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

Analysis  |  By Steven Porter  
   July 31, 2018

The reinsurance program, which the state operated in 2012 and 2013 before the ACA's transitional reinsurance took effect, is expected to reduce costs in Maine's individual insurance market.

The federal government approved another waiver application Monday under the Affordable Care Act, giving Maine the go-ahead to reinstate a reinsurance program it had operated briefly before the ACA took effect.

Maine is the fifth state to secure a Section 1332 waiver to establish a state-run reinsurance program, following closely on the heels of Wisconsin's waiver request being granted Sunday. Alaska, Minnesota, and Oregon won their waivers last year, and two other states—Maryland and New Jersey—have similar applications pending.

Related: Wisconsin Wins Waiver for $200M Reinsurance Program

Although the Trump administration has taken a number of actions that would appear to harm the individual market, approving these waivers seems to be a positive step in the opposite direction, says Matthew Fiedler, PhD, a fellow with the Brookings Institution Center for Health Policy who served as chief economist of the Council of Economic Advisers during the Obama administration.

"Reinsurance waivers will reduce premiums in the individual market in these states and will result in more people being covered. I think they're a reasonable way for states to spend money," Fiedler tells HealthLeaders Media. "There may be better ways to spend money to improve the individual market, but this is certainly an actionable one and one that states can implement more or less on their own."

Maine projects that premiums will be 9% lower in 2019 than they would be without reinsurance. Those lower premiums are expected to encourage more people to sign up for coverage, reducing Maine's uninsured population by 1.7%, according to independent actuarial projections cited by the state and federal governments.

A modest gain in enrollment could translate to a slight benefit for insurers and could reduce the burden of uncompensated care on hospitals, Fiedler says.

'Invisible High-Risk Pool'

In a letter submitted last May to Health and Human Services Secretary Alex Azar, Maine Bureau of Insurance Senior Staff Attorney Thomas M. Record said the program, which is known formally as the Main Guaranteed Access Reinsurance Association (MGARA), had "become popularly known as Maine's ' invisible high risk pool.'"

Record described the program as a key feature of health reform legislation Maine lawmakers passed in 2011. The program, which was active in 2012 and 2013, successfully reduced premiums in the individual market by about 20%, he said.

Despite that success, MGARA was suspended at the beginning of 2014, when the ACA's transitional reinsurance program rendered it redundant, according to Maine's waiver application. The federal reinsurance program ended as scheduled on the final day of 2016.

Material released by the Centers for Medicare & Medicaid Services describe MGARA as operating a hybrid-model reinsurance program that includes traditional and conditions-based components. High-risk patients with any of eight conditions will be ceded automatically. Other high-risk enrollees will be ceded voluntarily. The program will offer 90% coinsurance for claims in the $47,000-77,000 range and 100% coinsurance for higher claims up to $1 million.

For claims above $1 million, the program will cover the amount left uncovered by the federal government's high-cost risk-adjustment program.

Maine estimates that its program will result in a net spending reduce of more than $33 million per year, for 2019 through 2023, with that federal savings to be passed along to the state to fund the program.

The program's total expenses are projected to cost $90-104 million annually during the five-year waiver period.

Insurers and providers have responded positively to the prospect of state-run reinsurance programs, seeing the development as good news for business and patients alike. But the benefits should not be overstated.

"The one downside of these programs is that because tax credits fall dollar-for-dollar when premiums fall, they don't really do anything to make coverage more affordable for people with incomes below 400% of the poverty line," Fiedler says.

"That doesn't mean they're a bad thing. But they can only be one part of an overall strategy for making individual market insurance affordable."

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.

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