Cover: Assessing the Impact of Individual Market Reforms in Minnesota

Assessing the Impact of Individual Market Reforms in Minnesota

Published Jan 24, 2024

by Preethi Rao, Federico Girosi, Christine Eibner

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Research Questions

  1. How does implementing state-funded subsidies affect Minnesota's health insurance enrollment, premiums, and state spending?
  2. To what extent do these state-funded subsidies offset expected reductions in enrollment due to the expiration of federal premium subsidy enhancements and reinsurance?
  3. What are the additional effects of replacing MinnesotaCare, Minnesota's Basic Health Program, with a similarly structured marketplace plan?

Starting in 2026, Minnesota could experience disruptions to its health insurance marketplace caused by the anticipated sunset of federal premium subsidy enhancements, made available through the Inflation Reduction Act of 2022, as well as the expiration of state funding for its reinsurance program. With reduced premium subsidies, fewer people might enroll in marketplace plans, which could lead to higher premiums and market instability. The expiration of reinsurance, which partially offsets insurers' claims costs for people with high expenditures, could exacerbate these issues.

In this report, researchers estimate the effects of implementing state-funded subsidies to bolster Minnesota's marketplace given these anticipated changes. They also study the impact of replacing the state's Basic Health Program with a similarly structured marketplace plan. The policy reforms that researchers consider were developed by the Minnesota Council of Health Plans and share similar goals with legislation recently proposed by Minnesota policymakers, such as HF 96, a bill authorizing study of a public option that also proposed to temporarily enhance marketplace subsidies.

Key Findings

Enrollment

  • Enhancing subsidies increases individual market enrollment and reduces uninsurance in both 2025 and 2026; effects are larger in 2026 because the state-financed subsidy enhancements that researchers modeled for 2026 are more comprehensive relative to current law than in 2025.
  • Moving the MinnesotaCare Basic Health Program population to the marketplace reduces uninsurance relative to the enhanced cost-sharing reduction and premium subsidy scenario in 2026.

Premiums

  • Premiums are substantially higher under current law in 2026 than in 2025, reflecting the elimination of reinsurance.
  • The subsidy enhancements modeled for 2025 increase premiums slightly relative to current law because the affected population — people with incomes between 200 and 250 percent of the federal poverty level — tends to be slightly more expensive than the overall individual market population.
  • The 2026 subsidy enhancements, which are more comprehensive than the 2025 enhancements, tend to bring in a relatively healthy population compared to enrollees under current law, decreasing premiums relative to current law in 2026.
  • Premiums decrease even further in the 2026 scenario that adds the MinnesotaCare population to the marketplaces.

State Spending

  • Current law state spending is higher in 2025 than in 2026, reflecting the elimination of state funds for reinsurance in 2026.
  • State spending increases in the scenarios that add state-financed subsidies.
  • The scenario that includes both state-financed subsidies and moving the MinnesotaCare population into an actuarially equivalent marketplace plan increases state spending relative to the scenario that includes subsidies alone. This change is driven by increased insurance enrollment in this scenario.

Research conducted by

This research was funded by the Minnesota Council of Health Plans and was carried out within the Payment, Cost, and Coverage Program in RAND Health Care.

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