Oregon Expects to Net $30 Million a Year in Federal Money for Reinsurance

A waiver would pass federal savings back to the state to help fund the reinsurance program and save consumers $25 a month in the individual market. But the program is in doubt because of a Republican backlash to a $5 a month tax on group health insurance premiums.

The Oregon Department of Consumer & Business Services anticipates the state will receive as much as $30 million a year from the federal government to help fund its new reinsurance program for the individual health insurance market, if the Trump administration approves its waiver.

The $30 million comes from the savings the government will receive from the reinsurance program, which lowered premiums 6 percent for 2018. Instead of paying higher subsidies to pay those premiums, the money can go into an account that Oregon will administer to help offset the cost of insuring the most expensive consumers.  A public comment on the waiver closed Sunday, and the state anticipates sending the waiver to the feds  as early as this week.

In June, the Legislature approved House Bill 2391, which imposed a 1.5 percent assessment on all Oregon-regulated insurance plans in the group and individual markets, as well as managed care organizations that insure people who receive Medicaid. Agency spokesman Jake Sunderland said 1.2 percent of that tax will go for the Oregon Health Plan, with just 0.3 percent needed for the reinsurance program.

Because of one-time funds of $57 million held over from an older reinsurance program as well as savings at the state marketplace since Oregon switched to healthcare.gov, only a few million dollars will be needed from insurers in the first year to fund the $90 million program, assuming the Centers for Medicare and Medicaid Services gives its OK.

:”We are confident they’ll approve it in time to actually operate the program,” Sunderland said. “They have encouraged states to apply for pass-through funds.”

The tax can be levied beginning in January; and the waiver needs approval for insurers to recoup their losses, but those claims will not be settled until July 2019. A more stable insurance market will reduce liability for the federal government, which is required to provide insurance subsidies to keep premiums affordable for downscale consumers. This gives CMS an incentive to support reinsurance programs like Oregon’s, which was modeled after a successful waiver from Alaska.

Insurance Commissioner Laura Cali-Robison pitched the reinsurance program and a host of other creative ideas to get the individual market functioning properly when the outcome of the November presidential election was still in doubt. She shelved the proposals after Donald J. Trump was elected on a promise to repeal and replace the Affordable Care Act, but the reinsurance idea resurfaced after it became likely that Obamacare would survive and preside over the individual health insurance market for a fifth year.

“We’ve been pretty transparent over the past year of the need to develop policies to stabilize the insurance market,” Sunderland told The Lund Report.

Steep price hikes a year ago of 23 percent were driven in part by the expiration of reinsurance programs at the state and federal level. After the plan was put tentatively in place, premium  increases for 2018 were down to 5 to 9 percent. WIthout it, consumers would have suffered another double-digit increase, unless they were covered by federal subsidies that fix their payment to their income.

The reinsurance program is projected to save consumers in the individual market $25 a month, but it will raise premiums in the employer market by $5 a month on average, raising the ire of some Oregon House Republicans, led by Rep. Julie Parrish of West Linn.

Despite the steadfast opposition of the Oregon House Republicans, consumer advocate Jesse O’Brien of the Oregon Public Interest Research Group was enthusiastic about the new reinsurance program as a crucial first step to reining in the high and growing cost of healthcare: “This proposal will help stabilize Oregon health insurance markets and protect consumers from large rate increases, and represents a win for both consumers and the health insurance industry -- all at no cost to the federal government.”

Chris can be reached at [email protected]

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