During NASHP’s recent state health policy conference, state insurance experts explored the dramatic changes that recent federal action has foisted on their individual health insurance markets. In a second report from this conference session, they highlight strategies they’ve used to stabilize markets and identify lingering challenges to insurance markets’ affordability and choice.
While many state insurance commissioners and Affordable Care Act (ACA) marketplace directors work in tandem with state lawmakers to develop new policies that can support and stabilize markets, several experts noted that state leaders wield significant authority to influence their own markets. For example, through insurance rate review programs, state insurance commissioners have significant influence over the cost of premiums and scope of coverage sold in the markets they regulate.
Pennsylvania, for example, requires insurers to file rates using standard rating factors (a specific percent that all insurers must use to account for cost-sharing reduction calculations). Standard rating factors help the state minimize arbitrary variability between insurers’ rates and encourages competitive pricing practices among insurers.
Panelists also noted the importance – especially this year — of investments in outreach and education to teach consumers about the varying coverage levels of insurance plans now on the market. This is especially important given the expanded availability of short-term and association health plans that may confuse consumers.
Jane Beyer, senior health policy advisor to Washington State’s insurance commissioner, suggested the development of simple tables comparing coverage options (e.g., short-term plans, health care ministries, and broader qualified health plans) as important tools to educate ACA exchange navigators and other outreach workers as they help consumers purchase policies.
States that operate their own state-based marketplaces are uniquely positioned to support their individual markets through effective marketing and innovative consumer tools to help attract consumers.
- Mila Kofman, executive director of Washington, DC’s health insurance marketplace, stressed the importance of a local approach to marketing and outreach. Beyer touted the benefits of Washington State’s new marketplace app and “Smart Planfinder” decision tool that assists consumers in making informed decisions about their coverage options.
- Kate Harris of Colorado’s marketplace explained, “People wildly underestimate what they are eligible for.” She said Colorado is constantly evolving its outreach strategy to find new approaches to expand its reach to uninsured consumers.
- Wes Trexler, Idaho’s Department of Insurance Actuary and Bureau Chief of Product Review, cited his state’s systems control and its ability to create an integrated outreach and enrollment process for its consumers as big factors to its success.
Addressing Affordability through Reinsurance and Other Reforms
Affordability remains a huge threat to stable markets, especially among consumers earning more than 400 percent of the federal poverty level (FPL) and individuals earning less than 100 percent of FPL in non-Medicaid expansion states (see more on Medicaid below), who do not qualify for federal tax credits to purchase individual market coverage. Trexler said states must address the plights of individuals who fall into coverage gaps, including individuals who cannot afford their employer plans but do not qualify for tax credits and individuals who struggle with eligibility for subsidized coverage because of variability in their income throughout the year. As insurance rates rise, these individuals are increasingly priced out of the market and opt for no insurance coverage.
State-based reinsurance programs, instituted through 1332 state innovation waivers, have been successfully leveraged by some states to help reduce premium costs. A state’s reinsurance program pays insurers that take on higher-costs, enabling those insurers to lower their insurance premiums. The payments are funded through a combination of state funds and federal savings achieved from lower tax credit payments paid to subsidize the premiums of coverage sold through the state’s health insurance marketplace.
However, panelists raised concerns about the high costs of implementing state reinsurance programs, the sustainability of these programs, and the political challenge of getting legislation passed to submit a 1332 waiver. Some state officials expressed support for a federally-funded reinsurance program, which could help stabilize state markets and lower federal spending on tax credits.
States, faced with the prospects of market erosion from the emergence of short-term and association health plans, are contemplating options that will balance affordability with the need to keep a robust risk pool that includes healthy and sick; young and old. They are looking into other creative solutions to offer more affordable plans to their consumers.
Colorado recently passed legislation to support a study to use a 1332 waiver to allow for the sale of catastrophic health plans to individuals older than 30. Catastrophic health plans have low premiums, yet high out-of-pocket costs to consumers. Under the ACA, they are only available to individuals under age 30. By adding these plans to its individual market, Colorado plans to offer more affordable options to consumers. The law stipulates that catastrophic plans must be sold through the state’s health insurance marketplace and that Colorado would only pursue the waiver if the study finds that the expansion of catastrophic plans would not lead to overall premium increases OR decreases in tax credits received by consumers.
