In 2017, lawmakers made a historic change to Minnesota’s health insurance market, opening it to for-profit insurers beginning in 2019. Regrettably, they still have yet to fix a serious error committed two years ago — failing to enact safeguards to protect the public’s interest in the nearly $7 billion in charitable assets held by nonprofit plans that have long served the state.
Lawmakers are commendably on the verge of correcting this. With the 2019 legislative session likely headed toward overtime, they should be able to finalize a package of reforms that was still being publicly debated on Sunday by the Health and Human Services conference committee. There seems to be agreement among the committee’s DFL and Republican member about the need for permanent protections, but questions remain about how to enact them. The differences appear to be manageable. The challenge now is not to let them derail these important reforms.
As the debate continues, it’s important to keep in mind that tax breaks and reliable, usually profitable contracts to run public medical assistance programs played a key role in nonprofit insurers’ financial success over the years. The financial strength of these nonprofits, and their good names, may make them attractive acquisition targets. The trade journal Modern Healthcare has noted for-profit insurers that want to enter Minnesota see an abundance of opportunities in this marketplace.
But large payouts to executives and other abuses have occurred in other states that have lifted for-profit restrictions without enacting robust safeguards for nonprofits’ assets. The moratorium that the 2017 Legislature put in place ends in July, but former Attorney General Lori Swanson pushed for permanent protections, warning against “corporate raids,” and current AG Keith Ellison has continued the crusade.
In Minnesota and elsewhere, the state’s top legal officer traditionally has oversight responsibility for charitable institutions. A reform package included in the House’s omnibus health and human services bill reflects that historic role, calling for the office to review nonprofit health plan conversions to for-profit status or the transfer of significant assets to an out-of-state entity. Among the questions weighed by the office would be whether assets held by a nonprofit would continue to be used for public benefit.
The Sunday debate over these reforms was surprisingly tense. One of the Senate’s health care leaders, Michelle Benson, R-Ham Lake, came across as vehemently opposed to broadening the AG’s authority. Among her concerns: that the reforms would allow the AG to micromanage nonprofits and that the House reforms were so aggressive that Minnesota would become a comparative outlier among other states. Benson and Assistant AG Ben Velzen also differed on whether state officials have adequate authority under an existing law to review conversions or transfers. Benson has an MBA but is not an attorney.
The abuses that have occurred in other states suggest that being an outlier is not a bad thing. It also seems possible to address Benson’s concerns about micromanagement by adjusting language within the proposed House reforms, which are preferable to the Senate’s. For example, legislators could set a higher standard for when the amount of assets involved in a transaction triggers a review by the AG. The House legislation sets the trigger at the lesser of $10 million or 10% of an organization’s total assets. On Sunday, Velzen expressed willingness to consider a change.
Lawmakers have had two years to fix the problems they created in 2017. It’s time to forge an agreement and avoid merely extending the moratorium — a cowardly alternative that would only kick this down the road.