Maryland’s first-in-the-nation Prescription Drug Affordability Board (PDAB), enacted last year, has the authority to set upper payment limits for certain high-cost drugs purchased by state and local government. The board is also tasked with proposing a plan to extend upper payment limits to all purchasers in the state. This Q&A provides an update on Maryland’s implementation of its PDAB.
Who sits on Maryland’s PDAB?
The five appointed members of the PDAB include a pharmacist, clinician, and health policy researchers. They are:
- Van Mitchell, President/CEO of MSI, Inc. and, former Secretary, Maryland Department of Health and Mental Hygiene (PDAB Chair);
- Eberechukwu Onukwugha, MS, PhD, Associate Professor of Pharmaceutical Health Services Research, University of Maryland School of Pharmacy;
- George Malouf, MD, FACS, Optholmalogist in private practice and affiliated with the University of Maryland Capital Region Health Prince George’s Hospital Center;
- Gerard Anderson, PhD, Professor, Health Policy and Management, Johns Hopkins Bloomberg School of Public Health;
- Joseph Levy, PhD, Assistant Scientist, Health Policy and Management, Johns Hopkins Bloomberg School of Public Health.
When does the Maryland PDAB meet?
The board’s first two meetings were in January and February of 2020. Its initial tasks include hiring an executive director and developing a five-year budget and staffing plan. The staff is likely to consist of four to five people. The board will meet at least four times a year to complete its work.
How is Maryland’s PDAB funded?
The board has proposed legislation for the 2020 Maryland General Assembly session to fund its work through assessments on pharmaceutical manufacturers and other entities within the drug supply chain, including pharmacy benefit managers (PBMs), health plans, and wholesalers. The $800,000 allocated from the state’s General Fund to cover the PDAB’s start-up costs must be repaid to the state with the funding source that the board creates.
When will the PDAB begin setting upper payment limits for drugs?
Maryland’s PDAB has a phased-in approach to setting upper payments, beginning with placing upper payment limits on drugs for state and local purchasers before potentially expanding its reach to include all purchasers in the state. Maryland’s PDAB will begin to set upper payment limits for public payers in 2022 — pending approval by the state’s Legislative Policy Committee.
In 2023, the PDAB will recommend whether the assembly should pass legislation to expand the board’s authority to make high-cost drugs more affordable by setting upper payment limits on drugs for all purchasers (both public and private). The law also authorizes the board to explore other strategies to improve drug affordability, including bulk purchasing of drugs and reverse auction, a procurement method in which bidders compete by decreasing prices in response to an invitation to bid until a specified deadline.
Which drugs will the PDAB set upper payments for?
If authorized by the Legislative Policy Committee, the PDAB will begin setting upper payment limits in 2022 for certain high-cost drugs that surpass the price thresholds identified in the 2019 law. The Maryland PDAB will work with other states that are already collecting drug price data through transparency laws in order to establish memorandums of understanding for obtaining information to determine which drugs the PDAB should consider for review. While the thresholds specified in the law that trigger mandatory reviews focus on very high-cost drugs, the board also has the authority to review any drug deemed to cause an affordability issue for Maryland’s health care system or patients.
How are other stakeholders involved?
In addition to establishing the five-member PDAB, the Maryland law also establishes a 26-member advisory council that includes a diverse range of stakeholder opinions. Advisory council members represent brand-name and generic drug manufacturers, PBMs, health care advocates, labor unions, employers, researchers, clinicians, pharmacists, and hospitals. The public will have the opportunity to review and provide comments on proposed upper payment limits before any payment limits are finalized.
Has Maryland’s PDAB faced a legal challenge?
Maryland’s PDAB law has not been challenged as of March 3, 2020. However, once the PDAB begins to set upper payment limits, a legal challenge is expected. Unlike Maryland’s anti-price-gouging law, which was struck down for regulating prices outside the state, the PDAB is clearly limited to setting upper payment limits for purchasers within the state only.
Are other states enacting or considering PDABs?
Maine enacted a PDAB law in 2019. Rather than setting upper payment limits, the Maine PDAB establishes a spending target for prescription drugs for public payers and advances strategies to leverage public purchasing power to meet that target. Strategies can include establishing a common drug formulary, bulk purchasing of drugs, collaborating with other states, and other approaches.
