Tweet This
The Obama administration is encouraging states to come up with their own reinsurance plans to help health plans blunt the cost of the nation’s sickest patients who’ve purchased private individual coverage under the Affordable Care Act.
Insurers including
Depending on the path a state may take, state reinsurance plans could cost tax dollars or be passed along to insurance companies.
One answer may be to have states establish their “own reinsurance programs to help stabilize their markets,” Health Insurance Marketplace CEO Kevin Counihan said in a column last week on the Centers for Medicare & Medicaid Services web site. He cited an example that was already underway.
“Recently, Alaska enacted a law to allocate $55 million from an existing premium tax to provide reinsurance for the individual market and to pursue a State Innovation Waiver under the ACA,” Counihan wrote. “Alaska had previously collected funds for the state’s high-risk pool that is no longer needed because the ACA guarantees coverage to individuals with pre-existing conditions; about 35 states had high-risk pools prior to the ACA as well and may have similar opportunities.”
Whether the creation of state reinsurance plans would happen soon enough to prevent health insurance companies from leaving exchanges is unclear. Humana said this month it will scale back to “no more than 156” counties compared to more than 1,350 this year and Aetna called off its Obamacare expansion plans for 2017. UnitedHealth Group already said it will only sell on exchanges in three states next year and Aetna also said it was reviewing whether to participate in the 15 states where it sells individual coverage on the exchange under the health law.
There’s some urgency because the reinsurance created under the ACA was designed to be temporary through this year.
Inside Obamacare: The Fix For America’s Ailing Health Care System explores the ways the Affordable Care Act will impact your health care.
But insurance industry analysts say it would be a good move to have reinsurance be a part of the long-term future of plans operating on exchanges under the ACA just as it is for health plans that sell drug benefits under Medicare Part D. Here's an explainer on Medicare Part D reinsurance from MedPac.
“CMS seems to be extending an open invitation to states to create their own reinsurance programs via a 1332 waiver, referring to the example of Alaska,” Katherine Hempstead, who leads coverage issues for the Robert Wood Johnson Foundation, said in an interview. “While Alaska has some unique characteristics, there are other states where markets may benefit from reinsurance program, although it will need to be funded with state dollars.”
Reinsurance is one of the so-called “Three Rs” that have been a big concern of health plans. The other two are risk adjustment and risk corridors. Here's a detailed explanation of those terms from the Kaiser Family Foundation.
Separately, Counihan said the Obama administration is proposing to modify the “risk adjustment program to absorb some of the cost for claims above a certain threshold” and he mentioned $2 million. The program would be funded by a “small payment” from insurers, Counihan added.
