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January 16, 2017

Minnesota Legislature Quickly Gets to Work

As the Minnesota Legislature begins its second full week in session, most committees look to wrap up their state agency presentations and overview hearings and begin reviewing individual legislative proposals. However, for the legislators who serve on health care, commerce or tax committees, their work began in earnest almost immediately after the session began. 

Governor Signs Federal Tax Conformity Legislation 
On Friday Gov. Dayton signed tax reform legislation into law that brings Minnesota’s tax code into conformity with a number of federal tax provisions. The measure was moved expeditiously through the legislative process so that reforms could be implemented prior to the start of tax filing season on January 23, 2017. The House of Representatives went so far as suspending the rules to pass it without it first being heard in committee, while the Senate moved quickly to hear the bill in the Tax Committee before passing it off the floor of the Senate. The measure, which passed both bodies unanimously, would provide $21 million in tax relief to an estimated 220,000 Minnesotans.

The process was not without controversy, however, as Democratic legislators attempted to amend on a number of other tax proposals, including the entire 2016 tax bill which Dayton vetoed last June as a result of a technical error. Additionally, Republican legislators have begun introducing and discussing in committee a variety of other tax proposals including legislation authored by Rep. Joe McDonald (R-Delano) which would repeal the estate tax. Republicans argue the estate tax unfairly penalizes small business owners and farmers attempting to pass their business on to family members, while Democrats are critical that any move to repeal is too expensive and only benefits a small, affluent segment of the state’s population. 

Health Insurance Rebate Legislation Dominates Headlines 
While the Legislature passed the tax conformity bill with limited consternation, the ongoing debate about rising health insurance costs in the individual market has been much more contentious. Insurers marketing plans through the so-called MnSure program have been raising premiums dramatically due to the relatively small number of “healthy” enrollees compared to the relatively high number of individuals requiring expensive care. Gov. Dayton and Republican legislators have each proposed immediate relief for the approximately 125,000 Minnesotans who have purchased health insurance through the individual market and spent most of the first two weeks of session debating their merits. 

Dayton has called for a one-time 25 percent health insurance premium rebate for individuals purchasing their health insurance through the individual market. His proposal is financed with the approximately $313 million that was added to the existing $1.9 billion budget reserves this December.

Last Thursday the Republican-led Minnesota Senate passed SF 1 (Benson) – its health insurance relief package – 35-31 with Sen. Melissa Franzen (DFL-Edina) as the only Democrat voting for the measure. As passed by the Senate, SF 1 includes approximately $300 million from the state’s reserves to provide rebates to individuals and pay for continuing coverage for people with certain serious health conditions. The Senate bill would require Minnesota Management and Budget to establish and administer an application system and send rebate checks to individuals purchasing health insurance on the individual market who do not currently qualify for federal subsidies. It is estimated that, for the first three months, most individuals would get an approximately 25 percent rebate and after that it would be based on the individual’s income. 

The Senate proposal also includes approximately $150 million to create a “reinsurance” program designed to help insurance providers cover the cost of people with particularly expensive health care needs. Finally, the Senate bill includes various market reforms directed at increasing competition and lowering costs in the individual market, including opening the market to for-profit insurance companies currently prohibited from selling insurance in Minnesota. 

Gov. Dayton has been critical of the Republicans’ rebate proposal, calling it too complicated and administratively expensive to be quickly implemented. Dayton has also stated that he would prefer the Legislature pass the premium relief legislation now and hold off any market reforms or reinsurance initiatives until later in the legislative session. 

Meanwhile, HF 1 (Hoppe), the companion legislation currently moving through the committee process in the House of Representatives, is substantially similar to SF 1, but does not contain the $150 million reinsurance program. Provisions from HF 1 were heard in a number of policy and finance committees last week after Speaker Kurt Daudt (R-Crown) and the Republican majority failed to secure the two-thirds majority needed to suspend the House rules and pass the bill immediately following introduction. The bill is expected back on the House floor for a final vote later this week.


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Larkin Hoffman provides counsel to a wide variety of ‎organizations, from ‎small businesses and nonprofits to  Fortune 500 companies, in ‎many areas of practice including ‎corporate and governance matters, litigation, real ‎estate, government relations, labor and employment, intellectual property, ‎information technology, ‎franchising and taxation. The firm also serves the needs of individuals in many ‎areas ‎including trusts and estates, personal injury and family law.


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