REGIONAL— The Trump administration has tossed a monkey wrench into the state of Minnesota’s plan to bring down the cost of health insurance premiums on the individual market— and Gov. Mark Dayton isn’t happy about it.

At a news conference on Wednesday, the governor said the Trump administration failed to keep its commitment to the state to issue a decision on the state’s request for a waiver to implement a so-called “reinsurance plan” that was expected to drop health insurance rates for the individual market in Minnesota by about 20 percent next year.

Now, with a deadline looming, he said federal inaction is threatening “enormous disruption” to the state’s MNsure health insurance program.

“I’ve never experienced anything like it before,” said Dayton. “I can’t even get the secretary of Health and Human Services on the phone. I can’t even get a phone number to call him to discuss the issue.”

According to the governor, HHS officials had promised this summer to have a decision on the state’s waiver request by the end of August. That would have provided state officials and insurers with sufficient time to finalize insurance rates for next year ahead of the Oct. 2 deadline. But now, with the deadline just days away, the state still has no official word from Washington. Dayton said he’s been given some indication that approval is likely, but said he’s received nothing official and nothing in writing. “These are real peoples’ lives that they are threatening by what they’re doing and not doing,” he said.

The GOP-led Legislature and DFLer Dayton had agreed earlier this year on the reinsurance plan, designed to cover a portion of the excess medical costs of patients insured through the individual market. Those excess costs had sent private insurance premiums in the individual market skyrocketing the past two years, and prompted some prominent insurers, such as Blue Cross, to leave the marketplace altogether.

In response, lawmakers and the governor agreed to spend about $270 million in state funds over each of the next two years to help buy down a portion of the medical costs incurred by customers of the insurance providers. The proposal drew praise from insurers and projections show the plan would quickly stabilize rates and keep insurers in the individual market.

It appeared like a policy victory, and it’s one that caught the eye of policymakers around the country as a potential model. But the plan still required approval of the federal waiver, and that’s where the plan hit choppy waters. First, the Department of Health and Human Services has yet to issue a decision on the waiver, even as the deadline looms within days. Of even greater concern, however, is news that the Trump administration says it will penalize the state for proposing the innovative program, by taking $369 million in federal funding that the state has used to help pay the cost of MinnesotaCare, the state’s basic health plan, which serves mostly working poor families, particularly in rural parts of the state.

The lost funding won’t mean an immediate change for MinnesotaCare enrollees, said Dayton. The state does have reserves to cover the program for the next year or two. But it does leave the longer term stability of the 25-year-old state program in jeopardy, according to the governor.

The Trump administration’s plan to penalize Minnesota was unexpected, said Dayton, since state officials had worked closely with federal representatives from the Center for Medicare and Medicaid Services, to ensure that MinnesotaCare funding would not be affected. “We followed exactly the instructions provided by CMS so it would not affect the basic health plan,” said Dayton.

The Trump administration decision appears to undermine a longstanding understanding between state and federal officials that the federal government would allow states to implement innovative alternatives to the Affordable Care Act without hurting state budgets.

In the Minnesota case, the reinsurance plan reduces insurance rates significantly in the state for next year. That’s good news not just for those buying health insurance, but also for the federal government, which pays substantial subsidies to many individuals and families buying private insurance through MNsure, the state’s insurance exchange established through the Affordable Care Act. As premiums rise, the subsidies rise with them in order to keep the plans affordable. So, by spending state tax dollars to keep those premiums in check, Minnesota was proposing to save the federal government a substantial amount of money, just over $200 million over two years. While it appears the Trump administration is willing to fund a portion of the reinsurance plan, possibly as much as $208 over two years, the administration is now saying it will slash $369 million in federal funds that the state currently uses to finance its basic health care plan, known as MinnesotaCare.

In effect, the administration would punish Minnesota to the tune of $161 million for seeking a waiver that the administration has actively encouraged states to request— and that would save the federal government money.

“It’s a real discouragement for proposing such a waiver,” said Jeremy Drucker, a spokesperson for MNsure, which operates the state’s individual insurance marketplace. “The state had hoped for budget neutrality.”

Minnesota’s proposal has been widely discussed as a possible national model, but that’s less likely given the Trump administration’s response. “This now creates a funding dilemma for the state,” Drucker said.

So what does the state do? With just days to go before it has to set final insurance rates for next year, it isn’t clear what the state can do if the federal government refuses to act in time. The state law authorizing the reinsurance plan would have to be rewritten to take effect with or without federal approval, and that would take a special session, which appears to be out of the question given the limited time remaining.