Virginia: Budget Bill passes with reinsurance funding; could knock 2024 ACA rate increases down from ~21% to ~10% or less


A few weeks ago, I noted that Virginia's average 2023 unsubsidized ACA individual market premiums dropped by nearly 13% thanks to the newly-implemented state-based reinsurance program...but that they were at risk of skyrocketing by as much as 25% in 2024 due to that same reinsurance program being at risk of not continuing for a second year because of a budget standoff:

During 2021, the Virginia General Assembly passed HB 2332, the Commonwealth Health Reinsurance Program, which was signed into law on March 31, 2021 as Chapter 480, of the 2021 Virginia Acts of Assembly. This bill requires the State Corporation Commission to submit a waiver request for federal approval to establish a reinsurance program beginning January 1, 2023.

Section 1332 of the Affordable Care Act permits a state to apply for a State Innovation Waiver (also referred to as a section 1332 waiver) to pursue innovative strategies for providing residents with access to high quality, affordable health insurance while retaining the basic protections of the ACA. The program also provides pass-through funding to the state for federal savings from approved initiatives.

The proposed reinsurance program would be funded through state general funds and federal pass-through funding provided under the waiver. It would reimburse carriers in the individual health insurance market for a proportion of the claims of covered individuals with high annual costs. The program is designed to increase affordability in the individual market with a statutory goal of decreasing premiums by up to 20 percent.

...On May 18, 2022, federal reviewers issued a letter approving Virginia’s State Innovation Waiver application to establish the Commonwealth Health Reinsurance Program (CHRP) for an initial period of up to five years, beginning in 2023. Per enactment language, the remaining Virginia statutes establishing the CHRP will become effective on June 17, 2022, 30 days after the Commission provided notice of federal approval.

The CHRP is designed to operate as a traditional reinsurance program by reimbursing ACA individual market health insurers for a percentage of an enrollee’s claims costs exceeding a specified threshold (or “attachment point”) and up to a specified ceiling (or “reinsurance cap”). Specifically, in 2023, the approved program would reimburse claims between an attachment point of $40,000 and an estimated $155,000 cap with a coinsurance rate of 70%. This program is projected to reduce individual premiums in the ACA marketplace by 15.6% for plan year 2023.

Here's my reinsurance explainer. Virginia's is pretty typical, although the actual impact was less dramatic than anticipated--a 12.9% average rate drop instead of 15.6%. Even so, that's a significant reduction.

Most state-based ACA reinsurance programs are in effect for multiple years (I think it's typically 5 at a time, as that's the standard length for Section 1332 waivers before they have to be re-approved). In Virginia's case, however, the program has been in jeopardy after only being in place for one year:

Obamacare health insurance costs in Virginia are set to spike next year because the General Assembly budget impasse means a financial deal that cut premiums has now lapsed, a State Corporation Commission analysis shows.

The analysis projects individual coverage would rise by 28.5% in 2024, after the reinsurance program the state financed — in tandem with a much larger federal sum — cut this year’s premium rates an average of 17.2% from 2022’s average premium rates.

My own analysis of the preliminary 2024 individual and small group market rate hike put the weighted average rate hike at more like 21%, but that would still be huge if it were to go through.

I also warned that:

Even if the Virginia legislature does come to an agreement and the program is locked in for 2024, if this happens after the deadline for carriers to sign the final contracts (in mid-September), it will be too late; the 2024 rates will be locked in regardless, although this should also mean massive Medical Loss Ratio refunds being issued the following year.

Well, it looks like the powers that be in the Virginia legislature pulled a rabbit out of a hat at the last minute after all:

As the Virginia bipartisan, bicameral budget amendments deal moves rapidly towards passage (it’s already passed the House of Delegates and should pass the State Senate shortly), Virginia House Democratic Leader explained his reasoning for voting yes (and urging his Democratic colleagues to do the same). See below for video and a transcript of his remarks a little while ago.

The transcript goes into some length on a variety of issues, but the key quote is here:

We know that the health care system needs work. Most people are one hospital bill away from living in poverty, which is why Democrats work to fund the reinsurance program to ensure that the cost of health health care insurance marketplace premiums are reduced, making sure that families have access to care when they need it most.

I noted in my prior post on Virginia's reinsurance program that there's that as long as the enhanced federal subsidies of the Inflation Reduction Act remain in place (through the end of 2025 as of this writing), these types of programs (which nearly 2 dozen states have had in place for years now) actually, ironically, harm far more people than they help. Having said that, with the IRA subsidies set to expire in a couple of years, the math gets more complicated; so be it.

In any event, while the phrasing of the quote above doesn't come right out and say that the reinsurance funding is included in the budget as passed, it looks like it has been according to the legislative text of the bill:

G. The Bureau of Insurance shall continue the Commonwealth Health Reinsurance Program in plan year 2024 with a target for premium reduction of 15 percent.

I presume the VA individual market carriers will be posting revised 2024 rate filings any moment now...stay tuned.