Dear Neighbors,
This is my last update until after the election. Whether running or not, legislators cannot use state resources for unsolicited communications during an election period because it might create an unfair advantage. While I won’t be able to send out these updates for a while, you can still follow me on my legislative Facebook page.
I’m still available to meet, help with state level problems, and discuss issues important to our community. Please feel free to reach out at rep.steve.elkins@house.mn.gov or 651-296-7803, and I will be happy to help.
Insurance Rates
We’re all noticing that just about all our insurance rates are going up – home, auto, health and, especially Long-Term Care (LTC). I’ve been working on the cost of health care since I was first elected. This year I’ve been speaking with both industry stakeholders and the regulators at the Commerce Department to better understand the issues around other types of insurance.
With respect to autos, the main drivers appear to be increases in the value of our vehicles, the higher cost of repairing high-tech vehicles, and the theft of autos and their catalytic converters (both of which appear to be on the decline). For homes, it’s mostly due to extreme weather events, especially hail in Minnesota, which is related to climate change. If Commerce limits rate increases, insurers will exit the state, as is happening all over the south. In some of these states, the lack of available insurance coverage is forcing the state to become an insurer of last resort – but nobody is happy about the quality of the resulting coverage!
The one property/casualty exception where the State might have to step in is with condominium coverage, which has already become all but unavailable. A “reinsurance” program, wherein the State agrees to accept some of the risk from catastrophic events to lure insurance carriers back into the market is a model that I’m exploring. We already use this approach to buy down premiums in the individual health care insurance market.
The market for Long-Term Care (LTC) Insurance appears to be in an insurance “death spiral”. The LTC insurance carriers did a poor job of evaluating their actuarial risk when pricing these programs and their claims experience has far exceeded their original estimates. To recoup their losses, they have been raising their rates dramatically and, as a result, the only ones buying new policies are those who face a high probability of needing care. Limiting premium increases will bankrupt the insurance companies, leaving policy holders holding the bag, but allowing large premium increases is not fair to policyholders who have been paying into the plans for decades after having bought policies in good faith when they were much younger and the premiums were much lower. The only way I can think of to solve this dilemma is for the state to subsidize the rates of longtime LTC policy owners, while industry eases out of the market and stops offering policies. There doesn’t seem to be any way to turn this into a profitable market.
You should know that Medicare only covers 120 days of nursing home care coming out of a hospital stay. Medicaid will cover your nursing home care, but only after you have first spent yourself into poverty, leaving nothing for your heirs to inherit. That will happen quickly, because long term care, itself, is very expensive.
The State offers a small tax credit to holders of LTC policies, but it’s a pittance in comparison to the cost of the insurance.
Drug Prices and Pharmacy Benefit Manager Reforms
I’ve been working to reduce the cost of drugs to patients since my freshman year in 2019. I studied industrial organization in my college economics program and, since then, I have worked in about a score of industries as an economist or information architect. The drug value chain is unquestionably the most messed-up industry market structure that I have ever studied. In a typical industry value chain, you will find manufacturers, wholesalers and retailers – pretty straightforward and efficient. In the drug marketplace, you have all these plus insurance companies, pharmacy benefit management companies (PBMs), group purchasing organizations and referral businesses (e.g., Good Rx). This is a partial list, and every one of those additional “intermediaries” takes a small (or not so small) piece of the drug revenue pie. I don’t blame the high cost of drugs at the pharmacy counter on any one of these players – it’s the way they interact with each other that leads to high prices at the counter for patients.
Yes, the list prices of the patented brand name drugs you see advertised on TV every night are outrageous; however, the manufacturers only net about half of those list prices on average. The other half is split up among the wholesalers (a small part on each sale), the retailers (a very small part – not enough to keep many of them in business), bit players like the Group Purchasing Organizations and referral businesses (a very small part on each sale). The largest portion of the price concessions (mostly rebates) granted by the drug manufacturers flow down through Pharmacy Benefit Managers to their insurance company clients. If you have an employer-financed health plan most of these rebates flow, in turn, to your employer who uses them to defray the cost of your plan.
What’s most notable about how this works is that none of these manufacturer rebates are used to buy down the cost of the drug at the counter to the patient who needs the drug. The price paid by the patient taking one of these expensive brand name drugs is still pegged to the high list price and is sometimes higher than the net price paid by the insurance company! Sometimes, a PBM/Plan will cover an expensive drug in your plan so that they can collect a high rebate instead of a lower priced drug with smaller rebates. As a result, many patients cannot afford to purchase the prescriptions they need to maintain their health.
The New York Times recently published an outstanding expose of this process in a story entitled A Shadow Industry that was reprinted (in part) in the Strib. The Federal Trade Commission has just published its own report on PBM trade practices.
This summer, I’m meeting with industry stakeholders to advance four bills that address different aspects of the issues illustrated in this story.
- HF1711 Would require insurance companies and PBMs to pass all rebates on to patients in the form of “Point of Sale Rebates” directly to the patient at the pharmacy counter.
- HF5469 Would require insurance companies and PBMs to include the lowest cost generic drug in your plan (not just the drugs with the highest rebates) and make them available to you on the most favorable terms.
- HF5470 Would prevent PBMs from charging insurance companies more than the amount that they reimbursed the pharmacy for a prescription, and from engaging in other practices that squeeze retail pharmacies. (We’re down to one retail pharmacy in our entire district.)
