On March 25, 2020, New Hampshire released a draft Section 1332 waiver application that the state plans to submit to the Centers for Medicare and Medicaid Services (CMS) for the purpose of creating a state-based reinsurance program. The state accepted public comments on the plan through April 2, 2020. New Hampshire will request approval for a five-year demonstration beginning January 1, 2021. The program’s intent is to lower the market-wide index rate, resulting in lower premiums and reducing the federal cost of premium tax credits. New Hampshire will also request program funding assistance from the US Department of the Treasury.
Read on for a summary of the draft waiver.
Proposed Reinsurance Program Details
New Hampshire House Bill 4, signed into law on October 2, 2019, authorizes the state to set up a reinsurance program under Section 1332 authority. If approved, the program would reimburse insurance providers operating in the state’s individual market for a certain percentage of claims. The New Hampshire Health Plan (NHHP) would administer the program.
The proposed reinsurance program would be modeled after the former federal Transitional Reinsurance Program. It would reimburse insurance providers that offer comprehensive coverage in New Hampshire’s single risk pool individual market using an attachment point model. Payments to issuers would be calculated based on a percentage (coinsurance percentage) of the annual claims that issuers incur for coverage between a specified lower threshold (attachment point) and upper threshold (reinsurance cap). The state anticipates a target coinsurance percentage of 74%, an attachment point of $60,000 and a target reinsurance cap of $400,000 for plan year 2021.
The reinsurance program would reimburse issuers based on their liability for high-cost claims with funding allocations determined based on attachment point reinsurance parameters. The New Hampshire Insurance Department would determine the reinsurance parameters annually by February 1 of the prior year based on recommendations of the NHHP board of directors and the state’s Commission on the Status of the Individual and Small Group Markets. New Hampshire expects the program to lower insurance costs in the individual market by approximately 16% on average and to increase enrollment among unsubsidized individuals by approximately 6%.
New Hampshire proposes to fund the reinsurance program through a premium assessment and federal pass-through funding. The premium assessment would be fixed at 60 basis points (0.6%) of the prior year’s Second Lowest Cost Silver Plan (SLCSP) without-waiver rate. The assessment is expected to change annually and can be calculated as soon as the SLCSP premium for the prior year is known. Based on the 2020 SLSCP rate ($404.60), the 2021 assessment would be $2.43 per member per month. Given an assessment base of approximately 490,000 lives, the assessment is expected to raise $13.5 million to fund claims costs for plan year 2021.
New Hampshire also will request that Treasury “pass-through” net savings from reduced premium tax credits to help fund the reinsurance program. The state estimates that it will be eligible for approximately $33 million in pass-through funding in 2021, and an increasing amount in each of the remaining years of the initial waiver.