State Insurance Commissioner Mike Kreidler’s office was shocked when it received 2018 health plan proposals last spring.
Not only were plans requesting double-digit premium increases, but no insurers were willing to offer health plans in two counties — Klickitat and Grays Harbor.
“We weren’t expecting that,” said Stephanie Marquis, spokeswoman for the insurance commissioner’s office. “That got us thinking, ‘What’s going to happen next year?'”
Kreidler was able to find insurers to offer plans in those two “bare counties,” but in nine counties — mostly rural areas — one insurer is providing health plans. That, coupled with the premium increase of more than 30 percent, had health officials worried the uncertainty could lead to a market collapse, similar to what Washington experienced in the 1990s.
Last week, Kreidler’s office proposed legislation it says will help to stabilize the market by reducing the risk for insurers and lowering premiums for consumers.
The legislation — sponsored by Sen. Annette Cleveland, D-Vancouver, and Rep. Eileen Cody, D-Seattle — would create a state reinsurance program. The program would provide partial reimbursement to insurance companies for high-cost medical claims that exceed a certain threshold. It would be funded by a fee placed on all health plans.
The state program would mirror the federal reinsurance program, which expired in 2016, that was part of the Affordable Care Act. Implementing a state reinsurance program would be contingent on the state securing a $40 million federal waiver. Alaska, Minnesota and Oregon received waivers and operate state reinsurance programs.
Some healthcare stakeholder groups have expressed misgivings about how the program will be funded and how it could invite a lawsuit that would further complicate implementation. Lawmakers will need to pass legislation by early February, so Kreidler’s office can submit the waiver application and secure the federal funding before insurance companies file their 2019 rate proposals in May.
“We need to act with expediency so that this can actually work,” said state Sen. Ann Rivers, a La Center Republican who sits on the Senate Health and Long Term Care Committee.
The goal of a reinsurance program — both the federal and state programs — is to level the playing field for insurers, Marquis said. The program would ensure that if one insurer had a large population of sicker patients, it wouldn’t be saddled with those high costs while another insurer with a healthier population had far less costs, she said.
“There’s more incentive for them to stay in the market because they’re not taking on that risk,” Marquis said.
The proposed program would set a threshold — $75,000, for example — that, once an individual’s claims surpassed, the state program would begin paying the costs. The program would also have a cap, between $500,000 and $1 million, at which point the claims costs are no longer eligible for reinsurance payments. The insurance commissioner would set those amounts. The program would be capped at $200 million in payments.
Speaking last week at a hearing of the Senate Health and Long Term Care Committee, Kreidler said that the individual market has been the most vulnerable he’s seen in his nearly two decades as insurance commissioner.
“It’s clear that 2019 has the distinct potential of being worse than what we had when we were coming into 2018,” he said.
Kreidler said a reinsurance program was the best option for 2019, although he said it’s not a “silver bullet.” He said that prescription drug price increases are the No. 1 driver in premium increases. The federal reinsurance program did, however, help to keep premiums down by as much as 10 percent, according to Kreidler’s office.
During the short hearing, representatives from the Washington State Medical Association, the Washington State Hospital Association, the Association of Washington Healthcare Plans as well as several health care providers all expressed support for the program. But each expressed varying concerns with the funding mechanism.
Rivers said she is supportive of the program but described the current proposal as “not feasible.” She said that the costs would be $200 million a year to cover 300,000 enrollees and that the cost was too high.
Rivers also said the program’s funding mechanism is problematic and could add to rising premiums. Additionally, she said she expects the bill to attract a lawsuit seeking to exclude health care plans covered by the federal Employee Retirement Income Security Act. If the lawsuit succeeded, the cost would be redistributed to other health care plans.
Rivers said she is currently working with other legislators to make the bill workable.