Montana the latest state to jump on the reinsurance bandwagon to lower premiums 10-20% next year
A few days ago I noted that North Dakota had jumped onto the ACA reinsurance train; now it looks like Montana is onboard as well:
HELENA — Gov. Steve Bullock has signed legislation meant to lower premiums for Montana customers who receive health insurance through the Affordable Care Act’s individual marketplace.
Bullock signed the bill Tuesday creating a reinsurance program to help reimburse insurers for high-cost claims so those costs aren’t included in determining individual marketplace premiums for the following year.
U.S. health officials also must approve the plan, which is estimated to offset 2020 premium increases by 10% to 20%.
“This is one of the most important mechanisms that Montana as a state can deploy to not only make health care more affordable for the 55,000 people who are purchasing an insurance plan in this market, but also to stabilize this market,” said John Doran, divisional vice president of external affairs for Blue Cross and Blue Shield of Montana.
Only 45,374 people selected ACA exchange plans for 2019 during Open Enrollment, and due to nonpayment and net attrition that number is likely down to around 40,000 today, which suggests that there's roughly 15,000 people enrolled in off-exchange ACA policies statewide.
...Under the legislation, sponsored by Republican Sen. Steve Fitzpatrick, the state will assess a 1.2 percent premium tax on all major medical policies sold in Montana, which will raise an estimated $15 million. The tax does not apply to self-funded group insurance plans.
The reinsurance program also will receive about $60 million in federal money that would have otherwise been used as premium tax credits under the Affordable Care Act. A five-member board of directors will oversee distribution of that estimated $75 million to the insurance companies for high cost claims, likely ranging from $40,000 to $1 million. The board will include one member representing each of the three companies that sell policies on the exchange. It is scheduled to hold its first meeting next Wednesday.
$75 million divided by 55,000 is around $1,363 apiece, or $114 per month per enrollee. Montana's 2019 ACA premiums should average around $673 this year, so a $114 reduction would be roughly 17%, which is right in line with the 10-20% projection noted.
The downside of reinsurance programs, of course, is that while they reduce the unsubsidized premiums, they also reduce the amount of subsidies which most enrollees are eligible for (in fact, that's where most of the funding for the program comes from) so it's not an ideal solution...but it's the only premium reduction program which CMS Administrator Seema Verma seems to approve of which doesn't involve stripping away ACA protections or screwing with the risk pool, so I'll take it.