Twelve states are currently considering PDAB legislation, including Arizona, Florida, Illinois, Massachusetts, Minnesota, Missouri, New Jersey, Pennsylvania, Rhode Island, Virginia, Vermont, and Washington.
The National Academy for State Health Policy (NASHP) released the original Model Act to establish a PDAB several years ago, and is currently working on new approaches to setting upper payment limits without having to establish a PDAB. These more streamlined models may be necessary alternatives for states when establishing a PDAB is not feasible.
Maryland has a long history of enacting statewide health reforms and 2019 was no exception with the passage of several significant reforms, including the Maryland Easy Enrollment Health Insurance Program (MEEHP), which passed with bipartisan support and was signed by Gov. Larry Hogan in June. Maryland is also implementing a new value-based plan design for health insurance marketplace plans and is continuing the state’s reinsurance program. Collectively, these reforms are helping advance Maryland’s objectives to improve affordability and attain near universal coverage.
NASHP spoke with Michele Eberle, executive director of Maryland’s health insurance marketplace – Maryland Health Connection – to learn about the implementation of these programs, and how Maryland’s reforms are providing greater stability to its insurance market.
Maryland implemented a reinsurance program beginning in plan year 2019, why?
After the federal reinsurance program ended [after plan year 2016], premiums in the state’s individual market spiked. Maryland has only two insurance carriers in our individual market, and we worried there was a risk of either losing those carriers or pricing people out of coverage. We wanted to be aggressive in addressing the issue of affordability. We also recognized a unique opportunity in that Congress planned to delay implementation of the Health Insurance Tax [HIT – an annual fee assessed by the federal government on health insurers]. We argued that we would assess our insurers, in lieu of this fee to the federal government, and use the money to finance a reinsurance program. Our 2.75 percent assessment gave us nearly $365 million, combined with federal funding drawn from a 1332 waiver, we secured nearly $1 billion over a five-year period for a reinsurance program. [For more information read State Reinsurance Premiums Lower Premiums and Stabilize Markets.]
Our goal was to reduce premiums by 30 percent from what they would have been without the reinsurance program. And, for the first time in 20 years, we saw our premiums decrease in 2019 on average by 13 percent. The program has been so successful, the legislature this year agreed to maintain a 1 percent assessment on our insurers to finance the program even once the federal HIT is implemented [ plan year 2020].
What led Maryland to propose and enact the MEEHP?
This concept originally started as a traditional individual mandate [a requirement that all individuals purchase health insurance]. But there was mixed support for a mandate and operational challenges to implementing one in our state.
The policy is a testament to the work and commitment of our many stakeholders and legislature. Our goal is to achieve health care access for all, without people feeling that they are forced into a program. We also want to offer consumers affordable and value-based coverage. We developed MEEHP because it addresses these issues, which is a win-win for all.
How will the MEEHP work?
For the 2020 plan year, the marketplace will use data collected from state tax filings to complete a preliminary assessment of whether a person is eligible for Medicaid, CHIP, or a federal tax credit. The person will then be provided a list of resources to help them enroll in the coverage program for which they are eligible. In 2021, we plan to roll out an automatic enrollment feature (upon request) if the person qualifies for Medicaid or CHIP. If the person does not qualify for Medicaid or CHIP, they can enroll in marketplace coverage during a 35-day special enrollment period based on the date the marketplace received their information from the Office of the Comptroller )
At the marketplace, we are working very closely with the [state] Comptroller to implement this program, including transferring information between their department and our system. We now know the Comptroller’s office timelines and what they will need to have this ready for the upcoming tax season. Very early on, the marketplace and the Comptroller’s office began collaborating and that partnership is essential to ensuring we could meet fast-approaching deadlines.
Our current focus has primarily been on modifying our IT systems to operationalize the program. But we are also prioritizing working with stakeholders and other partners on how to message about the new program.
We are especially excited that this initiative gives us more robust information about Maryland’s uninsured population. It will help us target our outreach and inform our efforts to boost enrollment. We are trying to think of ways to make it easy for consumers to follow up and enroll in coverage.
