Commissioner updates Legislature on 1332 reinsurance waiver ahead of January 2022 deadline

Virginia’s reinsurance program is projected to reduce premium rates by 15.6% in the individual market starting in 2023, Commissioner of Insurance Scott White told legislators at last week’s Joint Subcommittee for Health and Human Resources Oversight meeting. That’s contingent on the approval of the 1332 State Innovation Waiver , which is due to the Centers for Medicare and Medicaid Services (CMS) Jan. 1, 2022. 

 

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Virginia has considered other insurance affordability strategies, such as a public option and cost-sharing, although the Bureau of Insurance (BOI) determined that a reinsurance program was the most feasible to implement in a three-year timeline, with payments going to insurers by Nov. 2025. 

The 1332 waiver, named after a section in the Affordable Care Act (ACA), allows states to access Federal pass-through funding. This means states can reallocate federal funds being used for the ACA’s premium tax credits (PTCs) for state-specific programs, such as reinsurance in Virginia. 

Federal PTCs can reduce insurance premium costs to a specific percentage of a person’s income, namely 400% above the federal poverty level (FPL). Reducing premium costs will lower the costs of PTCs to the federal government, and these savings can then be transferred to Virginia to use on a reinsurance program. 

 

Image: Commissioner of Insurance

 

White explained that the reinsurance program would use a co-pay system structure. For example, to achieve the 15.6% premium reduction rate in 2023, the state’s reinsurance would cover up to 70% of an insurer’s claims within certain cost caps. Claims under $40,000 and over $155,000 would fall solely on the insurer.

White emphasized that the reinsurance program will help cover costs for people in the health coverage gap, such as having incomes just above 400% FPL. Most subsidy benefits end after incomes reach 400% FPL, although California’s state health exchange provides subsidies for families up to 600% FPL.

“After that 400[%] FPL, then the subsidies go away. The big takeaway from the reinsurance program [is] it’s designed to help folks who don’t have these subsidies … we want to help folks, again, just because they’re above 400% FPL, we think they should have some help too.” 

With lower premium rates, unsubsidized individuals will likely move from being uninsured or using off-exchange plans onto the federal marketplace exchange, causing just under a 3% increase from baseline enrollment each year. 

White estimates the reinsurance program would cost a total of $292.5 million in 2023, and coincide with the end of American Rescue Plan Act’s(ARPA) enhanced premium subsidies at the end of 2022. 

Of that $292.5 million, about $223.9 million would come from federal pass-through funding, which would come via the 1332 waiver. The state would cover the other $68.6 million, although White said that figure could range anywhere from $60.8 million to $83.8 million depending on membership changes, exact premium cost, and medical costs. 

However, the most significant factor in determining the reinsurance program is the federal reconciliation budget. The current plan White proposed accounts for the loss of enhanced premium subsidies after 2022, although state costs could significantly drop if the Biden administration’s budget reconciliation package — which includes a permanent expansion of the  enhanced premiums — passes. 

White said the legislature may need to reevaluate the impact of the reinsurance program if federal funding is extended.

“The state’s cost would be substantially lower, first of all. It would go from about $70 million down to maybe $20 million. However the impact on consumers would be much less as well, so at that point, we may have to reexamine the value of this reinsurance program. Do we focus on something else? That would be a discussion for another day.”

To prepare for the Jan. 1 filing deadline, the Bureau of Insurance will host two public hearings on the reinsurance program tomorrow at 10 a.m. and 7 p.m. EST, which will be available via webcast. More information on the 1332 waiver and instructions for submitting written public comments is available here. Two entities, Anthem Blue Cross and Blue Shield and AARP Virginia have expressed their support for the waiver.