- HF294 Would prevent insurance companies and PBMs from kicking you off your drugs in the middle of the year and would require the drug manufacturers to make their prices public.
Effective Legislative Implementation
At the beginning of the Walz administration, he appointed Tarek Tomes as his new commissioner of IT Services and appointed a public-private “Blue Ribbon Council” to develop and implement IT investment and project management reforms (I was an informal member of this group from the beginning). Investments in cybersecurity were stepped up and project management reforms are continuously being implemented across state government.
The way that state agencies interact with the state legislature is changing, as well. For example, when the rent relief program was passed, nothing happened at Minnesota Housing for months. When Rep Bahner (another IT professional) and I reached out to them to find out what was taking so long, we learned that they had no existing application they could use to administer the program. They had to start from scratch and define the requirements (based upon the legislation), find potential vendors, conduct a request for proposals, select an application vendor and then implement the chosen platform while the vendor was hiring personnel to run the program on their platform. This took the better part of a year, even under emergency conditions.
In contrast, when the current legislature was developing the Paid Family & Medical Leave (PFML) program that we passed in 2023, we deliberately modeled the legislation after the existing Unemployment Insurance (UI) program so that we could adapt our existing UI system to administer the new PFML program, as well. We set a phased program implementation to provide plenty of time to get the design requirements right, select a vendor and build and test the system. (I acted as the liaison between the House and the Department of Employment and Economic Development (DEED) in this process.) In the meantime, several other states implemented PFML programs and we now have the option of selecting proven off-the-shelf software for this program, as well. The employer data reporting module of the PFML system is already completed and in operation and I am very confident that this program will be implemented effectively.
Last year we appropriated a great deal of money for a much-needed overhaul of the ancient systems used by the Department of Human Services (DHS). Historically, DHS’s IT project management record has been abysmal; however, the agency has new leadership in key strategy roles, they are embracing the program management reforms recommended by the MNIT Technical Advisory Council (TAC, the successor to the Governor’s Blue Ribbon Council), and I (and several of my colleagues) will be watching closely every step of the way.
More generally, the TAC is recommending fundamental reforms to the way the Legislature funds ongoing IT modernization work in the agencies, moving from one-time “Projects” to the ongoing “Product” funding model that has been embraced by the private sector.
This “behind the scenes” work doesn’t attract a lot of public attention but it’s some of the most satisfying work that I’m doing. Last summer, I was invited to speak on a panel at the annual Summit of the National Conference of State Legislators (NCSL) on the topic of “Future-proofing your Technology Legislation”, so I do receive some recognition from my peers.
Convention of States
I receive a regular, if somewhat sporadic, stream of correspondence requesting my support for state legislation calling for a Convention of States for purposes of amending the US Constitution pursuant to the provision within Article 5 which states that “On the application of 2/3 of the legislatures of the several states, [Congress] shall call a convention for proposing amendments.” Amendments proposed by the convention would go directly to the states for ratification, bypassing Congress. Each such proposed amendment would still require approval by 3/4 of the states.
Most of this correspondence comes via an organization called Convention of States Action, which seems to be most interested in enacting a balanced budget amendment and congressional term limits. However, once a Convention of States is convened, it would be free to take up any amendment proposed by participants.
Personally, I think that the Federal budget should be balanced over the course of an economic cycle, with deficits incurred during recessions paid off during times of economic prosperity. I would not support requiring that the Federal budget be balanced every year, as we are bound to at the state level. The Federal government must be able to provide fiscal stimulus to lift the national economy out of recessions.
I do not support Congressional term limits, but I do support reforms to the congressional seniority system. Over the course of my 25 plus years in public service I have observed that, when the governing body is subject to frequent turnover under term limits, all the institutional knowledge in the body ends up residing in the staff and the entire process becomes entirely staff-driven. As an example, I served for eight years on the Metropolitan Council, which is the most staff-driven government body I ever served with, because, with each change in administration, the new Governor appoints an entirely new Council which has to learn the body’s byzantine processes from scratch. In the Minnesota House the average member serves 8 years. However, the mixture of old and new members means that there are always at least some senior members around to teach the new members about the institution and, as a result, it’s the least staff-driven body I’ve ever served on.
If a Convention of States were to be called, some of the amendments that I would like to see offered include: Overturning the Supreme Court’s “Citizens United” ruling that corporations are people entitled to make unlimited campaign contributions; a prohibition against gerrymandering; protection of women’s reproductive freedom; a repeal of the 2nd amendment; and a provision clarifying that the President is not above the law.
As a practical matter, none of these proposals, including the ones proposed by Convention of States Action, have any chance of passing ¾ of the states in the current political environment so I see little point in advancing legislation supporting an Article 5 Convention of States.
Minnesotans regain access to their birth records
Last week, the Strib ran this front page story about our new law granting adoptees the right to access their birth records. One of our neighbors, Penelope Needham, was one of the leaders of this legislative initiative and I was proud to author this bill for them on their behalf (they did most of the work).
Keep in Touch
Don’t hesitate to reach out if I can provide any assistance. Please follow me on my Facebook page for further updates and invite your friends and family to do so as well.
Thanks for the honor of representing you at the Capitol.
Sincerely,
Steve Elkins
Representative, District 50B
Minnesota House of Representatives
rep.steve.elkins@house.mn.gov