CMS Offers Resources for High-Risk Pools, Reinsurance Waivers

May 17, 2017 - The Centers for Medicare and Medicaid Services (CMS) has just released a checklist for states to use on applications for Section 1332 waivers.    The waivers are specifically targeted at helping states establish high-risk pools and other state-operated reinsurance programs.  

The checklist seeks to complement the agency’s stated attempt to stabilize health insurance marketplaces for the 2018 enrollment period.

“Today’s guidance addresses the ACA’s impact in driving up insurance costs and reducing choices,” said CMS Administrator Seema Verma.

“State initiated waivers that implement high-risk pool/ state-operated reinsurance programs will help lower premiums, stabilize the health insurance exchange, and meet the unique needs of each state.” 

HHS Secretary Tom Price has also advised states to take advantage of the waiver option.   

“We welcome the opportunity to work with states in particular to pursue approval of waiver proposals that include high-risk pool/state-operated reinsurance programs,” Price wrote in a recent letter to the nation’s governors.

“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.”  

Reinsurance allows a state to set up a separate coverage program for the highest cost residents. Claims that exceed a benchmark amount are then paid by federal funds. Proponents argue that reinsurance reduces overall premium costs by limiting payer exposure to high-cost beneficiaries.   

For a Section 1332 waiver to be approved by HHS, the state is required to provide residents with comparable or better health plans than what is currently available through the ACA health insurance ecosystem.  

The plans must be “at least as comprehensive and affordable as would be provided without the waiver, provide coverage to at least a comparable number of residents of the state as would be provided coverage without a waiver, and not increase the federal deficit.”

The first state to apply and receive a waiver was Alaska, which created the Alaska Reinsurance Program (ARP) for the 2017 marketplace.  With 2017 rates projected to increase by 42 percent, ARP lowered the actual increase to seven percent.  

Alaska’s 2018 application estimates ARP will save the federal government $51.6 million in Advanced Premium Tax Credits (APTCs).  It also claims it will boost individual enrollment in marketplace by nearly 1,650.   

“Under the proposed waiver, the federal government would provide pass-through funds to ensure the long-term stabilization and viability of Alaska’s individual health insurance market,” stated on the waiver application.

“Alaska would receive federal funding to subsidize the ARP, based on savings that would be generated as a result of a reduction in APTCs absent Alaska’s reinsurance program.”   

The current application seeks approval for 2018 and an additional five years after, at which point a renewal application would be required. Alaska’s 2018 waiver is currently under review by HHS.

Minnesota has also taken advantage of the Section 1332 waiver.

For Minnesota, the decision to set up a reinsurance program came on the heels of a 50 percent increase in 2017 marketplace premiums.  As reported, Minnesota will set aside $271 million to establish a reinsurance pool for 2018-2019

The Minnesota reinsurance program would pay for 80 percent of medical costs for individuals who exceed a $50,000 a year threshold.  The state would continue subsidies up to a maximum $250,000 a year in costs, at which point responsibility for payment would revert to payers.

“With the deadlines for insurer rate filings fast approaching, policymakers need to act soon to address individual market issues for next year,” said Academy of Actuaries Senior Health Fellow Cori Uccello. “The consumers, insurers, and health care providers in the individual market will all be affected by whether and how these challenges are addressed.”