October 16, 2019
Through Section 1332 of the Affordable Care Act (ACA) states have the ability to apply for waivers requesting authority to amend ACA provisions in the individual and small group market place. A 1332 wavier grants the states flexibility in ensuring the stability of fragile insurance markets and address unique state insurance issues.
As of October 2019, 13 states received approval to implement a 1332 waiver. States that have received approval include: Alaska, Colorado, Delaware, Hawaii, Maine, Maryland, Minnesota, Montana, New Jersey, North Dakota, Oregon, Rhode Island and Wisconsin.
Below are summaries of recently approved 1332 waiver applications for Delaware, Montana, and Rhode Island.
On June 28th, 2018 the Delaware state legislature passed SCR 70 which authorizes the states 1332 waiver application. On July 11th, 2019, Delaware requested a Section 1332 waiver for a period of five years beginning with the 2020 plan year to establish the Delaware Health Insurance Individual Market Stabilization Reinsurance Program & Fund (the “Fund”). The waiver requests approval to waive section 1312(c)(1) of the ACA which requires states to consider all enrollees in all health plans members of a single risk pool. The request is made for the purpose of establishing a state-based, and state-administered reinsurance program, otherwise known as the Fund.
The goal of the waiver is to lower rates in the individual ACA market by 20 percent for the 2020 plan year, improve morbidity in the risk pool by 0.6 percent and increase enrollment in the individual market by 3.2 percent. The reinsurance program will be financed through a combination of premium assessments on health insurance issuers and federal pass-through dollars. Since the program is expected to bring down the cost of premiums in the individual market, Delaware is requesting that the Treasury “pass-through’ the savings resulting from the reduction of federal spending on premium tax credits. In order to achieve a 20 percent reduction in individual market rates, actuarial modeling predicts Delaware will need to raise $7.4 million dollars through premium assessments in order to secure $360.4 million in Federal pass through funding for the 2020 plan year.
On August 20th 2019, The Centers for Medicare and Medicaid Services (CMS) approved Delaware’s section 1332 waiver application.
On April 30th 2019, the Montana state legislature signed S.B 125 into law which established the Montana public reinsurance program. On June 19th, 2019, Montana requested a Section 1332 waiver for a period of five years beginning with the 2020 plan year to develop the state reinsurance program. The reinsurance program will reimburse qualifying individual market health insurers for a proportion of high-cost enrollee claims between a lower bound and an upper bound. For the 2020 plan year, Montana estimates that the lower bound will be $40,000 and the upper bound will be $101,750. Montana estimates that the program is likely to reimburse 60 percent of these claims.
The reinsurance parameters will be set so that total estimated reinsurance payments match the level of funding available. Financing for the reinsurance program will come from a 1.2 percent annual assessment on major medical health insurance premiums and federal pass-through funding. Since the program is intended to reduce premiums, the amount of federal dollars spent on premium tax credits is anticipated be reduced. Montana is thus seeking the amount of these federal savings resulting from the waiver in the form of federal pass-through dollars. It is estimated that the Montana reinsurance program will result in a net premium decrease of 8.0 percent in 2020 with similar impacts in the coming years.
On August 16th 2019, CMS approved Delaware’s section 1332 waiver application.
On July 2nd 2018, the Rhode Island state legislature enacted H.8351 which authorizes the state to pursue a 1332 waiver to establish a state based reinsurance program. On July 8th 2019, Rhode Island requested a section 1332 waiver for a period of 5 years starting in the 2020 plan year to develop a state-based reinsurance program. The request is made with the intention of stabilizing individual market enrollment, mitigating rate increases, and encouraging insurance companies to continue to offer plans in the state market place. The reinsurance program will reimburse qualifying individual health insurers for a percentage of an enrollees claims between a lower bound and an upper bound. In the 2020 plan year, the reimbursement rate is expected to be 50 percent with a lower bound of $40,000 and an upper bound of $97,000. The state estimates that the reinsurance program will lower premiums by 5.9 percent in the 2020 plan year and 6.3 percent in the 2021 plan year.
On August 26th 2019, CMS approved Delaware’s section 1332 waiver application.