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Analysis

Feds Slash $99M from Funding Estimate for Minnesota's Reinsurance Program

By Steven Porter  
   December 06, 2018

The unexpected adjustment for 2019 prompted state lawmakers to question the wisdom of the program moving forward.

Minnesota state senators began grappling with some unwelcome news Wednesday, after the Centers for Medicare & Medicaid Services said federal pass-through funding for the state-run reinsurance program would be $99.1 million less for 2019 than had previously been estimated.

The state had expected to receive $183.9 million next year under estimates provided in October 2017. But a letter received from CMS this week advised the state to expect just $84.8 million for 2019, potentially adding a significant financial burden on a state that has dealt in the past with unpleasant circumstances surrounding its reinsurance program.

The final figure will be determined in April, per standard procedure, Minnesota Department of Commerce Assistant Commissioner Peter Brickwedde told state senators during a committee hearing Wednesday.

"It is, obviously, a dramatic change, but this is the same process that played out for the 2018 number that was finalized earlier this April, so we're continuing the same process that we have used all along," Brickwedde said. "But I would expect there to be significant dialogue between the state and federal regulators on a go-forward basis."

This adjustment is much larger than the one Minnesota received a year ago. After earlier estimates said the state would receive about $139 million in federal pass-through funding for 2018, the finalized amount was about $130.7 million, Brickwedde said. Why the difference was so significant this time around remains a mystery.

"The state has not seen—nor am I aware of any other state having seen—into the black box that is the methodology that is used by the federal regulators at the Departments of Health and Human Services and Treasury to do the calculations," Brickwedde said.

"How that calculation is done we are not sure," he added.

Even so, the adjustment doesn't pose a risk to the reinsurance program's operation for 2018 or 2019, nor does it impact rates or premiums or costs for consumers, Brickwedde said. What the change could do is alter the share of the state's responsibility for plan year operations.

A spokesperson for CMS could not be reached Wednesday, as federal offices were closed in observance of former President George H.W. Bush's funeral, and answers to HealthLeaders' questions were not immediately available Thursday morning.

Adjustments Less Drastic in Other States
 

Minnesota, Alaska, and Oregon are the three states that have pioneered reinsurance programs authorized by waivers under Section 1332 of the Affordable Care Act. And they have all shown signs of success. But the adjustments to their 2019 estimated federal pass-through funding have varied, ostensibly due to a variety of state-specific factors.

After receiving about $54 million for 2018, Oregon now expects to receive about $42 million in federal pass-through funding for 2019, according to the Oregon Department of Consumer and Business Services.

"The funding is based on factors such as projected individual market enrollment, premiums, and plan offerings," department spokesperson Brad Hilliard told HealthLeaders in an email. "It represents the amount of money the federal government expects to save next year due to Oregon's reinsurance program."

This comes after the state had projected $30-35 million in annual pass-through savings, Hilliard noted.

Alaska's original estimate for 2019 pass-through funding was $62.6 million, so the updates estimate of $68.7 million "was right in line with what we were projecting," Lori K. Wing-Heier, director of the state's Division of Insurance, told HealthLeaders.

Several other states—Maine, Maryland, New Jersey, and Wisconsin—are following suit with waiver-authorized reinsurance programs of their own.

Minnesota's Reinsurance Hurdles
 

Despite the benefits of reinsurance, Minnesota state senators suggested the program may not be worth the hassle and unpredictability caused by these adjustments (which are made because programs authorized by waivers under the ACA's Section 1332 cannot increase the federal budget deficit, per four guardrails written into the law).

"This change significantly impacts the conversation about reinsurance going forward," said state Senate Health and Human Services Finance and Policy Committee Chair Michelle Benson, a Republican, as the StarTribune reported.

State lawmakers agreed last year to spend up to $542 million per year for two years on the program after Minnesota's individual market nearly collapsed, the paper reported. The federal government's contribution is based on how much the program saves the federal government.

This isn't the first trouble Minnesota has had with the federal government over its reinsurance program, as HealthAffairs reported last year.

Steven Porter is editor at HealthLeaders.


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