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New Jersey Gains CMS Approval for Reinsurance Program

New Jersey has received CMS approval to implement a reinsurance program to lower consumer premiums.

New Jersey received CMS approval to operate a reinsurance program.

Source: Thinkstock

By Thomas Beaton

- New Jersey has received approval from CMS to implement a five-year reinsurance program that aims to lower individual health plan premiums by 15 percent.

The program will operate from 2019 to 2023 and provide $218 million in reinsurance assistance to New Jersey’s individual health plans during the first year of operation.

With lower premiums, the state predicts that enrollment in the individual market will rise by 2.7 percent in 2019, 2.6 percent in 2020, and 2.6 percent in 2021.

State officials are enthusiastic that the program, which Governor Phil Murphy approved in May of 2018, will act as a stabilizing force for the individual market.

“The Murphy Administration has made it a priority to pursue policies that protect the health of New Jersey families by improving access to affordable quality health coverage,” Department of Banking and Insurance Commissioner Marlene Caride said in a press release.

“The reinsurance program is an innovative way to increase stability in the insurance market and reduce costs to consumers. Ultimately, this is about creating greater access for residents in the state to the coverage and care they deserve.”

The finalized reinsurance program waives federal requirements to provide a single risk pool for the individual health plan market. Waiving the single risk pool requirement allows the state to use reinsurance funds to alleviate payers’ high claims costs.

Payers with claims ranging from $40,000 to $215,000 can receive reinsurance assistance for 60 percent of the claim’s cost.

The reinsurance program effectively replaces the advanced premium tax credit (APTC) subsidies for individual enrollees.   

CMS estimates that New Jersey’s move from APTC subsidies to reinsurance funding will reduce federal spending between $218 to $310 million each year.

Failing to implement the reinsurance program would have significant negative impacts on enrollment rates, the state warned.

Department of Banking and Insurance actuaries calculated that New Jersey’s total insurance enrollment will continue to decline without a reinsurance program. The state’s total disenrollment rate grew from 7.5 percent in 2016 to 7.6 percent in 2017, as premiums steadily increased. For 2019, in-state payers requested premium increases of 5.8 percent for their individual health plan offerings.

“Without a reinsurance program, individual health premiums likely will continue to rise at an unsustainable rate,” the actuaries said. “Consequently, New Jersey residents will be forced to confront the costs of ever-rising health premiums, resulting in stagnation of individual market growth.”

New Jersey’s program also includes several federal reporting requirements such as federal audits, intermittent reinsurance performance reviews, documentation reviews, and funding calculations.

New Jersey now joins Wisconsin, Alaska, Minnesota, and Maryland on the list of states that have developed reinsurance programs to generate premium reductions of up to 20 percent.

The reinsurance program is now the third policy that the state has implemented to stabilize the individual health plan market. Previously, New Jersey legislators approved an individual mandate on insurance and enrollment limits on short-term health plans.

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