Proposed reinsurance bill could lower rates

Bill could cut future premium rates around 17 percent.
By Ramsey Scott
Wyoming Tribune Eagle
 
CHEYENNE – Wyoming has the dubious distinction of being one of the most expensive places in the country to get health insurance.
A bill sponsored by the Wyoming Legislature’s Labor, Health and Social Services Interim Committee could help bring rates down by subsidizing insurance companies’ coverage of high-cost patients.
The bill would create a reinsurance program that would help pay a portion of high-cost patient care by placing a 1 percent tax on health insurers’ plans. Wyoming would then use those funds to help pay a substantial portion of care for patients who rack up tens of thousands of dollars in costs for insurance companies.
Several factors are driving costs up in Wyoming, especially the health of the state. A study commissioned by Wyoming found 3.5 percent of those insured in the state have average costs of $50,000 or higher. The national average for states is 1.5 percent of the population.
Add to that a higher-than-average existence of major health problems in Wyoming residents and a rural state that doesn’t have enough providers, and premiums end up rising much faster than the national rate.
By putting a cap on how much insurance companies would have to pay for high-risk patients, it would bring overall costs down, which, in turn, brings down insurance premiums.
“It essentially takes risk away from the insurance company by covering a portion of high-risk claims,” said Julie Pepper, a senior actuary with Wakely Consulting Group, which was contracted by the state.
In the early years of the Affordable Care Act, the federal government used a reinsurance program to help subsidize the cost of high-risk patients on the federal exchange who tallied a substantial amount of care.
In 2014, for example, the federal government covered medical costs that exceeded $45,000, paying up to $250,000 back to insurance companies for each patient. It’s estimated the program in 2014 brought premiums down by around 14 percent.
While the ACA has phased out federal reinsurance programs, states can now apply for waivers to create their own programs. Money saved by the federal government in subsidies for premiums due to the program would be returned to the state.
Pepper, who has worked with several other states that have applied for reinsurance waivers, said Wyoming’s insurance landscape was ideal for taking advantage of the waiver program. The two key factors in the program being an advantage for a state were having a high percentage of members who are getting premium subsidies and higher health insurance premiums that required higher rates of subsidies.
“In Wyoming, if the average premiums are over $900, but the average member who’s getting subsidies is only paying $60, that’s a pretty large premium subsidy on a monthly basis,” Pepper said during the committee meeting Monday. “Those two things are working in Wyoming’s favor for having a high amount of dollars the federal government will save and could potentially be sent back to the state.”
The study of the state’s insurance market estimated a Wyoming reinsurance program could bring premiums down 17 percent from where they could be in 2020 without a reinsurance program.
The committee on Monday chose between two models for how to go about applying for a reinsurance waiver. The eventual plan approved was one created by the Wyoming Department of Insurance that included a 1 percent tax. That plan was similar to one created by Sen. Charles Scott, R-Casper, who used state dollars instead of a tax on health plans to fund the program.
Blue Cross Blue Shield of Wyoming, one of the biggest health insurance providers in the state, sent a representative to Monday’s meeting to voice support for the proposed reinsurance plan.
One thing Scott wondered was why Wyoming didn’t just go out on its own and use the tax on health-care plans to lower the costs in the market and not deal with the federal government.
“The feds are going to pass through to the state the savings they get out of the reinsurance program. So you’re lowering the federal subsidy by the amount of savings the feds get,” Scott said. “Why could we not do the exact same thing without fooling with the feds?”
State Insurance Commissioner Tom Glause said he asked the same question when analyzing the program. The answer was it’s easier to use the current system to administer the program than to have the state build its own program.
“There is merit to what you’re saying. There are higher administration costs,” Glause said. “It’s easier to administer the program through the exchange than it is to have a standalone program.”