How will Maryland’s new, value-based plans serve consumers?
As noted previously, the reinsurance program has led to a tremendous reduction in individual market premiums. However, while premiums have been going down, deductibles have been rising, leading to higher out-of-pocket health care spending by our consumers. We were concerned that consumers wouldn’t see the value of their coverage — if premiums and deductibles are too high, they will question whether it is worth purchasing coverage.
Under our value-based plan program, each carrier must offer at least one plan with a capped deductible for two metal levels in which it offers coverage ($1,000 for gold plans, $2,500 for silver). In addition, a bronze plan must cover at least three physician visits (primary care or specialists) prior to the deductible and the gold value plan must offer generic drugs before deductible.
We believe these requirements will help ensure that consumers can get value from their plans. Looking ahead, we will continue to refine our value-plan requirements. For example, we are looking at whether generic prescriptions should be covered pre-deductible, or with a separate deductible. We are also looking over how to improve coverage for diabetic populations.
What has been the key strategy to advancing these reforms so quickly in Maryland?
Maryland’s administration and legislature have a history of committing themselves to the improved health of Marylanders. For instance, even before passage of the Affordable Care Act, Maryland had enacted its own small group market reforms, including benefit requirements and a community rating standard. We are fortunate to have a lot of engagement from stakeholders and the administration on advancing further reforms.
Part of what drives innovation here is our global budget initiative, an all-payer model regulating hospital costs. The global budget underlies all our health systems and payers, so that anything that affects one part of our health care system reverberates throughout. The state does whatever it can to maintain this program, including actions to maintain our insurance markets, reduce our uninsured rate, and keep our uncompensated care costs down.
Which stakeholders have been especially helpful throughout your work?
Both of our health insurance carriers are always at the table and I appreciate the relationship we have built with them since establishment of the marketplace seven years ago. The marketplace and the carriers work together, proactively, to address concerns. We have a plan management stakeholder committee that includes all carriers and consumer advocates. They are one of the first groups we engage on any new initiative for the marketplace. We have discussions on how new policies will impact our insurers. I meet regularly with the CEOs of our health plans and discuss how we can work in partnership to affect overall health in our state. There were some challenges early on in our relationship, but the insurers have seen some benefits in working with us. For example, Kaiser Permanente’s market share has grown from 2 percent to 46 percent in our health insurance marketplace. Both of our insurers have seen significant growth overall.
We also have two groups that are focused specifically on consumer issues. What is important for us is to be as transparent and inclusive as possible. We know these issues effect populations statewide.
What advice would you offer to other states looking to enact similar reforms?
Establishing and building relationships with your stakeholders — consumer advocates, legislature, carrier community — is essential. It is important to approach reforms with a holistic view of what is going on with your markets and health systems. The insurance marketplace is one part of this wheel, but to really make changes on affordability and cost, we need everyone heading in the same direction. For example, I recognize the importance of our reinsurance program, but also acknowledge that other reforms will be necessary if we are going to have a long-term impact on health care costs.
Addressing lead hazards today generates future economic benefits and improved health outcomes for children. In partnership with the Health Resources and Services Administration, NASHP is publishing a series of case studies highlighting state initiatives to promote lead screening and treatment. This study explores Indiana’s efforts to address this issue within its Medicaid and Children’s Health Insurance Program.
- View or download: State Levers to Promote Lead Screening and Treatment: Maryland’s Strategies
- View or download: Medicaid and Children’s Health Insurance Program Levers to Promote Lead Screening and Treatment: Indiana’s Experience
- To learn about other state initiatives, read NASHP’s 50-State Scan of State Health Care Delivery Policies Promoting Lead Screening and Treatment.
On April 8, 2019, the Maryland General Assembly passed legislation that which would create the first state Prescription Drug Affordability Board (PDAB) to address the costs of certain high-priced drugs in Maryland. Gov. Larry Hogan has until May 31, 2019, to sign or veto the bill. If he signs the bill or does nothing, the measure will take effect on July 1, 2019.
