A public option that competes with Minnesota’s private health insurers could entice more than 100,000 people at a cost up to $364 million per year to state taxpayers.

Those estimates were included in a study released Thursday by the state Department of Commerce ahead of what’s likely to be a divisive debate in the Legislature over expanding the state’s role in insuring Minnesotans.

Gov. Tim Walz and Democratic lawmakers say health insurance will become more affordable if a public option is available to compete with existing private plans. Republicans oppose public interference in the private insurance marketplace and say it will raise premiums in the end. Lobbying groups for hospitals and insurers are also lining up against a public option.

While a public option could provide coverage to the roughly 4% of Minnesotans without insurance, proponents also say it would offer cheaper and better benefits to people who can only afford bare-bones insurance through MNSure, the state’s online marketplace for individual health plans. House Majority Leader Jamie Long, DFL-Minneapolis, hosted an online forum Tuesday that highlighted how Minnesotans are suffering from inadequate options in the individual insurance market.

“They can’t use it because it is too expensive,” Long said. “They have deductibles that are too high. They really are only covered for catastrophes, and that means that they aren’t getting the care that they need on a day-to-day basis.”

The study analyzed the consequences of removing income limits and creating open access to MinnesotaCare. That’s the public health insurance option for individuals and families who earn too much to qualify for Medical Assistance poverty benefits but don’t have workplace benefits and can’t afford top-flight private insurance on the individual market.

The analysis by Milliman, a national actuarial firm, also examined the benefits of offering a private plan similar to MinnesotaCare on the private marketplace.

Both would attract about 471,000 Minnesotans, but only 100,000 to 150,000 would sign up, the study found. The state would pay $86 million to $364 million per year to provide a public option to that many Minnesotans, after factoring out federal subsidies and premiums paid by the enrollees.

The proposal has created an unusual coalition of opposition from two groups that traditionally compete for their share of health care dollars. The Minnesota Council of Health Plans commissioned a study suggesting that the state would gain more affordable insurance options and increase enrollment if it instead moved all of its existing MinnesotaCare enrollees into the private marketplace.

The Minnesota Hospital Association has bemoaned payment rates from public plans such as MinnesotaCare that are below the cost of providing care, and it has opposed any expansion that could undermine struggling hospitals.

“Hundreds of patients are stuck in hospitals every day and hospitals around the state are being forced to cut services at an unprecedented rate in order to keep their doors open,” said Dr. Rahul Koranne, the hospital association’s president and chief executive.

The DFL-controlled Legislature considered creating a public option during the 2023 session before delaying plans and seeking the analysis.

Minnesota’s commerce and human service secretaries made several recommendations Thursday to the Legislature, including that it conduct additional research to see if a public option would provide equitable benefits to disadvantaged populations. Nearly 22% of Hispanic Minnesotans are uninsured, compared with less than 3% of white non-Hispanic Minnesotans, according to the state Department of Health.

Minnesotans seeking better health insurance options include Lisa Phillips, whose family raises livestock and grows pumpkins and produce on 450 acres in Good Thunder, about 14 miles south of Mankato. Phillips said during Long’s public forum that her family recently went uninsured because it couldn’t afford annual premiums of $25,500 and keep its business afloat. She said that decision might have delayed identification and treatment of her husband’s cancer and worsened his prognosis.

Phillips said she wants to pass the farm to her daughter and son-in-law but doesn’t want to bind them to farming unless they have access to affordable health insurance.

“This could be the end of our family farm,” she said.