More Recommendations for a Minnesota Health Insurance Exchance

A health insurance exchange is an essential element of a package of insurance market reforms that has been recommended by the Health Care Transformation Task Force. The Legislative Commission on Health Care Access has also recommended the creation of a health insurance exchange as part of its health reform proposal.

The Transformation Task Force proposed establishing guaranteed issue in the individual market, changing the rules of insurance rating to eliminate health status as a factor in determining premiums (but price differences based on health behaviors, such as smoking, would still be allowed), combining the individual and small group insurance markets, creating an expectation that individuals obtain and maintain a minimum level of health insurance coverage, requiring employers with more than 10 employees to establish Section 125 plans, and subsidizing the cost of coverage for people who cannot obtain "affordable" coverage.

In the Task Force recommendations, the definition of "affordability" varies based on income. The Task Force proposed a sliding scale to determine eligibility for premium subsidies. Families with incomes at or below 300% of federal poverty guidelines ($61,950 for a family of four in 2007) would not be expected to pay more than 7% of gross income ($4,337) for health insurance coverage, while families with income at 400% of federal poverty guidelines ($82,600 for a family of four in 2007), would not pay more than 10% of gross income for health insurance ($8,260).

Figure 1 summarizes the preliminary estimates from the Mathematica modeling in terms of the potential reduction in the number of uninsured Minnesotans. As shown in the figure, for example, instituting guaranteed issue and modified community rating in the small group and individual health insurance markets is estimated to result in about 18% fewer people uninsured in 2009 compared to baseline projections. Similarly, a personal responsibility to obtain health insurance coverage is estimated to result in about a 63% reduction in the number of uninsured, and potentially up to 88% if all the uninsured that are potentially eligible for public programs actually enroll. Including an exemption from the personal responsibility requirement for people who cannot obtain affordable coverage would have a smaller impact (up to 78% reduction in the number of uninsured, if all of the uninsured who are potentially eligible for public programs enroll). Establishing a requirement that employers with more than 10 employees offer a Section 125 plan is expected to result in an approximate 20% reduction in the number of uninsured. Finally, the two sets of bars at the far right side of Figure 1 show the estimated impact of these policy options in combination (with and without an affordability exemption from the personal responsibility requirement).

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