This effort, initiated during last year’s legislative session, began with the introduction of the National Academy for State Health Policy’s Drug Affordability Review Board Model Legislation. The concept is akin to states’ regulation of consumer payment rates for essential services, such as clean drinking water, safe and consistent electricity, and public transportation. Like prescription drugs, these services are necessary for a safe and healthy life. States act to ensure that these necessary services are affordable to the public without regard to the actual dollar value of their importance to modern life. A prescription drug affordability board looks at valuable drugs and determines at what cost they are affordable – at what cost will everyone who needs the drug be able to afford the drug.
The Maryland legislation that passed is a notable step towards establishing a board that could make informed recommendations to state leadership on future action Maryland may take to address prescription drug costs, even though it represents compromises resulting in changes to the original proposal. As many know, this is how the legislative process typically works. The legislation does create the new Maryland PDAB, which must report to a committee of key legislative leaders for the first several years to get approval to move forward with key phases of its work. The timeline for Maryland’s PDAB activity is as follows:
July 1, 2019: The PDAB is established using state general funds and begins its work.
On or before Dec. 31, 2020, the board must:
- Study the entire pharmaceutical distribution and payment system, as well as policy options used by other states and countries to lower the list price of pharmaceuticals, including:
- Setting upper payment limits;
- Using a reverse auction marketplace; and
- Bulk purchasing of drugs.
Submit findings and make recommendations, as well as provide any legislative language that may be necessary to implement its recommendations, to the state’s Senate Finance and House Health and Government Operations Committees.
- Identify circumstances under which the cost of a prescription drug product may create or has create affordability challenges for the state health care system and patients.
- Promulgate regulations that specify data sources the PDAB will use for its work, including establishing memoranda of understanding (MOU) with states that currently collect data from drug manufacturers and the rest of supply chain, insurers, and PBMs.
- Identify drugs that create affordability challenges in the state by applying the established criteria and deciding whether to do a full review of any of those drugs.
- Produce annual reports for House and Senate committees on drug price trends, the number of drugs subject to PDAB review, and any additional legislation that might be needed to facilitate drug cost containment.
- Make a recommendation for a funding source to sustain the board.
On or before July 1, 2021: If the work of the PDAB in 2020 results in a recommendation that the state pursue imposing upper payment limits to make drugs affordable, the board is required to draft and submit a plan of action to implement upper payment limits for state, local, and county government payers and purchasers to the Legislative Policy Committee of the General Assembly.
On or after Jan. 1, 2022: If the plan of action for upper payment limits is approved, the board may begin to set upper payment limits or establish other approaches to constrain costs of prescription drug products purchased or paid for by state, county, and local governments, including state hospitals, government employee plans, corrections, and Medicaid, etc. The board must also study the impact on availability of drugs subject to the upper payment limit.
On or before Dec. 1, 2023: If the plan of action for upper payment limits was implemented for the drugs purchased or paid for the state, local, and county governments, the board must report to the Assembly its recommendations regarding whether the board’s authority to set upper payment limits should be expanded statewide to all purchases and payer reimbursements.
The legislation also includes appeal and judicial rights for anyone aggrieved by a decision of the PDAB.
One reason for the phase-in of board authority starting with government drug purchases and payments was the concern in Maryland about a possible constitutional challenge after the federal Fourth Circuit Court of Appeals ruled that the state’s 2017 anti-price-gouging drug legislation (HB 631) violated the Dormant Commerce Clause (DCC) of the US Constitution. Although the PDAB is designed specifically to prevail in a DCC challenge, the issue resurfaced during Maryland’s legislative session when the US Supreme Court declined to take up the 2017 case. There are a number of reasons the Supreme Court might not take up a case – including if there is no conflict in opinions among the federal Circuits Courts (which was the situation with anti-price-gouging law, there was only one case and one decision). NASHP and Maryland have documentation and legal analysis of why a PDAB with upper payment limit authority does not violate the DCC.
There may be an advantage to being the first state pursuing an upper payment limit for costly drugs to do so in a phased approach. Maryland’s board will build its analytic capacity to determine the benefit and calculation of the upper payment limit for certain drugs, which is important. The board can apply the process of determining if a specific drug should be reviewed for affordability and then determine whether or not the drug should be subject to a upper payment level and what it should be – even if there is not authority to apply the limit statewide during the first few years.
