New York Estate Planning & Elder Law Blog
Across the country, states are attempting to combat the tide of rising insurance premiums and overall increased healthcare costs burdening Americans by asking the federal government for permission to engage in so-called “reinsurance programs.” While these types of programs have only been in effect for a few years, the early data suggests they can be potent tools to help curb the cost of health care premiums for individuals with plans under the Affordable Healthcare Act.
A reinsurance program helps to protect insurers from very large claims by having the state step in to pay part of an insurance company’s claims once they pass a certain amount and can help stabilize an insurance market and make coverage more available and affordable but needs more than just a temporary pool set up to create real and lasting effects on the market.. Experts estimate that around three-dozen or so common medical conditions are responsible for high claims, with about half of ACA marketplace enrollees living with one or more of these conditions.
Although each state participating in reinsurance programs have their own models, some of the more common plans are for the state to cover insurance claims between $50,000 and $250,000 for those with ACA coverage. With the repeal of the ACA’s individual mandate, these reinsurance programs can serve as a temporary fix to help shore up individual marketplace plans and give lawmakers a few more years to come up with a long term solution to rising healthcare costs.
States like Alaska, Minnesota, and Wisconsin have already implemented reinsurance programs with positive results. In Alaska, lawmakers used state funding to reduce an anticipated 2017 40 percent premium increase to just 7 percent.This year, the federal government will provide an additional $58 million to help lower consumer premiums by an average of over 22 percent and project a further decrease by almost 4 percent next year. In Minnesota, premiums dropped by 13 percent in 2018 compared over the previous year and are projected to fall again in 2019 by 5 to 8 percent.
Other states like Idaho, Louisiana, and New Jersey are also seeking federal approval to set up their own reinsurance programs and Maryland recently did just that. In Maryland, about $380 million in funding will come through an assessment on insurance carriers approved by the state legislature with the agreement of the companies with matching funds coming from the federal government.