Walz administration releases government-run health insurance plan

Walz administration releases government-run health insurance plan

On February 1, the Walz administration unveiled a government-run health insurance plan, commonly known as the “public option.”

On February 1, the Walz administration unveiled a government-run health insurance plan, commonly known as the “public option.”

Last year, lawmakers tasked the Minnesota Department of Commerce with developing a strategy for implementing a public option in Minnesota. The department’s report analyzed eight different public option plans, which are divided into two main parts:

  • MinnesotaCare Buy-In is administered by the Minnesota Department of Human Services. In that case, lawmakers would open up MinnesotaCare, a program that provides heavily subsidized health insurance to working-class people, to high-income people.
  • The government-designed “standard plan” must be offered by all health insurance companies selling insurance on the government-run MNsure health insurance exchange. This is similar to the public option models in Washington and Colorado.

Since the implementation of the Affordable Care Act (ACA or Obamacare) and MNsure in 2013, Minnesota has struggled to maintain affordability and stability in the individual market. The marketplace, where people without jobs or government insurance go to buy health insurance, serves about 200,000 people, including many small business owners.

Due to the instability caused by ACA regulations, individual market insurance premiums have doubled or worsened over the past decade. Deductibles are among the highest in the country.

Since 2018, the individual market has stabilized through “reinsurance” programs, in which state and federal governments pay some of the very high-cost medical bills to soften the blow to other policyholders. Reinsurance is authorized and renewed on a bipartisan basis with the support of the NFIB.

Reinsurance successfully brought more people back into the insurance pool and reduced rates by 25% from their original levels. It provides relief to everyone in the individual market.

Last year, DFLers and Governor Walz set reinsurance to end after 2025, with plans to launch a public option in 2027. The goal of a government-run public option is to create a comprehensive plan with high “actuarial value.”

Most health insurance plans pay about 70% to 80% of covered medical expenses; DFL’s public option will cover about 95% of the costs.

NFIB strongly opposes the public option for the following reasons:

More expensive and less effective. The public option is a more complex and expensive plan than reinsurance. As reinsurance, at least twice as much public funding would be needed to serve half as many people.

The chart below shows the public cost of reinsurance in the individual market versus the public option:

Small businesses (and everyone else) pay more. To provide platinum benefits at attractive premiums, the public option relies on substantial public subsidies and extremely low payments for health care provider services.

Hospitals and clinics will make up for this by having remaining private market health plans pay more for care.

Public option jeopardizes access to care. Across the state, rural health care providers are already struggling financially. This has resulted in a reduction in available services, longer drive times for services such as pregnancy care, and the consolidation of rural health care systems.

Putting more people on low government payment plans could leave many hospitals and clinics in trouble, making it harder for people in greater Minnesota to access care.

“Successful” public choices collapse private markets. If the public option succeeds in attracting enough enrollees through large government subsidies and low provider payment rates, it will hollow out other private insurance markets, such as the individual and small group markets.

As there are fewer and fewer participants in these private markets, the market will inevitably collapse. The public option encompasses these markets and effectively becomes single-payer.

The public option was once highly controversial among centrists on both sides of the political aisle. Concerned about the impact, the company was excluded from the ACA in 2010 in a bid to win votes from moderate Democrats. It now enjoys widespread support at the federal level and among Minnesota Democrats.

You can learn more about the NFIB opposition in an editorial published by the Duluth News Tribune last year: Local opinion: Government-run health insurance is false hope – Duluth News Tribune.

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