Using upper payment limits with government-purchased drugs before expanding to all payers may be an appropriate way to pilot the approach in Maryland. However, establishing a PDAB with limited authority and requiring state leadership approval to advance the primary mission of the board is a risk. Another phase-in approach discussed in Maryland before the DCC concerns were raised was to limit PDAB authority to set upper payment limits to a specific number of drugs.
NASHP Note: NASHP will closely follow Maryland’s experience in establishing the PDAB and will receive continued support from the state’s leadership for its mission to implement mechanisms to ensure necessary prescriptions are affordable. For more information, explore NASHP’s Center for Rx Drug Pricing.
Recent legislative committee hearings in Maryland, Florida, and Illinois provide a national snapshot of states’ diverse and innovative proposals to reign in drug costs.
Maryland’s drug affordability review board: Earlier this month, Maryland’s House Health and Government Operations Committee and Senate Finance Committee held lengthy hearings on an innovative bill that creates a state prescription drug affordability review board (see NASHP’s model legislation here.)
The board would review drugs whose price increases met or exceeded a certain threshold and set an upper payment limit if the board found the drug cost to be excessive. During the committee hearings, constituents stressed the urgency of finding a solution for increasing drug prices, and many shared their struggles of choosing between paying bills and purchasing necessary medication. There was also testimony from pharmaceutical industry representatives who voiced their concerns about the bill and said it could hamper innovation.
The committee hearings gave legislators the opportunity to hear details of the proposed bill. One Maryland state senator questioned how the upper payment limit established by the affordability board differed from the state’s anti-price-gouging law that was found to be unconstitutional last year, based on the claim that it regulated commerce beyond state borders. Supporters explained that an affordability review board would not encounter the same legal challenge because it clearly defines its jurisdiction over only drugs sold in the state. Another representative asked whether all drugs would fall under the purview of the board. The sponsor explained that only drugs that meet certain price increase thresholds would be subject to board review. As seven other states explore similar legislation, NASHP has compiled a Drug Affordability Review Board Legislation Q&A that answers many legislators’ questions.
Florida’s drug importation bill: Florida lawmakers are considering implementation of a wholesale drug importation program. Bills filed in both the Florida House and Senate would allow the state to import high-cost drugs from Canada at a lower price. Florida’s legislative process often requires that bills pass through two or three committees before a floor vote, giving lawmakers, stakeholders, and constituents ample time to consider a bill. In March, three House committees met to ask questions about the bill and learn more about importation. During hearings, the bill’s sponsor explained that more than 30 Canadian drug manufacturers are already registered by the US Food and Drug Administration to produce drugs for US markets, and that safety standards in Canada are comparable to those in the United States. Lawmakers had additional questions about cost savings and the supply chain. For more information about importation legislation, read NASHP’s importation Q&A.
Illinois’ prescription drug committee action: The Illinois House of Representatives created a Prescription Drug Affordability and Access Committee to address bills designed to curb drug costs. The committee is currently reviewing 17 bills, including legislation to create a drug affordability review board, similar to Maryland’s, and a wholesale importation program. It is also reviewing a bill that requires health insurers to ensure that at least 25 percent of their plans apply a pre-deductible, flat-dollar copayment structure to their entire drug benefit component. The committee is also considering a proposal to tax drug price increases that exceed the inflation rate. This tax would be paid by businesses that make the first sale in the state and could not be passed through to consumers. Any money collected from the tax will be deposited into a new fund dedicated to prescription drug cost fairness.
To date, the Illinois committee has met multiple times for informational sessions to learn how the drug pricing system works and to hear from consumer advocates and stakeholders. Establishing a specific committee dedicated to identifying solutions to the rising cost of prescription drugs indicates how important this issue is as the state legislature tries to help constituents afford medication and balance the state’s budget.
NASHP is tracking state legislative action across the country as lawmakers schedule more hearings on prescription drug costs. To find out the status of any state’s drug pricing legislation as they move toward enactment, explore NASHP’s Rx State Legislative Tracker. To learn more about NASHP’s prescription drug work, visit its Center for State Rx Drug Pricing.
