Reinsurance Pool May Be Resurrected to Help Stabilize Individual Market

A new reinsurance program could be in the works for the 2017 legislative session as the Department of Consumer & Business Services brainstorms ideas to stabilize the individual health insurance market exchange, where next year’s rates will leap an average of 23 percent over 2016 plans.

The current reinsurance program, which the Legislature implemented to take effect as the exchange opened in 2014, expires at the end of this year, contributing to the continued volatility in rates, as insurers will no longer be able to count on the Oregon Transitional Reinsurance Pool to offset their losses.

A new program would likely keep the policy of guaranteed issue intact for insurers rather than put high-risk customers in a special high-risk pool. New legislation would need to be passed early next session with an emergency clause if it wants to keep the leadership of the current Oregon Medical Insurance Pool board, which otherwise goes defunct on July 1, 2017.

“We are currently exploring policy proposals to bring to the 2017 legislative session that address the underlying costs of healthcare so that Oregonians throughout the state can continue to have coverage options,” said Jake Sunderland, the spokesman for the Department of Consumer & Business Services. “We are exploring many policy ideas, including a new reinsurance program and what other states have successfully implemented.”

A new reinsurance program would presumably support 2018 individual health plans, and similar to the former program, an assessment would be levied on all individual health insurance plans, which would allow insurers to receive help paying the costs of their sickest customers.

“We are not seeing young people sign up,” said insurance broker Rick Skayhan, who advocates renewing the reinsurance program. “The individual market overall is irrational. … We’ve got to protect against this cost, otherwise it’s just unsustainable.”

Unlike an increasing number of states with only a single insurance carrier on their exchanges, the Department of Consumer & Business Services has worked diligently to assure all Oregon counties have multiple options, especially after many of the state’s leading insurers attempted to pull out of many counties, a strategy further exacerbated by the death of Oregon’s Health CO-OP, which Skayhan said was the last statewide individual market insurer to have access to all the state’s hospitals, with the exception of Kaiser Permanente.

He said going forward, only individual policies sold through Providence Health Plan would have access to Providence’s hospitals, and he said the company has shown signs of going the way of Kaiser and limiting access with group insurance as well. Providence individual plans don’t have access to Legacy’s hospitals, leaving their own customers with a narrow network.

Merging the Markets

Another idea floated in national policy circles as a way to shore up the insurance exchanges would be to require health insurers to participate on the exchange if they want to sell individual insurance “off-market” -- or eliminate off-market sales altogether, as Vermont and the District of Columbia have done.

In Oregon, healthcare.gov had about 130,000 customers as of June 30, compared with 105,000 people who’d bought individual health insurance in the older, off-exchange market.

Oregon has three insurers that avoid the exchange -- Regence BlueCross BlueShield, Health Net Health Plan, and Golden Rule Insurance Company, a subsidiary of UnitedHealthcare. Little is known about the demographics and claim costs of the off-exchange market, but since the biggest incentive to use the exchange is the opportunity for middle-class people to get a tax credit, the off-exchange market is likely to be wealthier and healthier than the exchange, since people with comparatively low incomes have poorer health on average than those with higher incomes.

By avoiding the exchange, Regence and Health Net could be cherry picking a healthier clientele,  and pushing a riskier population onto the primary on-exchange insurers -- Providence Health Plan, Moda Health Plan and Kaiser Foundation Health Plan Northwest.

The exchange has also suffered the loss of two non-profit cooperative health plans and for-profit Lifewise Health Plan of Oregon is exiting at the end of this year. Lifewise had been the second-biggest player on Oregon’s exchange in 2015.

The state exchanges have been overwhelmed by a flood of new customers with high claims. By avoiding the exchange, Regence seems focused on retaining its old customers while not marketing itself to the newly eligible consumers, although it has been barred from turning away any paying customer.

Henry J. Aaron, a Brookings Institution scholar who sits on the board of the D.C. exchange, argued in the Washington Post recently that states could follow his market’s lead and stabilize the market by ending a situation where insurers have profits outside the exchange and losses inside it. “Establishing one big marketplace in each and every Obamacare exchange is low-hanging fruit, waiting to be plucked,” he wrote.

Rep. Rob Nosse, D-Portland, and Rep. Mitch Greenlick, D-Portland, find the idea interesting, but it could go over like a lead balloon without a strong consumer advocate like departing Sen. Chip Shields, D-Portland, since it gambles whether the individual insurance market can tolerate such an all-or-nothing approach, even though on-market and off-market plans already share a risk pool.

Although such a policy could presumably help Providence, Kaiser and Moda even the playing field with Regence, the insurance lobby is likely to balk at a regulation that limits their market options. Vermont and the District of Columbia decided from the outset of the Affordable Care Act to end off-market sales.

Jesse O’Brien, the policy director of the Oregon State Public Interest Research Group, said the insurance lobby opposed requiring all individual plans to be sold on the exchange when it was set up, and few advocated for the Vermont-D.C. policy.

“I think making the exchange the sole market would have the benefits [suggested] and is probably a good idea in principle, but given the instability in the Individual market right now there might be some concern that putting those kinds of requirements in place would just push insurers out of the Individual market altogether,” O’Brien said.

Skayhan was particularly opposed for that reason: “I don’t think it’s a good idea because of the current status. We are in an irrational market.”