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Analysis

Wisconsin Wins Waiver for $200M Reinsurance Program

By Steven Porter  
   July 29, 2018

The five-year innovation waiver, under Section 1332 of the ACA, is the nation's fifth and the first to be granted this year.

Beginning next year, Wisconsin will roll out a $200 million reinsurance program designed to stabilize premiums in the state's individual health insurance market.

The program, which will be jointly funded by the state and the federal government, was authorized by a five-year waiver granted Sunday by the U.S. departments of the Treasury and Health & Human Services under the Affordable Care Act. Insurers and providers alike have hailed the program as a positive step.

"People in the individual market saw their premiums go up by 44% on average last year, and some saw much larger increases—that's unsustainable and unacceptable," Gov. Scott Walker said in a statement Sunday after formally accepting the waiver at HSHS St. Mary's Hospital in Green Bay.

With the reinsurance program, premiums on the state's individual market are estimated to drop by a weighted average of 3.5% next year, Walker said, citing initial 2019 rate filings received by Wisconsin's insurance commissioner. The decrease would place premiums 11% lower in 2019 than they would be without the program, he said.

The program—known as the Wisconsin Healthcare Stability Plan (WIHSP)—will cover claims in the $50,000-250,000 range, paying 50% of the costs up to the $200 million cap.

Who Funds What
 

Wisconsin expects its plan will save the federal government $166 million in 2019, based on an actuarial report prepared by the Wakely Consulting Group. Those savings would be used as pass-through funding for the program, leaving Wisconsin to pay the remaining $34 million for 2019.

Exactly how much the program will cost Wisconsin, however, remains to be seen. If the plan saves the federal government less than expected, resulting in less pass-through funding, it will be up to Wisconsin to take up the slack. (The state law authorizing the reinsurance program defines the state's subsidy as "a sum sufficient" to cover the reinsurance cap after the federal funds are accounted for.)

Bobby Peterson, executive director of the Madison-based nonprofit law firm ABC for Health, described Walker's support for this reinsurance program as especially noteworthy in light of his past opposition to another jointly funded healthcare program.

"Curiously, Governor Walker rejected federal Medicaid Expansion funds for fear that the state would be left 'holding the bag' for the full cost of expansion, should the feds 'renege' on their funding share. Here, the statue directs the state to 'pay the bill,' should the feds not pay its share," Peterson wrote in a public comment on Wisconsin's waiver application.

Just Playing Politics?
 

Democrats rejected Walker's reinsurance plan as an attempt to score political points on healthcare during an election year without accepting additional federal funding through the ACA for Wisconsin's BadgerCare Plus program, as the Milwaukee Journal Sentinel reported.  

Walker, a Republican, is seeking reelection this fall to a third term. He has railed against the ACA, and his administration cast the WIHSP waiver as a state-led initiative to shield Wisconsinites from a broken federal law.

"If Congress continues to avoid action, states will need to continue to take the lead to protect our citizens from the negative consequences of the ACA," Wisconsin Commissioner of Insurance Ted Nickel said in a statement.

For their part, insurers and providers in the state seem to welcome the Walker administration's move—even if it doesn't fix the market's biggest problems.

"A state-based reinsurance program does not address the root causes of the rising costs of health care, but it is the best stabilization program that Wisconsin can implement in the short term to have a significant impact on rates for 2019 and beyond," Marty Anderson, chief marketing officer for Security Health Plan, and Ryan Natzke, chief external affairs officer for Marshfield Clinic Health System, wrote in a joint public comment responding to the state's application.

Others on the state and national level voiced their support as well:

  • Wisconsin Hospital Association President and CEO Eric Borgerding: "We support using the tools available under the ACA to put forward a plan aimed at stabilizing premiums, increasing competition in the insurance market and sustaining coverage gains for the foreseeable future or until the ACA is repaired or replaced."
     
  • Wisconsin Medical Society CEO Clyde "Bud" Chumbley, MD: "Reinsurance programs have been demonstrated to lower insurer risk, which can incentivize insurers to participate in the ACA marketplaces. … By stabilizing and lowering premiums, the Wisconsin Healthcare Stability Plan could help incentivize younger, healthier patients to acquire coverage, rather than risking a potential catastrophic event."
     
  • America's Health Insurance Plans President and CEO Matthew D. Eyles: "We believe the proposal will allow health plans to continue offering more affordable products in the individual market leading to increased competition and more affordable health plan options for Wisconsin residents."

The Centers for Medicare & Medicaid Services released public comments with Wisconsin's application materials online. The state released its own set of comments separately.

Other State Waivers
 

Wisconsin's waiver is the first to be granted this year and only the fifth since the waiver process began, according to records compiled by the Kaiser Family Foundation.

Wisconsin's reinsurance program bears some similarity to reinsurance programs established in Alaska, Minnesota, and Oregon, all of which had their waivers granted last year. (Hawaii's waiver, which was approved under the Obama administration, dealt with the ACA's Small Business Health Options Program.)

At least three more states—Maine, Maryland, and New Jersey—have pending applications for waivers that would allow pass-through funded reinsurance programs of their own, according to the KFF records.

Steven Porter is editor at HealthLeaders.

Photo credit: (at top) Wisconsin Gov. Scott Walker speaks at the Iowa Republican Party's Lincoln Dinner in 2015 in Des Moines, Iowa. (Creative Commons/Gage Skidmore)


KEY TAKEAWAYS

Wisconsin will use federal pass-through funding to cover reinsurance in the state, as three other states have.

The program will be budget-neutral for the federal government, leaving Wisconsin's share to be determined.

The plan comes as the state's Republican governor, an outspoken ACA critic, seeks reelection this fall.


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