How Reinsurance Saved Minnesota’s Individual Health Insurance Market

The program is a model for other states and Congress to help fix the ACA’s broken premium subsidy structure

Preview:

How Reinsurance Saved Minnesota’s Individual Health Insurance Market details the success of the Minnesota Premium Security Plan (MPSP) in reducing costs for Minnesota’s individual health insurance market and offering recommendations for other states and Congress. The MPSP, known as the state’s reinsurance program, was a legislative solution first adopted in 2017 in response to new challenges faced by the individual insurance market after implementation of the Affordable Care Act (ACA) in 2014.

The report was authored by American Experiment Senior Policy Fellow Peter Nelson, who served as Senior Advisor to the Administrator at the Centers for Medicare & Medicaid Services (CMS) from 2017 to 2021. In that role, Nelson oversaw the administration and implementation of reinsurance programs across 15 states.

Key findings of the report include:

• Minnesota implemented a reinsurance program in 2018 to lower premiums in the individual health insurance market after premiums skyrocketed by 119 percent from 2014 to 2017.
• The reinsurance program successfully lowered premiums by up to 36 percent.
• A federal evaluation shows that reinsurance saved the market as an affordable coverage option for people who do not qualify for federal subsidies.
• This federal evaluation suggests that reinsurance adds incentives to control costs which the federal government does not acknowledge.
• These cost controls help mitigate the inflationary nature of the Affordable Care Act’s current approach to subsidizing premiums.
• Based on the success of reinsurance in Minnesota, other states and Congress should adopt reinsurance to lower premiums and improve the ACA’s premium subsidy structure.

A full copy of the report can be viewed here.