Eligibility Information for the Minnesota Health Insurance Exchange

3. The use of the exchange to receive and process employee premiums on a pre-tax basis through Section 125 plans

As noted above, the exchange can reduce the administrative burden on employers that is associated with establishing and operating Section 125 plans. The exchange could act as a "payment aggregator" for funds withheld from employee paychecks by helping employers keep track of how much money to withhold from each employee's paycheck based on which health plan the employee has chosen to buy and serving as a single place for employers to remit money withheld from employee paychecks for the purchase of health insurance (instead of employers' having to send payments to many different health plans).

As explained in more detail in the Text Box on Section 125 plans, pre-tax payment of health insurance premiums will have a financial impact on both employers and employees. The cost to employers of setting up a Section 125 plan is minimal, and employers will save money because the amounts that employees choose to have withheld from their paychecks to pay for health insurance will not be subject to payroll taxes. For employees who cannot currently pay for health insurance with pre-tax dollars, the ability to do so can effectively reduce their health insurance premiums by 30 to 50 percent. For some people who choose to buy insurance with pre-tax dollars, there may be a reduction in future Social Security income but this cost is likely to be very small compared to the benefit of buying insurance with pre-tax income.

4. Eligibility criteria that enrollees and health plan companies must meet to participate in the exchange

In general, all individuals living in Minnesota and small employers (with 50 or fewer employees) located in Minnesota should be eligible to participate in the exchange. Other individuals who should be eligible to participate include individuals who (1) do not live in Minnesota but are dependents of another individual who is eligible to participate in the exchange, or (2) do not live in Minnesota but who work for a Minnesota employer that is required to offer a Section 125 plan.

There is no particular reason to limit the number of health plan companies that participate in the exchange, as long as they are licensed to operate in Minnesota.

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