Jaw Dropper: Tom Price pushing state-based reinsurance programs??

You may have noticed that among my 16 recommendations for repairing/improving the ACA, I foolishly failed to include one of the most important/obvious ones: Reinsurance. I didn't include it for two reasons: Partly because, quite frankly, I simply forgot about it and feel bad about myself now.

So far, two states (Alaska and Minnesota) have already established their own state-based reinsurance programs; in both cases, it was done as an act of sheer desperation...and, in both cases were put through in a bipartisan fashion (both states have GOP-held legislatures, but Minnesota's Governor is Democratic while Alaska's is Independent):

Alaska: Approved *unsubsidized* 2017 indy mkt rate hikes: 7.3%

There was a time, just a few months ago, when it looked like Alaska, which had already suffered from massive rate hikes the past 2 years due to their unique healthcare situation, might have a complete catastrophe on their hands with a third year of massive individual market rate hikes.

Fortunately (and to their credit), the GOP state legislature worked with the Independent governor to pass a new law which created a state-based reinsurance program to stave off the ugly hikes. In July, it looked as though this would result in not-fantastic-but-not-awful 10% average increase:

A major health insurer is seeking an average rate increase of about 10 percent on individual health insurance policies in Alaska, far less than what it received the last two years. Thisfollows recent steps by the state to shore up Alaska's insurance marketplace.

Premera Blue Cross Blue Shield is expected to be the only company offering individual health policies in Alaska in 2017, with Moda Health planning to leave that market. Premera received average rate increases of nearly 40 percent for 2015 and 2016.

Well, today Louise Norris followed up on the approved rates in Alaska, and the news is even better:

On July 18—the same day Governor Walker signed H.B.374 into law—Premera announced that they had filed rates with an average increase of 9.8 percent for 2017. The rate increase is significantly lower than the carrier’s rate increases were in 2015 and 2016, and Premera attributed that to the new reinsurance program.

A month later, on August 19, Premera filed a new rate proposal, requesting an average rate increase of just 7.3 percent for 2017. State regulators approved the 7.3 percent average rate increase a few days later, and the rates will take effect in January.

Perhaps other states should take a look at what Alaska did here?

Minnesota: MNsure announces 8 day Special Enrollment Period to take advantage of Premium Relief Bill!!

...62% of MNsure enrollees are receiving tax credits to help cover their premium costs...but that still leaves around 40,000 exchange enrollees paying full price...plus another 85,000 or so enrolled in off-exchange policies who also have to pay full price. That's around 125,000 people who saw their premiums skyrocket by over 50% on average, which caused a massive crisis.

This led to Democratic Governor Mark Dayton entering emergency negotiations with the GOP-held state House and Senate to come up with a plan to provide financial assistance for those people as well...and last week they did so:

Governor Mark Dayton’s office is pushing hard for legislators to come to an agreement on providing immediate relief for the rising cost of health insurance in Minnesota.

Dayton proposed a 25 percent health insurance premium rebate for Minnesotans who do not qualify for federal tax credits, but purchase health insurance in the individual market. Specifically, that would apply to those whose income is above the federal cut-off line of 400 percent of the federal poverty level, or $47,520 for an individual and $97,200 for a family of four.

According to a fact sheet released by the governor’s office, the proposed 25 percent rebate would automatically reduce the monthly health insurance premiums for qualified Minnesotans. Democrats argue that having the program administered by health insurers, which already have consumer information in place, would allow the plan to move forward quickly. Rebates would be paid to the insurance company, as opposed to going to the consumer, who would then have another step to go through.

...The premium relief bill passed by the Minnesota Legislature and signed by Governor Dayton appropriates $312 million to provide consumers who purchase health insurance in the individual market and do not receive advanced premium tax credits, an automatic 25 percent discount on their monthly health insurance premiums. The discount will be applied automatically by health insurance companies and does not require additional action by Minnesotans.

...Louise Norris informs me that it's coming from MN's general fund for the moment...no special tax/fee, no killing some other program or anything (yet).

In Minnesota's case, this was a one-time stop-gap measure to tide things over for 2017. However, just a few days ago, the Minnesota legislature created an official reinsurance program (this article is from before the vote, which later passed both houses):

March 30--The Minnesota House and Senate are expected to vote Thursday on whether to spend $542 million in state money meant to stabilize the state's individual health insurance market by subsidizing insurance companies' payments on unusually high claims.

The Legislature is expected to easily pass the measure, dubbed "reinsurance." Republican majorities have called it necessary to keep insurers in the individual market and drive down surging premiums.

But it faces an uncertain reception from Gov. Mark Dayton, who has expressed concern about spending state health care money on a plan with no guarantees it will achieve the intended results. The DFL governor and GOP lawmakers must reach an agreement by Friday in order for insurance companies to include the new subsidy in calculating their rates and health plan offerings for 2018.

OK, so the state will pony up a half a billion per year to cut down premiums for the individual market. Good. So why was Gov. Dayton unhappy about the plan?

Dayton and DFL lawmakers have expressed support for a reinsurance plan. But they disagree with Republicans on how it should be funded and administered and on what insurance companies should have to agree to in exchange for the state money.

