Stabilizing Markets with 1332

Transcription

1 Stabilizing Markets with 1332 L E S S O N S A N D A N E W T O O L F O R S T A T E S C O N S I D E R I N G R E I N S U R A N C E T u e s d a y, D e c e m b e r 1 1, p m E T / 1-2 p m P T D i a l - i n : C o D E : s p o n s o r e d b y B l u e C r o s s B l u e Shield A s s o c i a t i o n

2 Background on 1332 Waivers Allow states to waive ACA requirements related to regulation of health insurance/ health insurance marketplaces Legislatively mandated guardrails: Coverage must be at least as comprehensive as that offered through the health insurance marketplaces; Coverage must be at least as affordable as coverage that would have been offered under the ACA; Coverage must be provided to a comparable number of state residents as would have been covered under the ACA; and Waiver must not increase the federal deficit Guardrails must be maintained for each year of the waiver

3 States With Approved 1332 Waivers 7 states have received CMS approval of their 1332 reinsurance waiver proposals. 1 state has received CMS approval of its 1332 SHOP waiver proposal.

4 October 2018: New Waiver Guidance Requires states to make coverage available that meets legislative guidelines, but does not require all coverage to meet comprehensiveness and affordability guardrails Applies less strict standards to assessing the comprehensiveness of coverage Broadens definitions of coverage to include coverage that does not meet minimum essential coverage requirements Allows for greater variation in premiums and coverage available to lowrisk vs. high-risk populations (e.g., adverse selection) Allows for calculation of aggregate impacts of changes to coverage and deficit over the term of the waiver

5 Update on Minnesota 1332 pass-through funding is calculated annually state receives money based on savings achieved from waiver (calculated based on premium reductions/ lower federal tax credit payments) MN s 2017 approval included an estimate of future payments through 2022 Lower than expected premiums have lowered CMS payments for 2019 from initial estimates Initial 2019 estimate: $183.9M; payment: to $84.7M MN s premium reductions attributed to: lower utilization; improved economy; lower than anticipated service costs; effectiveness of reinsurance program

6 Today s Experts Michele Eberle, Executive Director, Maryland Health Benefit Exchange John-Pierre Cardenas, Director of Policy and Plan Management, Maryland Health Benefit Exchange Michael Schopf, Senior Health Policy Analyst, Oregon Department of Consumer and Business Services, Division of Financial Regulation Kurt Giesa, Partner, Office of Actuarial Consulting, Oliver Wyman

7 State Experiences with 1332 M I C H E L E E B E R L E E X E C U T I V E D I R E C T O R, M A R Y L A N D H E A LT H B E N E F I T E X C H A N G E J O H N - P I E R R E C A R D E N A S D I R E C T O R O F P O L I C Y A N D P L A N M A N A G E M E N T, M A R Y L A N D H E A LT H B E N E F I T E X C H A N G E M I C H A E L S C H O P F S E N I O R H E A LT H P O L I C Y A N A LY S T, O R E G O N D E P A R T M E N T O F C O N S U M E R A N D B U S I N E S S S E R V I C E S, D I V I S I O N O F F I N A N C I A L R E G U L AT I O N

8 Oregon s Reinsurance Program & State Innovation Waiver December, 2018 Department of Consumer and Business Services

9 Oregon House Bill 2391 (2017) HB 2391 establishes the Oregon Reinsurance Program (Sections 18 to 25). Purposes Help stabilize rates and premiums for individual health benefit plans. Provide greater financial certainty to consumers. All enrollees in non-grandfathered individual health benefit plans are eligible.

10 Oregon House Bill 2391 (2017) Attachment point model Claims between an attachment point and reinsurance cap will be reimbursed at the coinsurance rate. Attachment point and cap cannot change within a benefit year. Coinsurance rate may not increase during a benefit year (but may decrease if claims exceed funds).

11 Oregon House Bill 2391 (2017) DCBS may adopt rules as necessary to carry out the program, including: The amount, manner, and frequency of reinsurance payments Reporting requirements for issuers of reinsurance eligible health benefit plans Insurers must identify impact of reinsurance payments in their rate filings. Program sunsets on January 2, 2024.

