States might be able to use reinsurance programs or health insurance premium subsidies to keep the Patient Protection and Affordable Care Act (PPACA) from leading to big increases in commercial health insurance prices.
A team at the Health Care Reform Regulatory Alternatives Working Group, an arm of the National Association of Insurance Commissioners (NAIC), has included those ideas in a draft of a PPACA rate increase mitigation discussion paper posted on its section of the NAIC’s website.
Regulators from 26 states that are skeptical about PPACA formed the working group to come up with strategies for addressing their concerns.
The working group is dealing, for example, with the fear that a new PPACA ban on use of personal health status information in underwriting decisions, and a provision limiting health plans to charging the oldest enrollees rates only three times as high as the rates they charge young adults, could lead to big increases in premiums for health adults and young adults.
In one section of the discussion paper, drafters talk about the idea of states setting up their own, supplemental reinsurance programs — insurance programs for insurers — to add on to the protection that a new, PPACA-related reinsurance program is supposed to provide.
Officials at the U.S. Department of Health and Human Services (HHS) are estimating that the program could reduce individual market premiums by 10 percent to 15 percent in 2014, but PPACA could increase individual market premiums by significantly more than 10 percent in some states, the paper drafters wrote.
A state with a large uninsured population with serious health problems might be able to reduce the effects of PPACA on the cost of coverage for healthy people by providing extra reinsurance, the paper drafters said.
Challenges could include coming up with the cash to pay for the supplemental reinsurance program, the difficulty of structuring a program, and the need to get the program in place very quickly, the drafters said.
States that were setting up supplemental reinsurance programs were supposed to notify HHS by April 5, drafters said.
Because HHS will not pay for the supplemental reinsurance programs itself, “states will have to find alternative sources of funding,” drafters said.
Potential options could include assessments on insurers, redirecting assessments that insurers are already paying for other purposes, private sources, or redirecting other state funds, drafters said.
Similarly, a state could create a bigger, more stable risk pool by giving individuals and small groups cash they could use to buy coverage, drafters said.
A state could run a subsidy program through its state income tax program, but it would probably have to take quick legislative action to do so, drafters said.
The drafters said a cheaper, simpler way to mitigate the effects of PPACA might be for a state to help support the marketing efforts of the state’s PPACA “exchange,” or Web-based health insurance supermarket, and get as many residents as possible to to think about signing up for coverage.
A state could, for example, create a rewards program for exchange ombudsmen, or navigators, “based on both the quantity and the quality of enrollees, as measured by subsequent experience and persistency rates,” drafters said.
“Navigators cannot receive compensation from insurers, but states may want to explore other ways to provide incentives, while being aware of restrictions regarding gifts to employees, grantees, or agents of government agencies,” drafters said. “The definition of enrollee ‘quality’ would need to be written carefully so as not to be unfairly discriminatory or identify individuals based on medical conditions or another factor that may result in adverse selection. One possible approach is to define ‘quality’ based on enrollment during the first or second meeting between a navigator and the consumer, indicating that the navigator upheld his/her responsibility to inform the consumer of the information required for enrollment.”