...The state would pay those claims with money from a health insurance tax that funds MinnesotaCare, the state-subsidized health plan for poor residents. Another portion would come from the state general fund. Lawmakers hope federal money will cover some of the overall cost and that they won't see a drop in federal help if premiums go down. The federal government typically gives states less money for health care if they have lower premiums, so the state would apply for a waiver to ensure federal support for Minnesota at the same level.

...But in a letter to lawmakers Wednesday, Dayton said he was concerned the bill does not require insurance companies to commit to staying in the individual market or lowering premiums. He and DFL lawmakers urged those additions all along.

Well yeah...basically this amounts to hostage-taking by the insurance carriers: Give us $500 million or we're gonna bail...oh, and we might still bail even if you do give us the money. And no promises about lowering premiums, either. On the other hand, I believe Minnesota is among the states where the insurance commissioner is allowed to strike down excessive premium increases anyway, which should resolve that issue...but it still doesn't guarantee that they'll participate at all.

OK, so that's Minnesota and Alaska. What's this have to do with Tom Price?

Well, as tweeted out by the Kaiser Family Foundation's Larry Levitt earlier today:

MN and AK are using reinsurance pools to promote market stability. Tom Price has invited other states to do it too. https://t.co/PTHa6udIp7

— Larry Levitt (@larry_levitt) April 3, 2017

Here's the text of the letter:

Dear Governor:

The Administration's top priorities include improving patients' access to and affordability of care, slowing the rate of premium growth to improve the risk pool, bringing stability to the individual and small group health insurance markets, and increasing consumer choice. To achieve these ends, we are seeking to empower states with new opportunities that will strengthen their health insurance markets. In accordance with President Donald J. Trump's January 20, 2017, Executive Order1 directing agencies to alleviate the burdens ofthe Affordable Care Act (ACA), we are seeking to provide more flexibility and opportunities for innovation on the state level.

Under Section 1332 ofthe ACA, states can apply for State Innovation Waivers and pursue · innovative strategies to adapt many ofthe law's requirements to suit the state's specific needs.2 To receive approval, the state must demonstrate that a proposed waiver will provide access to quality health care that is at least as comprehensive and affordable as would be provided without the waiver, will provide coverage to at least a comparable number ofresidents ofthe state as would be provided coverage without a waiver, and will not increase the federal deficit. Before submitting its Section 1332 waiver application the state must also provide a public notice and comment period, including public hearings, sufficient to ensure a meaningful level of public input, and enact a law providing for its implementation ofthe waiver. Under a Section I 332 waiver, a state may receive pass-through funding associated with the resulting reductions in federal spending on Marketplace financial assistance consistent with the statute.

State Innovation Waivers that implement high-risk pool/state-operated reinsurance programs may be an opportunity for states to lower premiums for consumers, improve market stability, and increase consumer choice. For example, in response to initial rate information for plan year 2017 in Alaska indicating that premiums were projected to increase by 42% in the individual market, Alaska implemented a state-operated reinsurance program for 2017 that mitigated the projected rate increase significantly. Based on that success, Alaska has applied for a Section 1332 waiver, part ofwhich would implement a high-risk pool/state-operated reinsurance program, the Alaska Reinsurance Program, for 2018 and future years. We are reviewing the application and will work with the State on any updates or adjustments necessary for receipt of pass-through funding consistent with the statute.

We welcome the opportunity to work with states on Section 1332 State Innovation Waivers, and in particular, invite states to pursue approval of waiver proposals that include high-risk pool/state-operated reinsurance programs. If a state's plan under its waiver proposal is approved, a state may be able to receive pass-through funding to help offset a portion of the costs for the high-risk pool/state-operated reinsurance program. The amount offunding available will depend on state-specific circumstances.

We encourage states interested in applying for Section 1332 waivers to reach out to the Departments promptly for assistance in formulating an approach that meets the requirements of Section 1332. As a reminder, consistent with the statute, states must enact or revise state laws to apply for and implement Section 1332 waivers.

The Departments will work with states to review all applications within the timeframe provided under Section 1332's implementing regulations and do our best to work with states to review their applications on an expedited basis. In the coming weeks, we will be providing a checklist with further information intended to assist states in moving forward with waiver applications.

If your team would like to discuss Section 1332 waivers in more detail, please email stateinnovationwaivers@cms.hhs.gov. You may also find general information about State Innovation Waivers at the CMS website. We look forward to working with you.

Levitt explained it simply:

Here's how it works:
States put up $ for reinsurance, which lowers premiums.
Feds save $ on tax credits.
Feds give the savings to states.