12 Reinsurance Funding Three Sources: One time state funds transfers Excess balance from Oregon Health Insurance Exchange Remaining balance of the Oregon Medical Insurance Pool Account A portion of the 1.5% health benefit plan premium assessment created under HB Federal pass-through funding received under Oregon s Section 1332 waiver.

13 ORP - Projected Annual Budget Projected per year $90 million in 2018 $95.4 million in 2019 Funding for 2020 and beyond contingent on available funds. Impacts to date 7.5% market average reduction for % market average reduction for 2019 (-4.2% to -11.4% by carrier)

14 Proposed Payment Parameters Expected Payment Parameters Reinsurance Cap - $1M Coinsurance 50% Attachment points 2018 $95, $90,000 Final parameters will be set by Oregon Administrative Rule (expected to be final by 12/31/18).

15 Oregon s 1332 Waiver Waived the single risk pool requirement. Allows plans to lower individual market to reflect the impact of reinsurance. Oregon also requested a pass-through of federal savings attributable to reinsurance. Primary driver of federal savings is reductions in premium tax credits (lower rates mean lower APTC).

16 Oregon s 1332 Waiver Oregon applied on August 31, 2017 and was approved on October 19, Terms and Conditions Five year wavier term Quarterly and annual reports State must also submit additional information to CMS and Treasury annually. Additional information: innovation_waivers-.html

17 Oregon s 1332 Waiver Four data elements to CMS/Treasury: Second lowest cost silver premium for each rating area Estimate of what the second lowest cost silver premium for each rating area would have been without reinsurance. Estimate of total individual market premium for the year Estimate of what the total individual market premium would have been without reinsurance.

18 Oregon s 1332 Waiver Pass through funding to date 2018 $54,482, $41,845,226 (CMS estimate) Exact reason for the lower amount in 2019 is unknown Pass-through calculation is a black box May be driven by market factors

19 Maryland State Reinsurance Program December 10, 2018 A service of Maryland Health Benefit Exchange

20 Decision Point: Funding Source State-based Health Insurance Premium Assessment The 2.75% premium assessment is broad-based and is applicable to all premiums that would have been subject to the federal assessment under Section 9010 of the ACA and where the state has the statutory authority to do so. Premiums for health benefits subject to ERISA and Federal programs (ex. Medicare, FEHBs, etc.) are exempt from the state assessment. 2.75% is the rate that results in the aggregate amount that would have been assessed under the federal HIT. Each issuer is assessed a different rate at the federal level based on the issuer s situation. The assessment will impact issuers differentially depending on their treatment under the federal assessment.

21 Decision Point: Funding Source State-based Health Insurance Premium Assessment The broad-based nature of the assessment allows the state to assess Medicaid Managed Care Organizations under taxation rules, and increase federal contribution to the SRP. The state assessment is federally tax-deductible (important for determining aggregate percentage). Of the $365 million (FY 2019) projected for collection under the assessment: $196.5 million from Commercial Carriers $168.4 million from Medicaid MCOs (62% of that amount is federal share)

22 Maryland State Reinsurance Program Waiver Estimated Maryland/Federal Funding Waiver Year SRP Amount Estimated Federal Funding % Federal Estimated State Funding % State 2019 $462,000,000 $303,534, % $158,466, % 2020 $451,000,000 $315,700, % $135,300, % 2021 $287,000,000 $212,380, % $74,620, % Total $1,200,000,000 $831,614, % $368,386, % Medicaid MCO Revenues: $168,400,000 Federal Share (62%): $104,408,000 Adjusted Total $1,200,000,000 $936,022, % $263,978, %

23 Decision Point: Reinsurance Impact Front loading Federal Pass-through funds The State Reinsurance Program was envisioned as a bridge program to: Support market stability in the short-term Provide the legislature with time to develop a long-term solution State-based HI Assessment for the SRP would only be collected once (FY 2019). Funding allocation (and thereby federal pass-through dollars) over the five-year waiver resulted in different market impacts. Federal pass-through may be additive and not supplementary. Pass-through funding may increase the size of the reinsurance program, state funding allocation is not a cap on program impact.