Across the nation, in response to rising health insurance premiums and unsettled markets, a growing number of states are using reinsurance programs to reduce premiums and stabilize jittery markets.
Two states – Oregon and Maryland – have implemented reinsurance programs that provide funding to insurers who cover consumers with high medical costs to prevent them from raising insurance premiums on all enrollees. This approach, state officials explained during a recent National Academy for State Health Policy-sponsored webinar, has reduced premium prices and helped stabilize their insurance markets.
Reinsurance is not a new concept — the federal government uses a reinsurance program to support insurers who participate in Medicare Part D and the Affordable Care Act (ACA) temporarily implemented a reinsurance program during its first three years to keep insurers stable as they adjusted to new market dynamics triggered by the ACA’s legislative changes. Some estimates indicate that premiums rose about 4 to 7 percent in 2017 when the ACA’s reinsurance program ended, and some experts suggest that continuation of the federal reinsurance program would have helped keep premium rates lower.
Section 1332 of the ACA allows states to experiment with different approaches to coverage, and while there has been considerable discussion about new federal guidance about these Section 1332 waivers, seven states have used them to implement their own reinsurance programs. By reinsuring against high, unanticipated costs, these state initiatives lower premiums which, in turn, reduces the federal government’s costs to cover advanced premium tax credits, which are based on average premium rates. These federal “savings” are then reinvested to finance the reinsurance program, also known as pass-through dollars. In its recent webinar, officials from Oregon and Maryland shared their experiences with 1332 waivers and reinsurance.
A Tale of Two Models
Oregon established its reinsurance program under a legislative mandate (HB 2391) in July 2017, with federal approval of its waiver coming three months later. Oregon’s reinsurance program follows a “traditional” model — the state sets a fixed range at which insurers will be paid back for “high cost” expenditures and also a rate at which insurers will be reimbursed for costs that fall within that range, known as coinsurance. The range is fixed each year, though Oregon may adjust the coinsurance rate based on the amount of funds available to the program. Proposed regulations set the 2018 range to start at $95,000, with a coinsurance rate of 50 percent. The range is capped at $1 million. Modeled after Oregon, Maryland’s reinsurance program was established by statute in April 2018 and its waiver was approved in August 2018. While also a traditional reinsurance program, Maryland has set its expenditure cap at $250,000 and a coinsurance rate of 80 percent.
Financing State Reinsurance Programs
States have broad latitude to design their reinsurance programs — they can balance the trade-offs between making a robust reinsurance investment and achieving market stability and affordability. Based on their choices (e.g., generosity of coinsurance rates), states may be accountable for considerable program costs not covered by federal pass-through dollars. In states with reinsurance programs, it is estimated that federal funds will cover between 36 to 98 percent of total program costs.
Oregon officials estimated that their reinsurance program will cost approximately $90 million in 2018 (the webinar occurred in late December 2018), with a slight increase to $95 million in 2019. The state has estimated it will receive $54 million and $42 million, respectively, in federal pass-through dollars during those two years, meaning the state will need to cover $89 million in costs over those two years to cover the program’s anticipated expenditures. State funding for the program comes from:
- A portion of a 1.5 percent premium assessment on individual market and small group plans; and
- Funding from Oregon’s former high-risk pool and reserves from the state’s health insurance marketplace.
Maryland officials estimate its program will cost $462 million in 2019, and decrease to $287 million by 2021. The state will need to cover approximately $264 million in costs over those three years. Maryland aimed to be strategic in financing its program. First, it delayed a two–year anticipated federal tax on insurers and instead instituted its own assessment on health plans in 2019 in order to finance the reinsurance program from 2019 to 2021. The 2.75 percent premium assessment applies to all health plans regulated by the state. The assessment also applies to Medicaid managed care organization (MCO) plans, which are financed by federal matching funds at a rate of 62 percent.
