~ Modernize MinnesotaCare; Establish the Minnesota Health Insurance Exchange; Extend Tax Benefits ~
Governor Pawlenty today announced a new health care reform plan to drive down health insurance costs, improve quality, and increase access to affordable health care for the uninsured.
Governor Pawlenty’s “Healthy Connections” proposal will further transform Minnesota’s health care marketplace by:
- Modernizing MinnesotaCare to offer a more affordable private sector alternative that focuses on rewarding healthy outcomes.
- Increasing affordable access to health care coverage for kids in Minnesota.
- Establishing the Minnesota Health Insurance Exchange to connect employers, employees, MinnesotaCare recipients and individuals to more affordable coverage options.
- Providing small employers and their employees with more affordable coverage, greater choice of health plans, and reduced administrative burden.
- Lowering out-of-pocket costs for individuals purchasing insurance through the private market.
“Minnesota is the healthiest state in the nation with the highest percentage of people with health insurance, but even we can do better,” Governor Pawlenty said. “We measure progress in health care reform by access to insurance, quality of care delivered, and cost containment. It’s not just about providing access to a broken system. All three need to be addressed and this proposal does that.”
The Need for Health Care Reform
Health care costs continue to rise at a disturbing rate. Private insurance premiums in Minnesota grew by 81 percent per health plan enrollee between 2000 and 2005 and MinnesotaCare spending grew by 134 percent between 2000 and 2006. By comparison, per capita income for Minnesotans grew an estimated 20 percent during the same period.
The availability of affordable health insurance may be limited for employees of small employers. About 20 percent of uninsured Minnesotans work for companies with 11 to 50 employees and about one third of these firms don’t offer health insurance coverage to their employees.
In addition, the current health care system is built on rewarding volume and not value. In many cases, providers lack incentives to provide the best care at the lowest cost. Investing in quality improvement can save money. For example, HealthPartners has estimated a savings of about $18 for every $1 invested in the management of diabetes and cardiovascular disease.
Last year, Governor Pawlenty introduced QCare – Quality Care and Rewarding Excellence – as a new quality standard to reward top performing providers while saving millions of dollars in health care costs. To implement the program, the Governor signed an executive order directing state government to apply QCare standards and align payments and incentives for all state purchased health care. Healthy Connections will now reward MinnesotaCare enrollees for making the same cost and quality decisions that will lead to better health outcomes.
“It has been 17 years since MinnesotaCare was introduced and it needs to be modernized and upgraded,” Governor Pawlenty said. “Healthy Connections will modernize MinnesotaCare by improving affordability, promoting quality and value, rewarding healthy behaviors, and expanding choice for enrollees.”
1. Improving affordability and access to coverage for kids
MinnesotaCare premiums will be reduced for children to about one third of current levels. MinnesotaCare eligibility will expand coverage to children under age 21 with household income of $60,000 or less for a family of four (from 275 percent of the poverty level to 300 percent for children under age 21 and to 305 percent for infants). To further encourage eligible kids to enroll, the proposal would reduce premiums by about 50 percent for kids choosing a private sector option known as MinnesotaCare II.
2. MinnesotaCare II - Expanding Enrollee Choice
Those insured by MinnesotaCare will be able to save even more through subsidized private coverage at lower premium rates than traditional MinnesotaCare. MinnesotaCare II will be available for kids with family incomes above 200% of poverty and would include standard benefits and deductibles. A family of four currently enrolled in MinnesotaCare with an income at 225 percent of poverty would save $372 per year on premiums. With pre-tax premium payments and other options, the same family could save up to $1,948 annually.
All health plans with more than 3% of the individual market would be required to offer MinnesotaCare II for children and could also design the same products for adults so that families could enroll all members in the same plan.
3. Rewarding Healthy Behaviors and Promoting Quality and Value
MinnesotaCare II - QCare bonus accounts would be established for enrollees meeting preventive care goals. A $50 per child annual bonus for up to three children in a family would be used to offset other health care costs including deductibles and cost sharing.
MinnesotaCare Classic - Children who meet QCare preventive care goals will receive a reduced premium – about $4 per month (5 to 33 percent of premiums) for up to three children in a family. Adults meeting QCare goals for diabetes and cardiac care will also have their premiums reduced by about $4 a month.
Establish the Minnesota Health Insurance Exchange
To improve access and affordability of health insurance coverage in the private market, Governor Pawlenty is proposing the creation of a private, non-profit Health Insurance Exchange.
Employers - The Health Insurance Exchange will create another option for employers who would like to provide health insurance as a benefit for their employees. The Exchange will also streamline administrative responsibilities and reduce the paperwork burden for employers by allowing them to designate the Exchange as their health plan.
