Reinsurance Programs Lower Premiums, But States May Want to Think Bigger

Reinsurance Programs Lower Premiums, But States May Want to Think Bigger by Jane Anderson Reinsurance programs can help lower premiums in the individual insurance market, but they're not enough by themselves — states will need to experiment with broader measures to impact underlying health care costs, particularly for unsubsidized individual market enrollees, a report from The Commonwealth Fund concludes. The report found that all 12 states that have implemented a reinsurance program in the individual market have been able to lower premiums. However, the effect on marketplace enrollment is less clear, with some states showing declines in enrollment and others demonstrating small increases or remaining level. Other policy options may have a bigger effect, according to study author Justin Giovannelli, an associate research professor and project director at Georgetown University's Center on Health Insurance Reforms. For example, a state coverage subsidy program is more flexible than reinsurance. However, states considering such an option likely will need federal support, he says. That federal support may not be forthcoming, says Avalere Health consultant Chris Sloan, who notes that the likely Republican-controlled Senate would block additional funds for stabilizing the Affordable Care Act and the individual market. "While the Biden administration will be able to tailor [section] 1332 waiver rules in order to encourage states to pursue reinsurance programs or public options, it won't be able to make funding simply appear," he says. "Regardless of the tweaks around the edges, that will continue to be the barrier to additional improvements in affordability in this market." Most of the erosion in individual market enrollment over the last few years has occurred in the unsubsidized population, Sloan says. "Frankly, many states need a strong reinsurance program to sustain a viable unsubsidized market, and could use some additional funding to improve cost-sharing affordability, particularly for lower income individuals." The funding for reinsurance is key, according to the report. However, many individual states are facing severe budget crises tied to the COVID-19 pandemic, making it unlikely that they could shift money from their general funds to subsidize insurance, Sloan says. "Some states are looking at alternative proposals" to reinsurance, Sloan says. "Things like standardized benefit designs that we see in some state-run exchange states, as well as states like Colorado or Washington who are looking at public options, are all ways that states may try to improve affordability without allocating substantial additional funding. From Health Plan Weekly Subscribers may read the in-depth article online. Learn more about subscribing to AIS Health's publications.