances that the state will reimburse them promptly for the millions of dollars in rebates they'll be issuing their customers. Administering the plan would also likely require insurers to go through state audits later on.

OUTCOMES

Lawmakers are trying to pass a relief package before Jan. 31, when the 2017 open-enrollment period for individual market health insurance ends. The faster a deal becomes law, the sooner the relief can start flowing.

Gov. Mark Dayton and his fellow Democrats are backing the carrier-run proposal, while Republican lawmakers have coalesced behind the state-run option.

Any package needs both Dayton's signature and a majority support from the Republican-controlled Legislature to become law.

Aside from differences on how to administer the relief, the two parties also differ on whether other provisions should be added to the bill. Republicans are pushing to add long-term reforms to a relief package, while Dayton wants a slimmed-down bill with only 2017 relief.