Senators of the Health, Education, Labor, and Pensions (HELP) Committee held their first hearing on bipartisan efforts to stabilize the health insurance market Wednesday morning, and one word was on the tip of everyone's tongue: reinsurance.
Four of the five state health insurance commissioners who testified before the committee made clear during Wednesday's hearing that they believe a return to the policy would encourage growth and drive down premiums in the individual market in their states.
“The federal reinsurance program has a benefit for states like mine that may not have an ability to up front receive money to get our programs started,” Tennessee insurance commissioner Julie Mix McPeak said.
Reinsurance offsets the costs of enrollees with expensive medical needs through direct federal payments to insurance companies, removing the need to make up for losses by raising premiums across the board. It was a feature of the Affordable Care Act from 2014 until 2016 when it expired. Twenty billion dollars went to reinsurance during that time period.
In the time since Obamacare's reinsurance program ended, some states have called for its return, while others have hoped to establish their own reinsurance programs in order to stabilize markets and reduce premiums.
Currently, states can use the Affordable Care Act's Section 1332 waivers — also known as innovation waivers — to create their own reinsurance programs, partly supported by federal dollars. One such state, Alaska, which has the highest insurance prices in the country, has managed to do so.
Alaska's efforts took over a year to come to fruition; the Trump administration finally approved the state's requests to establish the program in July. Health and Human Services (HHS) estimates the federal government to provide about $48.4 million to help fund Alaska's reinsurance program in 2018.
As a result of the decision, Alaska projected premiums in 2018 would be 20 percent lower than they would have been without the reinsurance program, and coverage would expand to almost fifteen hundred additional Alaskans.
But other states, like Tennessee, aren't in a sound enough financial position to start their own reinsurance pools, leading officials to call for Congress to take action on a federal level.
During the hearing, Sen. Susan Collins (R-Maine) asked Tennessee Commerce and Insurance Commissioner McPeak if the federal government should have a role in establishing a reinsurance pool.
“The reinsurance mechanism or a high-risk pool has the effect of removing from the risk pool the highest cost claims, which should bring premiums down remarkably,” McPeak answered.
She added that insurers would be encouraged to provide plans in areas with few options because they would have a better sense of risks involved.
But McPeak's comments were met with skepticism from fellow Tennesseean, Senate HELP Committee Chairman Lamar Alexander (R-Tenn.), who argued it “would take new money” to bring back a federal reinsurance program and would be difficult to establish.
Some Republicans are more interested in encouraging states to use the current Section 1332 waiver framework to establish reinsurance programs on their own, instead of taking federal action.
“Why don't states set up their own reinsurance programs?” Alexander asked. “All it takes is money.”
But it's not that simple. Not only is raising taxes politically unsavory, but the application process for 1332 waiver approval is cumbersome. States' efforts to establish reinsurance pools can't be accomplished quickly enough to improve health insurance markets in 2018.
According to the Centers for Medicare and Medicaid Services checklist, states must demonstrate the waiver will:
- “Provide access to quality health care that is at least as comprehensive and affordable as would be provided without the waiver.”
- “Provide coverage to at least a comparable number of residents of the state as would be provided coverage without a waiver.”
- And finally, not increase the federal deficit.
After that, states also are required to hold public hearings and allow time for a public comment period. Toughest of all, the state legislature must pass a bill approving the waiver's implementation.
Insurance commissioners argued that streamlining the process for waiver requests would allow states more flexibility in responding to conditions in the marketplace.
It is unclear whether a plan for reinsurance will be included in the bipartisan stabilization legislation. What was clear throughout the hearing was unanimous support for guaranteeing cost-sharing reduction payments, which — to the anxiety of insurers — the Trump administration has repeatedly threatened to end.
Alexander promised after the hearing concluded that progress was being made on the bill and said his plan may be ready for recommendation to the full Senate in the coming days.