— Larry Levitt (@larry_levitt) April 3, 2017

Anne Paulson explained it a bit further, but honestly, it sounds like here's the situation:

  1. Let's say there's 100,000 people in a state's individual market: Half under 400% FPL, half above it.
  2. Avg. unsubsidized rates in X state shoot up from, say, $500/month to, say, $700/month (a 40% rate hike).
  3. At full price, that'd be 100K x $700/mo x 12mo = $840 million for the year.
  4. Those 400% FPL, receive tax credits which slice it down to an "affordable" level...
  5. ...but those 400% FPL (on or off-exchange) have to pay full price, which sucks, thus causing them to either drop out (death spiral!) or be pissed about paying through the nose.
  6. The state ponies up, say, $120 million per year for reinsurance, which goes directly to the insurance companies to lop the increase in half (from $200 to $100/mo, or $600/month).
  7. Those below 400% FPL still receive APTC...but the amount of APTC needed is reduced by $100/month per person. In this sense, the state is now covering part of the cost of the APTC assistance, but these enrollees don't really see much of a difference at their end.
  8. Those above 400%, however, go from paying $700/mo to $600/mo. Their rates only went up 20% (still not great, but a hell of a lot better than 40%).

The federal government has, at this point, saved $60 million in APTC, because the 50K who receive it had their APTC amount reduced by $100/mo apiece. The state government has, at this point, had to spend $120 million in reinsurance. If the federal government then matches the state at 50%...that means the feds end up paying exactly the same amount they would have otherwise...while the state ends up eating $60 million.

Assuming I have this straight, this is rather ironic...because it amounts to the REPUBLICAN-held federal government encouraging STATE governments to pony up tens of millions of dollars of taxpayer money to subsidize the private insurance industry...

...which is already exactly what the ACA does to begin with (at the federal instead of state level).

I actually have no problem at all with a reinsurance program, however, as Governor Dayton noted, it's all about how they're funded and, just as importantly, whether or not the insurance carriers are required to participate in the exchanges to receive the funding.

In Minnesota's case, they don't appear to have had much choice, as Dayton noted here: 

Letter from Gov. Dayton to House Speaker Kurt Daudt

Dear Mr. Speaker:

Last Thursday, March 30, 2017, I received the Conference Report passed that day by both the Minnesota House and Senate, which appropriates $542 million of state funds in the FY18-19 Biennium to subsidize insurance companies operating in the so-called Individua  Market. I recognize that this bill has been a top priority of your respective Leaders, since the Session's beginning; and I commend you and them for moving it expeditiously through the legislative process.

...Unfortunately, two of my main concerns about the bill were not addressed in the final Conference Report. The first was the source of funding for the insurance subsidies. In my March 29th letter to the two of you, I reiterated what I had been saying during previous weeks: "The conference report uses the Health Care Access Fund and the General Fund to cover the state responsibility for reinsurance. I believe reinsurance should be funded by a tax on the industry itself, as was the Minnesota Comprehensive Health Association. The General Fund and Health Care Access Fund dollars should be used for statewide priorities like schools, early childhood education and health care for low-income Minnesotans. Furthermore, it is unwise to use Health Care Access Fund dollars without repealing the sunset of the two percent provider tax that sustains the fund."

My proposal was ignored, because of, I am told, opposition by the insurance industry. Thus, the bill not only provides insurers with up to $542 million of taxpayers' dollars, as direct subsidies to their businesses, but also allows them both to dictate where that money shall come from and to evade any financial responsibility for their own aid program.

Secondly, my proposal to include a MinnesotaCare Buy-In option for Minnesotans purchasing health insurance on the Individual Market was rejected. As a result, private insurance companies will decide our citizens' options, including the extent of coverage, the composition of the provider networks, and the cost of their insurance.

...Finally, I am deeply concerned that this $542 million subsidy is being offered to insurance companies, who refuse to make any commitments about their participations in next year's Individual Market or the insurance rates they will charge Minnesotans. On March 16, 2017, I wrote the attached letter to the Chief Executive Officers of each of the presently participating insurers. I said, in part, " If the Legislature chooses to advance these reinsurance bills, it is imperative that your industry publicly commit to Minnesotans that, moving forward, you will specifically: 1) sell products statewide in the individual market and; 2) lower premiums to a level that will make insurance coverage more affordable than it is today. I ask that you provide consumers, the Legislature, and me with these public commitments as soon as possible Minnesotans deserve to know that a program of this scale and cost will actually have the intended results of stabilizing the individual insurance market and improving its affordability for consumers. Thank you in advance for your swift reply."

To date, I have not received even the decency of a written reply from a single one of those CEOs, much less their answers to my questions. I know that they have refused to provide those same assurances, when asked by individual legislators and by legislative committees. Yet, this bill would contribute $542 million of public monies to their bottom lines without even the acknowledgement of my request for information or the information I requested.

On March 22, I stated publicly that I would not sign a Reinsurance bill until I received written replies to my questions from the insurance executives. Having received no responses, I could not sign this legislation for that reason alone, in addition to my other concerns previously stated.

However, I agree with you, this bill's authors, and those legislative leaders, who believe that this subsidy must be committed to the health insurance industry at this time, to try to induce their participation in Minnesota's Individual Market in 2018 at the lowest possible rates. Thus I will allow this measure to become law by not acting upon it within the requisite three days, which end at midnight tonight. I will deposit, without signature, in the office of the Secretary of state, Chapter 13, House File 5. 

In short: The private insurance carriers have us over a barrel here; there's not much we can do other than throw $500 million at them with no strings attached.