- In order to stabilize in-state insurance markets, stakeholders should consider strategies including reinsurance, Medicaid-sponsored health plans, and high-risk pools, according to the AHA.
Several factors are contributing to unstable state insurance markets, including demographic characteristics, limited payer competition, a lack of Medicaid expansion, continued use of transitional health plans, and poor coordination between Medicaid and individual health plan market.
“While many of the factors contributing to Marketplace instability could be addressed through changes in federal policy, states also have levers to stabilize their Marketplaces and ensure health coverage is available,” AHA said.
AHA proposed solutions that require either state actions to develop new healthcare financing mechanisms or use federal waivers such as 1115 Medicaid demonstrations. The organization also provided “difficulty ratings” for a state to successfully implement a proposed solution.
State insurance market stabilization solutions with moderately difficult implementation challenges require intensive financial restructuring and investments.
States can implement reinsurance programs to lower premiums through a structured financing pool that spreads out the cost of expensive healthcare claims. A state government can use federal policies such as 1332 waivers and a state financing mechanism to develop a reinsurance program.
Reinsurance has emerged as a popular stabilization tool for state insurance markets and can create lower premiums for consumers and lower the rate at which premiums are expected to grow.
“A statewide reinsurance program is one of the more effective policies for preventing bare markets and stabilizing at-risk markets,” AHA said. “However, reinsurance programs can take time to implement, particularly to identify sufficient funding.”
AHA added that reinsurance programs may drive payers not to incentivize the treatment of high-cost members, because some reinsurance programs put a cost limit on claims subject to reinsurance and add incentives for payers to keep costs down.
States may additionally leverage financial investments to create a state-sponsored basic health plan for enrollees.
The ACA allows states to develop a basic health plan (BHP) that covers individuals with incomes between 133 and 200 percent of federal poverty who do not qualify for Medicaid. This option allows states to create plans that are less expensive than Marketplace plans and provide essential health benefits.
“States could choose to implement a BHP for lower-income individuals themselves, or, alternatively, they could work with another state to open enrollment into that state’s BHP,” AHA said. “The latter may be an option for states that cannot operate their own BHP for political or administrative reasons.”
States would have to make significant investments in health plan infrastructure to host these plans while coordinating between the state’s Medicaid agency, Marketplace, or insurance agency.
Stabilization options with the most difficult implementation challenges require high levels of coordination with federal policy leaders and Medicaid organizations.
A state-coordinated high-risk pool can lower individual premiums statewide by putting high risk individuals into a seperate financing program. However, high-risk pools may result in higher premiums for more expensive individuals, which can make it more difficult for sicker individuals to purchase insurance.
Additionally, states attempting to create a high-risk pool would face federal policy barriers including ACA laws that guarantee coverage to people with pre-existing conditions.
“States that wish to establish a high-risk pool could choose to do so either as a long-term solution or as a short-term fix in bare or at-risk markets while other longer-term solutions are developed,” AHA said.
States could potentially design a new health plan option by leveraging their Medicaid managed care organizations (MCOs) and infrastructure. This option is best for states that have high participation rates in MCOs and well-developed Medicaid managed care programs
The use of state-sponsored Medicaid health plans could also drive competition in a state’s health marketplace by creating a new product, but may also cause emerging health plans to become disinterested in participation.
“If a state were able to pass legislation authorizing a public product, state agencies would be required to work collaboratively to design and implement such a product consistent with state law and Marketplace standards,” AHA said. “If the state chose to offer a product that did not meet Marketplace standards, the state would need to apply for a federal 1332 waiver.”
AHA summarized its findings by suggesting that states use a combination of market stabilization solutions when appropriate for their market needs.
“Given the unique characteristics of each state, there is no single option that would work for all states, and all of the options come with implementation hurdles,” AHA said. “Among other considerations, we discuss which solutions may be more or less appropriate based on a state’s characteristics.”