Policy Examples

• Section 1332 of the Affordable Care Act (ACA) allows states to apply for reinsurance waivers—which can alter certain ACA requirements for health insurance plans—to help make coverage more affordable. source
• The Medicare Modernization Act of 2003 established coverage of prescription drugs through Medicare Part D and allows Medicaid to subsidize 80% of drug spending above the out-of-pocket threshold. source
• As of September 2019, 12 states received approval from CMS for 1332 State Innovation waivers to develop reinsurance plans. Two states submitted waivers and later withdrew, and three states have drafted waivers and had not submitted yet. source
• In January 2020, the Centers for Medicare and Medicaid Services (CMS) will begin the Part D Payment Modernization, a voluntary five year model to test the impact of a revised program design and incentive alignment on overall Medicare Part D prescription drug spending and beneficiary out-of-pocket costs. One way the model promotes a decrease in overall spend is the creation of a two-sided risk model to incentivize plans to promote the selection of low cost drugs to better manage the federal reinsurance subsidy. source

Outcome Evidence

• A recent report from Georgetown University’s Center on Health Insurance Reforms found that Minnesota’s reinsurance program successfully held rates down for 2018 and 2019, stabilized individual market premiums, and helped contribute to increased enrollment in 2018. source
• Before the reinsurance system was enacted, individual market premiums were projected to increase 42 percent in Alaska in 2017. In an effort to curb costs and keep premiums low, the state instituted a tax on all types of health insurance, and was able to generate $55 million to fund its reinsurance system and bring rate increases down to 7.3 percent in 2017. source
• As of August 2019, Montana received federal approval for a reinsurance program that will take effect in 2020. As a result, insurers in the state have proposed average rate decreases of more than 10 percent. source
• A 2019 report published by Avalere found that among the 12 states running reinsurance programs, premiums were 16.9 percent lower, on average, in the first year of enactment compared to what they would have been without the reinsurance program. The reductions ranged between a decrease of 6% (OR) to 43.4%(MD). source
• In 2017, the University of Pennsylvania’s Leonard Davis Institute of Health Economics (Penn LDI) published a report comparing multiple subsidized reinsurance approaches, including per enrollee insurance, invisible high-risk pools, aggregate coinsurance, and per enrollee subsidies. They found these approaches have the potential to stabilize the individual health insurance market by reducing the financial burden on insurers. However, program efficacy is dependent on multiple factors, including risk management, incentives for risk selection, incentives for care management, and administration complexity. SOURCE