Reinstate Obamacare Subsidies, State Official Says

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By Sara Hansard

Obamacare plans that cover people with expensive claims should be given subsidies for the next five years to stabilize the exchange markets, a state insurance commissioner who will testify before a Senate committee told Bloomberg BNA.

Congress should reinstate the Affordable Care Act reinsurance program that was in effect from 2014-2016 in addition to funding subsidies to reduce out-of-pocket costs for low-income people, Washington Insurance Commissioner Mike Kreidler, a Democrat, said Aug. 24. The Senate Committee on Health, Education, Labor and Pensions has scheduled hearings Sept. 6 and 7 on stabilizing the ACA exchange markets in 2018. Tennessee Insurance Commissioner Julie McPeak, Oklahoma Insurance Commissioner John Doak, Pennsylvania Department of Human Services Secretary Teresa Miller, and Alaska Insurance Division Director Lori Wing-Heier will also testify at the Sept. 6 hearing.

Democrats, health-care industry stakeholders, and a number of Republicans—including HELP Committee Chairman Lamar Alexander (R-Tenn.)—have called for appropriating the cost-sharing reduction subsidies, which President Donald Trump has threatened to withhold unless Congress acts on changing the ACA. But getting Republicans in Congress to agree to reinstate the reinsurance program, which required fees on employer-sponsored plans, will likely be more difficult as many Republicans oppose what they call an insurer bailout.

Kreidler’s comments may be a preview of what Democrats will call for at the hearings.

Washington, a predominantly Democratic state that set up its own ACA exchange, is considering filing an application for a 1332 waiver for a reinsurance program, Kreidler said. Premiums in the state rose an average of 13 percent in 2017 largely because the federal ACA reinsurance program ended after 2016, he said.

Under Section 1332 of the ACA, states can apply for innovation waivers from major requirements of the law as long as they demonstrate they can provide care at least as comprehensive and affordable and cover a comparable number of residents without increasing the federal deficit.

Make Reinsurance Permanent

While five-year funding for a reinsurance program would be helpful, Kreidler said, he would prefer that a permanent federal program be authorized. “If you want to stabilize the market, this is something you have to put into effect,” he said.

Minnesota, Oklahoma, and Iowa have also applied for 1332 waivers to create reinsurance programs, and Oregon has posted a draft of its waiver application.

The ACA’s reinsurance program, which was authorized to provide a total of $20 billion in funding from 2014-2016, was the only one of the law’s three premium stabilization programs that succeeded in helping insurers cover the cost of sicker enrollees.

A risk adjustment program, under which insurers that cover healthier populations make payments to insurers of less healthy pool of enrollees, is the only permanent premium stabilization program authorized by the ACA. But the risk adjustment program has resulted in many new, small carriers that lack historical data on their enrollees making big payments to large, established carriers, typically state Blue Cross Blue Shield plans. That undermined the competitiveness of the new plans.

Alaska Waiver

“There should be some reinsurance available to these individual markets,” Wing-Heier told Bloomberg BNA Aug. 25. In July, the U.S. Health and Human Services Department approved Alaska’s innovation waiver for a reinsurance program. Alaska is to receive an estimated $322 million in reinsurance funding from the federal government between 2018-2022, and the state is providing between $10 million to $15 million for each of those years as well, Wing-Heier said.

Alaska’s reinsurance program contributed to reducing 2018 premiums filed by the state’s one insurer, Premera Blue Cross, by 20 percent, and the lower premiums will result in lower federal subsidies that will be paid for enrollees under the ACA, Wing-Heier said.

Many employers may be wary of how Congress approaches a reinsurance program. “Employers are very much supportive of a stable individual market,” Katy Spangler, senior vice president of health policy for the American Benefits Council (ABC), told Bloomberg BNA Aug. 25. The ABC represents more than 400 large employers who provide health-care and retirement plans for employees.

Funding by Employers a `Concern’

But the three-year reinsurance program was funded primarily by employers, Spangler said. “That’s a concern to us and certainly a concern if Congress were to look to that now,” she said.

However, the American Health Care Act passed in May by the House as well as the Better Care Reconciliation Act considered by the Senate included stabilization funding that could be used for reinsurance that would be paid by the federal government, Spangler said.

“The idea of putting federal dollars into the individual markets to help lessen the risk and the adverse selection is a concept that’s been around for a long time that’s been bipartisan,” Spangler said. Under the ACA, health insurers are prohibited from refusing to sell policies to people with health problems, or charging them more. Adverse selection occurs if a disproportionate share of unhealthy people sign up for coverage, raising premiums and pushing more healthy people out of the market.

Regardless of what Congress does concerning cost-sharing reduction subsidies or reinsurance, Wing-Heier said, it is questionable whether any action taken by Congress at this point won’t be too late to provide more stability for the exchange markets in 2018. The deadline for insurers to file final rates for 2018 is Sept. 27.

“Perhaps it should be viewed as changes for the 2019 renewal cycle,” Wing-Heier said of the Senate HELP hearings.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bna.com

To contact the editor responsible for this story: Kendra Casy Plank at kcasey@bna.com

For More Information

Information on Senate HELP Committee hearings is at https://www.help.senate.gov/hearings.A May 23 letter from America's Health Insurance Plans to Senate Finance Committee Chairman Orrin Hatch (R-Utah) calling for a market stabilization program with a "reinsurance approach" is at https://www.ahip.org/wp-content/uploads/2017/05/AHIP-Letter-to-Chairman-Hatch-5-23-2017.pdf.A fact sheet on Alaska's Section 1332 waiver is at https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/Downloads/Fact-Sheet.pdf.Minnesota's 1332 waiver application is at https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/Downloads/Minnesota-Section-1332-Waiver.pdf.Oklahoma's 1332 waiver application is at https://www.ok.gov/health2/documents/1332%20State%20Innovation%20Waiver%20Final.pdf.Information on Iowa's 1332 waiver request is at https://iid.iowa.gov/press-releases/iowa-submits-stopgap-measure-for-federal-approval.A draft of Oregon's 1332 waiver application is at http://healthcare.oregon.gov/Documents/draft-OR1332-waiver-app.pdf.A Congressional Research Service report comparing the American Health Care Act and the Better Care Reconciliation Act is at https://fas.org/sgp/crs/misc/R44883.pdf.

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