MINNEAPOLIS — Last fall, as consumers in Minnesota were facing health insurance rate increases of 50 percent or more, Gov. Mark Dayton, a Democrat, said the Affordable Care Act was "no longer affordable to increasing numbers of people." The state's top insurance regulator said the Minnesota market was "on the verge of collapse."
The outlook now is much better. Rate increases requested for 2018 are relatively modest, thanks in part to a new program under which the state will help pay the largest claims. The program, known as reinsurance, and the efforts that led to its creation hold lessons for other states where rates are rising rapidly, and for Congress, where lawmakers are considering the introduction of a similar program.
"The individual insurance market is stabilizing under the program here," said Allison L. O'Toole, the chief executive of Minnesota's state-run insurance marketplace. "Health plans are very happy about it."
State officials and insurers say that, as a result of the program, premiums next year will be about 20 percent lower than they would otherwise have been. The program — for which Minnesota has budgeted about $270 million in each of the next two years — potentially benefits all of the 160,000 people buying insurance on their own, not just those with large claims.
But the program will be invisible to consumers. They will not have to file additional paperwork or do anything different from what they would ordinarily do.
"Reinsurance is keeping rates under control and keeping insurers in the market in counties and places where they might not otherwise participate," said State Senator Michelle R. Benson, a Republican who is chairwoman of the Senate health and human services committee.
In Washington, Congress returns Tuesday with a list of urgent priorities that include an increase in the federal debt limit, disaster relief for victims of Hurricane Harvey, a spending plan to avert a government shutdown — and decisions about the future of the Affordable Care Act.
The Senate health committee, headed by Senator Lamar Alexander of Tennessee, a Republican, has scheduled four hearings in the first half of September to consider bipartisan proposals to steady insurance markets. A group of eight governors, led by John R. Kasich of Ohio, a Republican, and John W. Hickenlooper of Colorado, a Democrat, has suggested a package of quick fixes, including federal funds for reinsurance programs.
Minnesota's experience with such an effort is instructive. The bill creating its reinsurance program, the Minnesota Premium Security Plan, became law within three months of being introduced — lightning speed when compared with the pace in Congress.
The Minnesota plan was a Republican initiative. Most Democrats voted against the bill, and Governor Dayton allowed it to become law without his signature. Many Democrats preferred a different approach that would have allowed consumers to buy coverage under an existing state program.
But now that the reinsurance program has been authorized by state law, members of Congress from Minnesota and state legislative leaders from both parties have joined Mr. Dayton in urging the Trump administration to grant the approvals the state needs to carry out the plan. When proposed rates for 2018 were announced at the end of July, Mr. Dayton said, "I applaud the Minnesota legislators, who worked together to pass this pioneering legislation, which is being shown to cause major reductions in the costs of health insurance next year for many thousands of Minnesotans."
In a letter to governors in March, Tom Price, the secretary of health and human services, said the Trump administration would be receptive to such state initiatives.
"State-operated reinsurance programs may be an opportunity for states to lower premiums for consumers, improve market stability and increase consumer choice," Mr. Price said.
HealthPartners, a Minnesota company that provides coverage to 62,000 people who buy insurance on their own, has proposed rate reductions that average 13 percent to 15 percent next year. Without the reinsurance program, it would require rate increases of 3 percent to 5 percent, it said in filings with the Minnesota Commerce Department.
"We've had two years of very significant rate increases, and the market is still volatile," said Andrea Walsh, the president and chief executive of HealthPartners. "But the reinsurance program promises more stability. We'll be able to spread the cost of high-cost cases across the entire individual marketplace."
Blue Cross and Blue Shield of Minnesota is proposing rate increases of up to 11 percent for the plans it offers in the public marketplace. Without reinsurance, it said, its rates would rise 16 percent to 32 percent, on average. By contrast, its average rate increase this year was 55 percent.
Hodan Guled, the chief executive of Briva Health, a community group that helps Minnesotans sign up for coverage under the Affordable Care Act, said the reinsurance program was "definitely helpful and beneficial" for consumers.
State Senator Tony Lourey, the senior Democrat on the health committee in the Minnesota Senate, said he voted against the legislation because it was financed mainly with money from a fund intended for a separate state health program for the working poor. But he said, "Reinsurance itself is a good tool, a valuable tool, to mitigate premium spikes, and this program does work.''
"This is the type of risk-mitigation tool that the feds defunded in an effort to sabotage Obamacare," Mr. Lourey said. "It's left to states then to put this massive investment in place. The feds need to be stepping up to the plate and not leaving it to the states."
The Affordable Care Act created a temporary federal reinsurance program, which was in effect from 2014 to 2016. But like much of the law, it became snarled in politics and legal disputes.
Under the measure adopted this year in Minnesota, the state reinsurance program pays 80 percent of the amount of a claim from $50,000 to $250,000. The insurer is responsible for any amounts over $250,000.
If, for example, a person has $60,000 in claims next year, the reinsurance program would pay the insurer 80 percent of $10,000, or $8,000. If a person has $600,000 in claims, the program would cover 80 percent of the cost from $50,000 to $250,000 — 80 percent of $200,000 — so the payment to the insurer would be $160,000.
The state is counting on the federal government to pay about half of the cost for the reinsurance program, using money the federal government is expected to save because of lower premiums here.
Under the Affordable Care Act, the federal government offers subsidies, in the form of tax credits, to lower- and moderate-income people to help them pay premiums for insurance that they are generally required to buy.
"Higher premiums mean higher federal tax credits," the state said in its application to the federal government. "Lower premiums mean lower federal tax credits."
In Congress, House and Senate Republicans say the Affordable Care Act has failed to hold down premiums. As part of their bills to repeal the law, they would provide tens of billions of dollars that states could use for reinsurance programs in the coming decade. Two Democratic senators, Thomas R. Carper of Delaware and Tim Kaine of Virginia, have introduced legislation that would provide money for reinsurance programs without dismantling President Barack Obama's health law.
In Maryland, CareFirst BlueCross BlueShield, the dominant insurer, has just received approval from the state insurance commissioner for rate increases averaging 34.5 percent to 49.9 percent next year.
Chet Burrell, the president and chief executive of CareFirst, said the rate increases were unsustainable and would drive healthier people from the market, leaving a pool of sicker customers. "A few more years of this," he said, "and there will be no more market left."
Mr. Burrell said that a federal reinsurance program — to help pay for the "really high-cost cases" — would help stabilize the market.
In July, the Trump administration approved a reinsurance program proposed by Alaska, where health care and coverage are particularly expensive. The program helps pay claims for people with certain high-cost medical conditions like metastatic cancer, H.I.V. and AIDS.
