April 4, 2013 — The House Health Committee has unanimously passed major reinsurance legislation, designed to offset the spike in premium rates next year when insurers are required to accept thousands of sick people who had previously been denied coverage because of pre-existing conditions such as cancer and heart disease.
“It’s intended to give relief in the first years of the Affordable Care Act,” said Laura Calley, the chief actuary for the Department of Consumer & Business Services’ Insurance Division.
Last year, health insurers were assessed $89.3 million ($5.09 per person per month) to offset the medical costs of more than 11,000 people who participated in the high-risk pool administered by the state. That program comes to an end in 2014.
Now House Bill 3458 heads to the Joint Ways & Means Committee before it can be approved by the full House. The fiscal impact on the Department of Consumer & Business Services and the Oregon Health Authority to administer the program has not yet been determined.
The legislation is the result of a closed-door task force called by Gov. John Kitzhaber and the state Insurance Division that included insurance companies, unions, business groups and OSPIRG. Leaks from those conversations were reported in The Lund Report in February.
A report commissioned by the Insurance Division — the “Wakely” report — estimated last July that premiums in the individual market would increase by 38 percent in 2014 once medical underwriting is eliminated under the Affordable Care Act and insurers are required to cover everyone regardless of their medical condition.
About 22 percent of that increase was anticipated because of people with high medical costs. Another factor driving costs is what’s known as tighter rate bands – the deviation in rates that can be charged by insurers because of the age of the participants.
Up until now, insurers have had the ability to charge much lower rates to younger people, while raising rates for older populations. But under the Affordable Care Act, those deviations must be reduced and insurers are expected to charge higher rates to younger people and decrease the premiums to older people, according to Barney Speight, special advisor to the governor and the Oregon Health Authority.
A mandatory new federal reinsurance program, funded with a new $5.25 per member per month assessment on insurance premiums is expected to offset those premium increases by 11 percent, Speight told the Oregon Health Policy Board on Tuesday. With the state reinsurance pool, those rates should drop by another 4 percent, Speight indicated.
The assessment under HB 3458 is identical to the assessment base that’s also used for the Oregon Medical Insurance Pool, according to Calley.
In 2013, insurers paid more than $11 per member per month in assessments to fund the Healthy Kids Program, children’s reinsurance, portability and the Oregon Medical Insurance Pool.
The assessments charged by the Oregon Reinsurance Program are expected to decline over three years as the market stabilizes before ending after 2016. Assessment rates in those later years will be set by a state board, although HB 2458 sets caps on the assessment at $3.50 per member per month in 2015 and $2.20 per member per month in 2016. The total program costs are also limited to $72 million in 2014, $63 million in 2015 and $40 million in 2016.
“The only direction that the board can take the assessment is down,” said lobbyist Tom Holt of Regence BlueCross BlueShield, which supports the measure.
Insurers will have to identify the impact of the reinsurance program in their annual rate filings with the Department of Consumer & Business Services. Any excess assessments paid by insurers that are not needed to administer the program will be returned to the insurance companies.
“We think HB 3458 is a reasonable response to the cost-shifting,” said Betsy Earls, the lobbyist for Associated Oregon Industries, a conservative business group that participated in the task force called by the governor.
Earls told the Health Committee that her organization was most concerned that the 1 percent insurance premium tax for the Health Kids Connect program go away — which is expected in September, since families who get help with private insurance will be eligible for Medicaid through the Oregon Health Plan next year.
HB 3458 is part of a packet of four bills that have passed through the House Health Committee that will help Oregon come into compliance with the 2010 Affordable Care Act.
On April 30, the insurers participating in the exchange, known as Cover Oregon, must submit their proposed rates to the Insurance Division, which is expected to hold hearings during late May and early June before approving – or in some cases – modifying those rates.
Small businesses and individuals will be able to sign up for Cover Oregon in October, with coverage beginning on January 1. Open enrollment will continue through March 2014. All insurers participating must offer 10 essential health benefits that include:
• Ambulatory patient services
• Emergency services
• Hospitalization
• Maternity and newborn care
• Mental health and substance abuse
• Prescription drugs
• Rehabilitation and habilitation services and devices
• Laboratory Services
• Preventive wellness services and chronic disease management
• Pediatric services including vision and dental