Under an executive order, Idaho is exploring granting greater flexibility to insurance carriers to sell products that do not comply with federal requirements under the ACA, but would be part of the individual market risk pool. Specifically, these plans would:
- Not meet pre-existing condition protections,
- Allow for a 5-to-1 age rating ratio, meaning that insurers can charge older enrollees up to five times as much for coverage as younger enrollees (the ACA sets this cap at a lower 3-to-1 ratio);
- Allow for annual coverage limits of no less than $1 million; and
- Allow year-round enrollment and not limit enrollment to special time periods).
As envisioned by Idaho’s Department of Insurance, these insurance products, called “state-based plans,” would complement ACA-compliant products. They would bring consumers into the state’s individual market, help to stabilize the risk pool, and force any insurer that sold a state-based plan to also sell a fully ACA-compliant product through the state’s insurance marketplace, thus encouraging product competition through the marketplace.
The Centers for Medicare & Medicaid Services (CMS) rejected the proposal, due to non-compliance with federal law. However, Idaho is continuing conversations with CMS to develop federally-compliant solution for its market.
During the conference session, state officials described a slew of other proposals they plan to explore to help stabilize their markets, including:
- Merging individual and small group markets;
- Forging stronger links between ACA-compliant qualified health plans and public programs (see Washington’s public-employee law described below);
- Providing state-funded subsidies for insurance in addition to federal tax credits; and
- Working with insurers to create more efficient plan design (e.g., changing benefit and network requirements).
Several panelists said it was important to ensure that future solutions do not undercut their individual markets — as new federal policies promoting market segmentation do (e.g., promulgation of short-term plans and health care ministries). Several states have explored implementing a state-based insurance mandate to help ensure that consumers continue to participate in their insurance markets to help stabilize their risk pools for all.
Washington, DC’s new mandate , for example, is modeled closely after the federal mandate, though it made small changes, such as including an automatic exemption for those eligible for Medicaid based on their income even if they were not currently enrolled in Medicaid. Under federal law, these individuals had to actively pursue an exemption, and would often not apply on time if at all. Money collected from the mandate will be used to fund additional affordability programs and coverage outreach initiatives. Washington State leveraged its state purchasing power to require that any insurer offering school or state employee coverage must also offer individual market plans in those counties through the state’s health insurance marketplace.
Medicaid’s Bearing on Individual Market Costs
A few panelists cited the positive effect that states’ decisions to expand Medicaid have had on their individual markets. In Medicaid expansion states, Medicaid eligibility is raised to 133 percent of FPL, meaning that individuals earning between 100 to 133 percent of FPL — who would otherwise be eligible for subsidies for private coverage through the health insurance marketplaces — are enrolled in Medicaid coverage. Studies indicate that Medicaid expansion states have better individual market risk scores than those that have not expanded coverage, suggesting that populations at lower-income thresholds are in poorer health than those at higher-income levels. This suggests that the individual market risk pool in expansion states is healthier, leading to lower overall costs in those markets.
Building on this concept, Idaho, a non-expansion state, explored a dual waiver program in which it would use an 1115 Medicaid waiver and a 1332 state innovation waiver to allow individuals earning below 100 percent of FPL to receive subsidies for coverage through its health insurance marketplace, while enrolling individual earning between zero to 400 percent of FPL with complex medical needs in Medicaid. The program would have enabled more individuals to access coverage, while lowering premiums for marketplace enrollees by taking those with unhealthy risk out of the individual market risk pool.
The proposal was ultimately rejected by Idaho’s state legislature in part due to concerns over costs to the state’s Medicaid program. However, supporters of expansion in Idaho have secured a ballot initiative so residents can vote on whether the state should expand Medicaid in November. Similar initiatives will also be on the ballot in Nebraska and Utah.
Future State Solutions
Challenges remain for states pursuing stabilization strategies. Several officials expressed hope the federal government would refrain from new actions that could de-stabilize markets or reduce state authority over markets, such as restricting state decisions on “silver-loading” to account for CSR losses. Some also expressed a desire for greater flexibility over 1332 waivers that could ease states’ ability to apply for waivers or allow more state experimentation. .
This remains a unique time for states, observed Washington, DC’s Mila Kofman, with consumer groups, insurers, and state policymakers united in their goal to enact policies that create more stable and affordable insurance markets.
NASHP will continue to closely monitor state strategies and report on their efforts to create stable and affordable markets.