OHIC, HSRI pursue health care reinsurance to reduce 2020 rates

HEALTHSOURCERI and OHIC are pursuing a federal waiver to set up health care reinsurance in Rhode Island, which could reduce rates by 10 percent.

PROVIDENCE — HealthSourceRI and the R.I. Office of Health Insurance Commissioner are pursuing a federal waiver to set up a health care reinsurance program following the General Assembly’s approval of the Rhode Island Market Stability and Reinsurance Act, which officials say could reduce health care rates by 10 percent starting in 2020.

The authorization was one of three strategies The Market Stability Workgroup agreed to recommend to Gov. Gina M. Raimondo early this month. The group recommended health care reinsurance, a state version of the individual mandate, and providing regulatory oversight authority of short-term limited duration, or STLD, plans to ensure they’re subject to the same consumer protections that apply to all private health insurance coverage.

Reinsurance helps control insurance premiums by establishing a separate fund to pay for some of the most expensive claims for consumers insured in the Individual Market.

This legislation authorizes the state to begin the federal waiver application process and does not commit any state funding. Federal savings realized by lower premiums and matching funding from other sources would be identified and proposed separately through 2019 state legislation.

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“We do expect the Governor to sign the bill,” said Kyrie Perry, spokesperson for HealthSourceRI.

If that comes to pass, she said, the two agencies will need to submit an application to the federal government to begin the process. That will require some advance actuarial work, Perry said, including determining what the market is expected to look like and the funding level.

Once the actuarial work is done, the state must hold a 30-day public comment period. With the 1332 waiver application submitted, the Centers for Medicare & Medicaid Services has up to six months to review it. CMS has indicated that 1332 waivers specific to reinsurance will not take the full six months to review, she said.

After it’s submitted to the federal government, Perry said, they’ll need to wait for a review. Even if all goes according to plan, the reinsurance program won’t be in place and affecting rates until the 2020 rates are determined.

“So this is the first step in a very long process,” Perry said.

The state will also need to determine how to fund the reinsurance program, Perry noted. In some states, she said, penalties collected from people who decide to pay a fine rather than purchase health insurance is used to fund state reinsurance systems.

According to the report the The Market Stability Workgroup sent Raimondo along with their recommendations, funding a reinsurance program that would cut health care rates by 10 percent instead of the projected increases would cost $26 million, with $15 million funded through pass-through savings and another $11 million needed before moving forward, Perry said.

The report also notes that revenue from penalties charged to the uninsured, mostly from households with income below $75,000, was $8.6 million in 2015, and the estimated 2016 revenue was $9.7 million.

Rob Borkowski is a PBN staff writer. Email him at Borkowski@PBN.com.

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