WA Office of Insurance Commissioner releases report on stabilizing the individual market

The Office of the Insurance Commissioner (OIC) has released an analysis conducted by the actuarial firm Wakely on state-based options to stabilize the individual market for 2019.

The goals of market stabilization are:

  • Bend the cost-curve downward towards affordability
  • Maximize availability of coverage and promote consumer choice of health plans in all counties
  • Maximize the opportunity for federal funding

Wakely analyzed setting up a reinsurance program, state-offered solutions for bare and underserved counties, and additional premium and cost-sharing reduction (CSR) assistance.

Washington could set up a reinsurance program through a 1332 Waiver. The reinsurance program could be claims-based as seen in Oregon’s 1332 Waiver, or condition-based as seen in Alaska’s 1332 Waiver, both of which have been approved by CMS.

A reinsurance program that resulted in a 10 percent reduction in premium would cost an estimated $179-232 million a year, not including administrative costs. The reduction in premiums would cause an estimated 2.5 percent increase in the individual market enrollment.

The OIC will consider applying for a 1332 Waiver, which would need approval from the Legislature in the 2018 legislative session.

Wakely also offered solutions for bare and underserved counties, which included

  • Incentivizing participation from existing carriers
  • Directly contracting with providers and offering health plan choices
  • Contracting with a carrier to provide network and coverage

These solutions require additional analysis of cost trends and the individual market before they can be implemented.

Wakely analyzed the impact of Washington providing additional subsidies to lower premium costs and out of pocket costs for enrollees.  These additional cost-sharing wraps would not be expected to significantly reduce total premium costs or increase enrollment, only make coverage more affordable for certain enrollees.

All of the options Wakely analyzed have the potential to lower premiums, improve affordability, or improve consumer choice.

Wakely’s feasibility recommendation states:

Among the reinsurance options, it is Wakely’s opinion that a claims-based reinsurance program would be least complicated and likely least expensive, in the short-run, to operate on an ongoing basis.

The additional verification and ongoing analytic needs of a condition-based or reference pricing program would be higher than a claims based program, in the short term, as we expect operational costs to be higher than for the other programs.

Premium or cost-sharing wraps appear to be feasible as other states have implemented them. Wakely was unable to ascertain potential administrative costs of such programs.

A state offered option funding requirement would include both variable expenses (dependent on the number of enrollees and amount of claims for those people) as well as fixed costs for administrating that program. Wakely did not estimate the likelihood of a bare county for which a state offered option in Washington was necessary. Wakely assumed that the primary method of funding the program would be through premiums collected by enrollees in the State offered option. If fixed costs for the program are high and likelihood of bare counties is low, then funding needs beyond premiums would increase.

The report’s key findings will be presented to the Legislature’s Joint Select Committee on Health Care Oversight. In addition to considering a 1332 Waiver, the OIC will also consider moving forward with the market options presented in the report to stabilize the individual market in 2019.