24 Decision Point: State Reinsurance Program Impact Reinsurance Impact Models

25 State Innovation Waiver Timeline Summary of Public Comment Coordination with the Federal Risk Adjustment Program Many stakeholders have expressed concern over potential issuer payments under the SRP and the federal Risk Adjustment program that would be duplicative of the same risk. Both carriers request that Wakely conduct a study to determine the degree of overlap between the two programs, if any. Establishing a State Reinsurance Program That Will Attract New Entrants Many stakeholders expressed that the SRP could be leveraged to create a market environment that is favorable for new entrants. They caution, however, that the program should not be constructed in a manner that would support certain care delivery models over others. Incentives for Utilization/Care Management and Quality Improvement Stakeholders expressed that the SRP should be explored as a tool to increase quality and reward effective utilization/care management. Respondents suggest that the SRP could be used to further the goals of other state initiatives, such as the All-Payer Model and the Medicare Waiver. 25

26 New 1332 Guidance: Impact on Future Applications Flexibilities under the ICA Under the Intergovernmental Cooperation Act (ICA) federal agencies may provide certain technical and specialized services to state governments to help implement their state plans. CMS services covered under the ICA are not considered as an increase in federal spending due to the state plan when determining deficit neutrality. The new guidance may allow states to implement reinsurance programs under the ICA. State would be able to pay CMS to utilize the EDGE server infrastructure, to determine reinsurance payments, with pass-through dollars. 26

27 Questions? For more information contact John-Pierre Cardenas, 27

28 New Tool: Reinsurance Pass-Through Calculator K U RT G I E SA PA R T N E R, O F F I C E O F AC T U A R I A L C O N S U LT I N G, O L I V E R W Y M A N

29 PASS-THROUGH FUNDING CALCULATOR DECEMBER 11, 2018 Kurt Giesa, FSA, MAAA Peter Kaczmarek, FSA, MAAA Tammy Tomczyk, FSA, MAAA Thomas Sauder, ASA, MAAA Oliver Wyman

30 Pass-through funding calculator why and what? Genesis for this effort: Understand our own micro-simulation model results Conversations with states in the early stages of considering a 1332 waiver program BlueCross BlueShield Association s interest in helping states with the process What is the tool? Excel-based tool to help policymakers and other interested parties understand the approximate cost and potential benefit of implementing a 1332 waiver Can be used as an aid in estimating pass-through savings from the federal government under a simplified set of assumptions Examples of the questions the tool can address: - State can spend $X. How much will premiums decline, and how much will the federal government contribute? - State wants to reduce premium by Y%. How much will that cost the state? - State wants to implement a program with a total reinsurance fund of $Z. How much will premiums decline and what would be the state s share? What isn t the tool? Replacement for actuarial expertise Tool will not produce the information required to complete a 1332 waiver application Oliver Wyman 30

31 Forces driving the net cost of an externally funded reinsurance program in the non-group ACA market (default assumptions) Sources of pass-through funding -- Louisiana Size of program Share of premium subject to APTCs Reduced administrative expenses Shift in risk pool Improved morbidity Oliver Wyman State Funding Pass-through $100.0 $100.0 $100.0 $100.0 Under a 1332 waiver, Sec. 1332(a)(3), states can receive reimbursement from the federal government for premium tax credits, cost-sharing reductions, or small business credits that the state would have received if the waiver were not in place. We have identified five forces driving the net cost: 1. The higher the proportion of individuals receiving APTCs, the higher the pass-through savings 2. The higher the average premium for subsidized individuals relative to the market as a whole, the higher the pass-through savings 3. A reinsurance program reduces claims expenses, and also reduces non-claims expenses, e.g. premium taxes, commissions, exchange fees and the HIT tax 4. Due to the increased cost of coverage for the lowest-cost silver plan under a reinsurance program, we expect some reduction in the number of individuals qualifying for APTCs 5. Lower premiums due to reinsurance result in increased enrollment and a healthier risk pool which lowers overall premiums further Note that the above does not account for offsets which should be recognized, such as the loss of Exchange user fees 31

