New Jersey: Reinsurance program approved by CMS for another 5 years; will continue to reduce full price premiums by ~15%
NJ Department of Banking and Insurance Announces Federal Approval of Section 1332 State Innovation Waiver Extension to Continue Reinsurance Program
Reinsurance Program Improves Health Insurance Affordability
TRENTON – The New Jersey Department of Banking and Insurance today announced the state received federal approval of a Section 1332 State Innovation Waiver Extension to continue a reinsurance program that lowers health insurance premiums in the individual market by 15 percent. The reinsurance program increases certainty and stability in New Jersey’s individual health insurance market.
I wrote a piece just a few days ago in which I note that as long as the enhanced subsidies under the Inflation Reduction Act are in place, there's little reason for state-based ACA reinsurance programs to exist, and in fact that they generally harm more people financially than they help. Regardless, reinsurance programs seem to be all the rage these days, and at the moment the enhanced IRA subsidies are scheduled to sunset at the end of 2025 anyway, so there's not much point in getting too bent out of shape over it, I suppose.
Section 1332 waivers are subject to approval by the U.S. Department of Health and Human Services and the Department of the Treasury. The initial waiver was approved in 2018 for the period of 2019 through 2023. That program was successful at reducing rates in the individual market by 15 percent from what they would have been without reinsurance. This extension continues the program for an additional five-year period from 2024 through 2028. The extended time frame is the only change from the existing 1332 waiver.
“The extension of the state’s reinsurance program is another example of Governor Murphy and his administration successfully implementing innovative measures to expand health insurance coverage and ensure that quality, affordable health care is available to New Jersey residents,” said Acting Department of Banking and Insurance Commissioner Justin Zimmerman. “The reinsurance program has successfully contributed to increasing access to and affordability of health insurance in the individual market. With the approval of the waiver extension, rates will continue to be lower than they otherwise would have been if New Jersey had not taken the step to establish this program.”
Governor Murphy signed the New Jersey Health Insurance Premium Security Act into law in 2018 creating a reinsurance program. The program reimburses carriers for certain high-cost claims in the individual insurance market, reducing risk and exerting downward pressure on premiums. It uses a mix of federal and state funds to fund the program to produce a reduction in individual health insurance premiums. The program is primarily supported by federal pass-through funding granted by the waiver, along with funds collected by the State pursuant to the law continuing a shared responsibility requirement in New Jersey and funds from the Health Insurance Affordability Fund, which is funded through a repealed federal assessment on insurers that was continued by the State. Since 2020, no General Fund dollars have been used to support the program.
Specifically, the reinsurance program reimburses individual health carriers for a proportion of the cost of certain high-cost claimants between a minimum and maximum threshold. Under the parameters for 2024, the program will reimburse 50 percent of claims between a $35,000 minimum threshold (attachment point) and the $270,000 maximum threshold (reinsurance cap).
The individual health insurance market is comprised of coverage offered through Get Covered New Jersey, the State’s official health insurance marketplace, as well as coverage offered outside the Marketplace.
Under Governor Murphy’s leadership, the Department has implemented numerous initiatives that work together to increase health insurance affordability and stabilize the individual insurance market. In addition to creating the reinsurance program, Governor Murphy established Get Covered New Jersey to improve access to quality, affordable health coverage, as well as continued a health coverage requirement that has helped to reduce rates in the individual market.
Additionally, New Jersey was the only state in the country to open its marketplace with additional financial help provided through state subsidies, ensuring greater affordability for hundreds of thousands of New Jerseyans. The administration also increased and expanded state subsidies to individuals with household incomes up to 600 percent of the federal poverty level, up from the previous 400 percent FPL threshold. Nine in 10 people enrolling in a health plan at Get Covered New Jersey now qualify for financial help, and many can find a plan for $10 a month or less.