Minneapolis-St. Paul Region Overcomes Early State Resistance to National Health Reform

Media Advisory
Aug. 21, 2013

FURTHER INFORMATION, CONTACT:
Alwyn Cassil (202) 264-3484 or acassil@hschange.org

WASHINGTON , DC—After initial state government resistance to national health reform, the Minneapolis-St. Paul metropolitan area is well on the way to preparing for national health reform, according to a new Community Report released today by Center for Studying Health System Change (HSC).

Funded by the Robert Wood Johnson Foundation (RWJF) and based on interviews with local health care leaders in 2013, the study examined the Minneapolis-St. Paul region’s commercial and Medicaid insurance markets.

Shortly after passage of the federal Patient Protection and Affordable Care Act (ACA) in March 2010, former Gov. Tim Pawlenty (R) and state Republican lawmakers vowed to block implementation of many of the law’s key provisions. However, since electing Gov. Mark Dayton (D) later in 2010 and Democrats gaining control of the Legislature in 2012, Minnesota has proceeded with full ACA implementation.

The state opted to expand Medicaid eligibility for childless adults with incomes up to 75 percent of the federal poverty level in 2011 and will implement the full Medicaid expansion in 2014. After winning legislative approval in March 2013, the state-run health insurance exchange is expected to be ready for open enrollment on Oct. 1, 2013. Key findings of the report, Minneapolis-St. Paul: Health Care Market Overcomes Early State Resistance to National Reform, which is available here, include:

• A history of comprehensive public insurance programs. Minnesota offers several public insurance programs to children and adults with incomes higher than allowed in many states. MinnesotaCare supplements the traditional Medicaid program—called Medical Assistance—to provide limited benefits to people with higher incomes and new immigrants.
• Average health insurance regulation. Minnesota falls in the middle of states in the degree of current regulation governing the individual—or nongroup—and small-group health insurance markets.
• A relatively competitive insurance market with multiple local, nonprofit health plans. Stemming from a Minnesota law precluding for-profit health maintenance organizations (HMOs) from operating in the state, four local nonprofit carriers divide the commercial insurance market.
• An evolving health insurance product mix. While Minneapolis-St. Paul was known for strong gatekeeper-type HMOs in the 1980s and 1990s, preferred provider organizations have become the dominant product as consumers demanded more provider choice. Employers and consumers also have embraced high-deductible health plans. More recently, health plans have established tiered-network products that differentiate patient cost sharing depending on whether a provider is in a preferred tier.
• Tightly aligned hospitals and physicians in four systems. Allina, Fairview, HealthPartners and HealthEast, the market’s major hospital systems, now employ most of the area’s primary care physicians. With these integrated systems traditionally based in either St. Paul or Minneapolis, some are now crossing the Mississippi River to compete for patients.
• Plans and providers collaborating on innovative contracting. Despite significant provider consolidation, insurance carriers typically reported that provider contract negotiations with insurers tend to focus on improving care quality, coordination and efficiency. Many providers have entered “total-cost-of care” contracts that include incentives to limit spending growth but stop short of global capitation.
• Restricted Medicaid health plan choices. While Minnesota law requires all HMOs to participate in the state’s public health insurance programs—Medicaid, the Children’s Health Insurance Program (CHIP) and MinnesotaCare—the state’s 2012 transition to competitive bidding eliminated one health plan in the Twin Cities area and changed the remaining health plans’ service areas, requiring many enrollees to change plans.
• Lack of clarity about the structure and impact of the state insurance exchange. With the state insurance exchange still under development, respondents faced many unknowns about which commercial plans would participate. Many predicted significant premium increases in the nongroup market and changes in product offerings intended to control premium growth.

As health reform unfolds in the coming years, there will be ongoing issues to track in the Minneapolis-St. Paul-area health care market, including:

• How rapidly will new payment arrangements shift risk to provider groups and how successful will they be in containing costs? How will the Medicaid program’s foray into these arrangements compare with or impact arrangements in the commercial market?
• Will national, for-profit insurance carriers participate in the exchange and be able to break into the nongroup and small-group markets dominated by local health plans? If so, what impact will there be on local nonprofit carriers, provider rate negotiations and product types?
• How much will premiums for healthy and young people increase as the state implements modified community rating and people in the high-risk pool shift to the nongroup market?
• To what extent will employers opt to offer employees defined contributions to purchase coverage directly through commercial carriers or the state insurance exchange?
• What approach will the state take in contracting with Medicaid managed care plans going forward? How will that affect competition between managed care plans and managing care for people who transition between public and private coverage?

Minneapolis-St. Paul is one of eight metropolitan areas HSC researchers are studying on behalf of RWJF’s State Health Reform Assistance Network initiative—the others are Baltimore; Denver; Portland, Ore., Long Island, N.Y.; Birmingham, Ala.; Richmond, Va.; and Albuquerque, N.M.


### ###

The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation's changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is affiliated with Mathematica Policy Research.