32 Forces driving pass-through savings (Louisiana as an example) Baseline spending on APTCs is $590.3 million 1. Baseline Subsidized Non-subsidized Total Covered lives 93,726 48, ,113 Average claims PMPY $ 6,335 $ 5,586 $ 6,080 Average expenses and profit PMPY 1,584 1,396 1,520 Average premium PMPY $ 7,918 $ 6,982 $ 7,599 Individual's premium responsibility PMPY (1,620) (6,982) (3,446) Average APTCs PMPY $ 6,298 $ - $ 4,154 Market wide claims $ 593,708,385 $ 270,274,319 $ 863,982,704 Market wide expenses and profit 148,427,096 67,568, ,995,676 Market wide premiums $ 742,135,481 $ 337,842,899 $ 1,079,978,380 Total Exchange User Fee Revenue $ 25,974,742 $ 3,941,500 $ 29,916,242 Total spending on APTCs $ 590,267,942 $ - $ 590,267,942 Size of Reinsurance Program $ 100,000,000 Key assumptions: Number of off-exchange enrollees equals twice the number of on-exchange enrollees without subsidies Average premium off-exchange is equal average premium on-exchange without subsidies Oliver Wyman 80% loss ratio 32

33 Pass-through savings under a $100 million reinsurance program If only the share of premium being subsidized is considered, $68.7 billion of the program can be funded with pass-through savings 2. Share of subsidy eligible, and higher premium for subsidy eligible people Subsidized Non-subsidized Total Covered lives 93,726 48, ,113 Average claims PMPY $ 5,601 $ 4,939 $ 5,376 Average expenses and profit PMPY 1,584 1,396 1,520 Average premium PMPY $ 7,185 $ 6,336 $ 6,896 Individual's premium responsibility PMPY (1,620) (6,336) (3,226) Average APTCs PMPY $ 5,565 $ - $ 3,670 Market wide claims $ 524,990,761 $ 238,991,943 $ 763,982,704 Market wide expenses and profit 148,427,096 67,568, ,995,676 Market wide premiums $ 673,417,857 $ 306,560,522 $ 979,978,380 Total Exchange User Fee Revenue $ 23,569,625 $ 3,576,539 $ 27,146,164 Total spending on APTCs $ 521,550,318 $ - $ 521,550,318 APTC Savings from subsidy eligible premium $ 68,717,624 Share of program funded with pass-through savings 69% Key assumptions: Reinsurance program of $100MM goes to reduce claims and premiums All other items remain unchanged Oliver Wyman 33

34 Pass-through savings under a $100 million reinsurance program Reduced administrative expenses from reduced claims results in an additional $4.3 million in pass-through savings 3. Reduced administrative expenses Subsidized Non-subsidized Total Covered lives 93,726 48, ,113 Average claims PMPY $ 5,601 $ 4,939 $ 5,376 Average expenses and profit PMPY 1,538 1,356 1,476 Average premium PMPY $ 7,139 $ 6,295 $ 6,852 Individual's premium responsibility PMPY (1,620) (6,295) (3,212) Average APTCs PMPY $ 5,519 $ - $ 3,640 Market wide claims $ 524,990,761 $ 238,991,943 $ 763,982,704 Market wide expenses and profit 144,132,245 65,613, ,745,676 Market wide premiums $ 669,123,006 $ 304,605,374 $ 973,728,380 Total Exchange User Fee Revenue $ 23,419,305 $ 3,553,729 $ 26,973,035 Total spending on APTCs $ 517,255,467 $ - $ 517,255,467 APTC Savings $ 73,012,475 APTC Savings from reduced administrative expenses $ 4,294,851 Share of program funded with pass-through savings 73% Key assumptions: Administrative expenses are reduced by 5% of the reduction in claims All other items remain unchanged Oliver Wyman 34

35 Pass-through savings under a $100 million reinsurance program Assume no shift in the risk pool away from subsidy eligible so no passthrough savings 4. Shift in the Risk Pool Subsidized Non-subsidized Total Covered lives 93,726 49, ,541 Average claims PMPY $ 5,601 $ 4,939 $ 5,372 Average expenses and profit PMPY 1,538 1,356 1,475 Average premium PMPY $ 7,139 $ 6,295 $ 6,846 Individual's premium responsibility PMPY (1,620) (6,295) (3,243) Average APTCs PMPY $ 5,519 $ - $ 3,604 Market wide claims $ 524,990,761 $ 246,045,666 $ 771,036,427 Market wide expenses and profit 144,132,245 67,549, ,682,222 Market wide premiums $ 669,123,006 $ 313,595,643 $ 982,718,649 Total Exchange User Fee Revenue $ 23,419,305 $ 3,658,616 $ 27,077,921 Total spending on APTCs $ 517,255,467 $ - $ 517,255,467 APTC Savings $ 73,012,475 APTC Savings from risk pool shift $ - Share of program funded with pass-through savings 73% Key assumptions: Elasticity of for non-subsidized and 0.00 for subsidized enrollees Oliver Wyman 35