Employees will be able to pay for coverage with pre-tax dollars, the same advantage enjoyed by people with coverage through their employers. They will also have access to a wider range of health plan choices. The Exchange will also allow employees – especially part-time employees - to combine premiums contributions from multiple employers.
Individuals - All individual health insurance policies in Minnesota will be required to be purchased through the Exchange. Individuals will also be able to pay for coverage with pre-tax dollars. The products will continue to be regulated by the state.
MinnesotaCare II - The Exchange will also provide the policy for eligible Minnesotans who select MinnesotaCare coverage through the private market.
The Exchange will receive the pre-tax payments for health insurance premiums and make premium payments to health plans. It will also administer the bonus accounts for MinnesotaCare II enrollees meeting QCare targets.
Enhance tax breaks for individuals and employers
In order to withhold money on a pre-tax basis for employee health insurance, all employers with more than 10 employees would be required to establish a “Section 125 plan” – based on the Section 125 of the Internal Revenue Code. However, employers will not be required to offer or contribute to health insurance coverage for their employees.
The initial setup cost of a 125 plan is estimated at about $300 and employers would realize some savings by not paying payroll taxes (Social Security, Medicare, and unemployment taxes) on the amounts that employees pay for health insurance premiums through the Exchange.
Governor Pawlenty’s Healthy Connections initiative will require legislative approval and will be included in his budget proposal later this month. The program will cost $31 million for the next two-year budget cycle and $88 million when fully implemented in the next biennium.
Additional health care reform initiatives will be proposed by Governor Pawlenty to transform the system to reward health and produce better outcomes. Those initiatives include:
Mental Health Initiative - Building on his legislation passed in 2006, Governor Pawlenty’s proposal will include new investments to improve the accessibility, quality and accountability of publicly funded mental health services.
E-Health – The Governor will propose continued investment to move Minnesota toward an interoperable electronic medical record and personal health record system.
Administrative uniformity and simplification – The Governor will propose a new effort to streamline Minnesota’s billing and coding systems used by various health care providers and health plans that will simply systems and lower administrative costs.
Transparency in cost and quality – The Governor will continue his efforts to make the cost and quality of health care services transparent to consumers by increasing the number and type of procedures disclosed.
Pay for performance – Building on his QCare imitative, Governor Pawlenty will propose continued efforts to reward providers for better health care outcomes.
Healthy Connections and QCare build on previous health care initiatives:
- Governor Pawlenty’s Health Cabinet unveiled www.minnesotahealthinfo.org to provide consumers with information on health care costs and quality in Minnesota.
- Minnesota leads the country in a collaborative approach between health plans, medical groups, physicians, patients, and employers working together through MN Community Measurement.
- The Minnesota Nursing Home Report Card is an online tool for Minnesota consumers to compare quality of life and resident satisfaction at the state’s 396 Medical Assistance certified nursing homes.
- Governor Pawlenty launched the Smart Buy Alliance – a unique public-private partnership of health care purchasers in Minnesota.
- RxPrice Compare allows consumers to comparison shop prescription drug prices at more than 1,000 local pharmacies using a new feature on the state’s nation-leading prescription drug Web site.
Examples of Premium Savings
Family of 4 enrolled in MinnesotaCare, income at 225% of poverty ($45,000 in 2006)
- This family would save $372 per year on MinnesotaCare premiums compared to what they are paying now.
- If they are able to pay premiums with pre-tax dollars, they would save an additional $1,128 per year.
- If they enroll their kids in the private market option, they would save an additional $500 per year (starting in 2009) • Families can save an additional $50 per child if children meet QCare preventive care targets (starting in 2009)
Up to $1,948 in total savings annually for this family
Family of 4 enrolled in MinnesotaCare, income at 275% of poverty ($55,000 in 2006)
- This family would save $420 per year on MinnesotaCare premiums compared to what they are paying now.
- If they are able to pay premiums with pre-tax dollars, they would save an additional $1,620 per year.
- If they enroll their kids in the private market option, they would save an additional $768 per year.(starting in 2009)
- Families can save an additional $50 per child if children meet QCare preventive care targets (starting in 2009)
Up to $2,680 in total savings each year for this family
Single male, age 22, income at 250% of poverty ($25,000 in 2006), no employer coverage
- Premium for $500 deductible health insurance policy is about $2,220 per year
- Savings from using pre-tax dollars to buy coverage would be $660 per year, or about 30%
Family of 4, income at 350% of poverty ($70,000 in 2006), without employer coverage
- Estimated premium for $500 deductible health insurance policy for the family is currently about $9,600 per year
- Savings from using pre-tax dollars to buy coverage would be $2,856 per year, or about 30%