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Analysis

ACA Reinsurance Waivers Provide Relief From Premium Hikes

By Jack O'Brien  
   November 27, 2018

Three states with reinsurance programs sustained insurer participation and reduced premium rates, according to a new study from Georgetown University’s Center for Health Insurance Reforms, funded by the Robert Wood Johnson Foundation.

Reinsurance programs have proven effective in stabilizing health insurance markets in three states which have launched a program to reimburse health insurers for high-cost claims, according to a study from Georgetown University's Center for Health Insurance Reforms.

Researchers found that three states, Alaska, Minnesota, and Oregon, experienced lower premium rates in 2018 due to the implementation of reinsurance programs in 2017. One year after a final rate increase of 7.3%, Alaska experienced a 26% rate decrease in 2018 and is slated to see rates drop by more than 6% in 2019.

Minnesota's rate increase for 2018 was 11.3%, significantly less than the 57% increase in 2017, and is due to drop next year as well. Similarly, Oregon's rate increases have been suppressed since instituting a reinsurance program, with rate increases ranging from -1.6% to 14.8% this year, and falling to a range of -9.6% to 10.1% in 2019.

The effect of reducing premium rates has been coupled by the consistent participation of health insurers in the marketplace from 2017 to 2019, with only Oregon losing ATRIO at the start of 2018. This study's findings come as four additional states, Wisconsin, New Jersey, Maine, and Maryland, are set to launch reinsurance programs in 2019, with the goal of stabilizing their respective insurance markets. 

Related: Wisconsin Wins Waiver for $200M Reinsurance Program

"After experiencing sharp rate hikes in 2017, it appears that state reinsurance programs have helped stabilize rates in 2018 and 2019," Sabrina Corlette, research professor at Georgetown University, said in a statement. "Many states are grappling with how to control the high cost of coverage and they can learn valuable lessons from what Alaska, Minnesota and Oregon have accomplished." 

The study also found that each state increased its enrollment numbers from 2017 to 2018, as Minnesota led the way with an additional 16,346 enrollees. 

Related: New Jersey Seeks to Stabilize ACA Markets With Policy Triad

Currently, all three active reinsurance program waivers are slated to run through 2022 at an annual total cost ranging from $60 million to $271 million. However, none of the states have secured permanent or natural funding sources for the reinsurance program, creating uncertainty about sufficient state funding in the years ahead.

Related: Maine Secures Waiver to Resurrect 'Invisible High-Risk Pool'

One goal that hasn't been fully realized yet is the federal savings generated from the reinsurance program, with the aim of using the savings to foster healthcare innovation at the state level. All three states reported that their projected savings are in line with expectations and are working alongside CMS to monitor quarterly savings.

Related: Maryland Wins ACA Reinsurance Waiver Approval

Despite the positive results from the first year of reinsurance program activity, many respondents expressed frustration at the lack of a federal reinsurance program to provide a permanent solution to the likely funding woes that states will face going forward. Meanwhile, other respondents advocated for additional measures to boost participation in the individual insurance marketplace.

Jack O'Brien is the finance editor at HealthLeaders. 


KEY TAKEAWAYS

Alaska, Minnesota, and Oregon experienced lower premium rates in 2018 than they would have without reinsurance programs in place.

The study also found reinsurance programs bolstered consumer enrollment, sustained insurer participation, and fostered market competition. 

Four other states, Wisconsin, Maryland, Maine, and New Jersey, have received federal approval to commence with reinsurance programs next year.

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