36 Pass-through savings under a $100 million reinsurance program Change in morbidity with an inflow of members results in pass-through savings of $2.5 million 5. Change in morbidity Subsidized Non-subsidized Total Covered lives 93,726 49, ,541 Average claims PMPY $ 5,576 $ 4,917 $ 5,347 Average expenses and profit PMPY 1,536 1,355 1,473 Average premium PMPY $ 7,112 $ 6,271 6,820 Individual's premium responsibility PMPY (1,620) (6,271) (3,234) Average APTCs PMPY $ 5,492 $ - $ 3,586 Market wide claims $ 522,589,358 $ 244,920,208 $ 767,509,565 Market wide expenses and profit 143,982,157 67,479, ,461,793 Market wide premiums $ 666,571,515 $ 312,399,844 $ 978,971,359 Total Exchange User Fee Revenue $ 23,330,003 $ 3,644,665 $ 26,974,668 Exchange User Fee Offset $ 2,941,574 Total spending on APTCs $ 514,703,975 $ - $ 514,703,975 APTC Savings $ 75,563,967 APTC Savings from improved morbidity $ 2,551,491 Share of program funded with pass-through savings 76% Key assumptions: Morbidity of the lapsers and new members is 50% of the average pool before reinsurance Oliver Wyman 36

37 Burlington, Vermont (F) Washington, DC (F) Seattle, Washington (F) Atlanta, Georgia Portland, Oregon (F) Providence, Rhode Island (F) Denver, Colorado (F) Los Angeles, California Boise, Idaho (F) Indianapolis, Indiana Cleveland, Ohio (F) Detroit, Michigan (F) Portland, Maine (F) Baltimore, Maryland (F) Minneapolis, Minnesota St Louis, Missouri Hartford, Connecticut (F) Nashville, Tennessee Newark, New Jersey (F) Albuquerque, New Mexico (F) Philadelphia, Pennsylvania Premium changes in 2019 Change in second lowest cost silver plan by market 30% 20% 10% 0% -10% 23% 21% 12% 10% 9% 8% 6% 4% 3% 3% 3% 0% -5% -8% -8% -9% -12% -12% -15% -17% -20% -24% -30% (F)=Final Source for chart: Oliver Wyman 37

38 Pass-through funding calculator sample estimates Estimates of Pass-Through Funding Oliver Wyman Pass-Through Waiver Tool Compared to States Waiver Applications (Millions) Federal Pass- Through Pass-Through Funding Estimated in the Calculator Tool Difference State Year Reinsurance Program Dollars Estimate AK 2018 $60.0 $49.0 $ % ME [ % MD % MN % NJ % OR % WI % i] Estimated Reinsurance and APTCs saving in 2018 in AK, Table 1 on Page103, Attachment 3: State Innovation Waiver June pdf?ver= [ii] Estimated Reinsurance payments and Federal Pass-Through Funding in 2019, Figure 3 and I-2A of the Actuarial Analyses: Maine 1332 Waiver Application and Exhibits.pdf [iii] Estimated Reinsurance and Net Federal Savings in 2019, Tables 1 and Table 6 Best Estimate of the Actuarial Analysis: [iv] Estimated Reinsurance and Federal Premium Tax credit saving in 2018 in MN, Table A-1 on page 7 of the Actuarial Analysis: [v] Estimated cost of the Reinsurance Program and the Net savings to the Federal Government in 2019 in NJ, Table 1 on page 5 of the New Jersey 1332 Waiver Application: [vi] Estimated Reinsurance and Federal Premium Tax credit saving in 2018 in OR, Best Estimate in Table 1 on page 2 of the 1332 Draft Waiver Application: [vii] Estimated WIHSP total cost and federal pass through rate for 2019 on page 3 of the Wisconsin 1332 Waiver Application: Waiver Application and All Attachments.pdf Oliver Wyman 38

39 You can find the tool here: Oliver Wyman 39

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