Maryland estimates that it will draw down an additional $168 million from its assessment on MCOs — approximately $104 million of which will be financed by the federal match. Second, to reduce administrative costs, Maryland is working with the Centers for Medicare & Medicaid Services (CMS) to leverage existing federal servers and databases established to support claims data collection and processing for the federal reinsurance and risk adjustment programs. By using its existing systems, the state anticipates saving money that would have otherwise been used to maintain its own claims collection and processing infrastructure. Third, to ensure that it was maximizing its reinsurance dollars, Maryland included an adjustment to its reinsurance formula to mitigate against duplicative payments insurers might receive under the federal risk adjustment program.
Officials expressed caution about the estimates of federal pass-through dollars to finance reinsurance programs, indicating that states should prepare for some variability between estimates calculated in their waiver applications and actual program costs. The insurance markets remain dynamic and calculations will be adjusted as CMS gains a better understanding of state enrollment trends, risk mix, and/or the effect of policy changes on insurance markets. Because of these adjustments, Minnesota received nearly $100 million less than expected in federal payments in 2018, while New Jersey and Wisconsin will each receive approximately $40 million less than expected. In contrast, Oregon received nearly a $4 million boost in funding from what it had expected. New guidance issued in early December 2018 addresses some concerns by providing greater transparency about the CMS process for completing pass-through calculations.
Impact of Reinsurance Programs to Date
Officials from both states described their reinsurance programs as a “quick” and effective way to reduce premium costs and add stability to markets. In Oregon, the program led to an 8 percent reduction in 2018 premium rates and a 9 percent drop in 2019. Maryland’s program led to a 13.2 percent decline in premiums for 2019. Maryland and Oregon officials anticipate longer-term benefits from reinsurance.
- In Oregon, reinsurance has helped secure statewide participation of insurers in its markets, insurers who may not have participated if not for the stabilizing effect of reinsurance.
- Maryland anticipates that lower premiums enabled under the program will help entice younger and healthier enrollees to participate, which, will help sustain lower rates and continued participation of low-risk populations in the future.
While effective, the state reinsurance programs are designed as temporary solutions, designed to help insurers calibrate risk as insurance markets and policies continue to evolve post-ACA. As Oregon officials noted during the webinar, while reinsurance can help states bring down premium costs, it does not, in itself, address any of the underlying drivers of premium costs, such as rising costs of health care. They are looking toward more sustainable solutions to maintain lower costs in the future.
Maryland officials are wondering how to leverage the reinsurance program to drive health care management and quality improvement initiatives. The state has proposed a series of regulatory standards that require participating insurers to display information about how they are utilizing reinsurance funds, and how the insurer is working to offset costs. Longer term, the state hopes to leverage this work to address total costs of care by working with carriers on social determinants of health and health literacy.
As other states explore options to improve health insurance affordability, reinsurance remains an attractive opportunity. Tools, like a Reinsurance Pass-Through Funding Savings Calculator may help states get an initial sense of the impact a reinsurance program could have on premiums and the level of state investment needed to properly finance a program. However, this is a standard baseline estimate, and any state considering a program will need to conduct in-depth actuarial analysis to fully consider all conditions that could uniquely affect a state’s markets. States may also seek to leverage flexibility under new 1332 guidance in order to couple reinsurance with other reforms to bolster their markets.
The National Academy for State Health Policy is working to develop new state policy solutions to address rising costs, including those waivers, and will continue to report on these efforts.
Pre-exposure prophylaxis, known as PrEP, is a comprehensive HIV intervention that combines an antiretroviral drug, testing, and counseling to reduce new HIV infections. NASHP brought together officials from Maryland, Michigan, and Connecticut in a PrEP Policy Learning Series to learn and report on how states are effectively deploying and improving their PrEP initiatives to save lives and reduce health care costs.
Download: How Can States Stop HIV Transmission? Increase Access to Pre-Exposure Prophylaxis (PrEP)
With effective repeal of the federal individual insurance mandate scheduled for 2019, many state policymakers are exploring ways to stabilize their insurance markets, including creating a state-based mandate similar to one in Massachusetts. This NASHP webinar included a deep dive into Massachusetts’ mandate, and featured a Maryland proposal to create an auto-enrollment process for individuals through its marketplace. This webinar was open to the public.