- The Biden administration is distributing $452 million in federal funding to bolster more than a dozen state reinsurance programs, CMS said Tuesday.
- The additional funding from the American Rescue Plan passed in March will go to 13 states with the programs, which aim to prevent an increase in premiums by directly paying insurance companies for their most expensive claims.
- The goal of the funding is for more individuals to enroll in insurance at a lower cost, swelling coverage during the COVID-19 pandemic, HHS Secretary Xavier Becerra said in a statement.
The funds, known as "pass-through funding," are determined by HHS and the Treasury Department on an annual basis, and go to states that have implemented their reinsurance programs to lower premiums through a section 1332 waiver. The waivers allow states to revamp their insurance regulations in novel ways with the goal of improving coverage access and affordability.
State-based reinsurance programs created through such waivers are designed to improve insurance affordability and market stability by reimbursing plans for a portion of pricey claims that would otherwise be paid by consumers and the government through higher premiums.
States with such waivers have seen significantly reduced premiums in the individual market. According to CMS data, from plan years 2018 to 2021, states that have implemented section 1332 waivers have seen average premiums drop between about 4% to more than 41%, compared to states without such reinsurance programs.
In 2021, statewide average premium reductions due to the waiver were 4.92% in Pennsylvania, 18.47% in Colorado and 34% in Maryland, compared to if there'd been no waiver in place, CMS said.
Additionally, there's some evidence that reinsurance programs help states maintain and even increase plan participation on the individual exchanges. Colorado, Wisconsin, Alaska and Maryland have seen additional insurers enter their marketplaces since implementing their reinsurance programs, according to the Biden administration.
Disbursement of new pass-through funding from the ARP varies from $2.6M to Rhode Island to $139M to Maryland
The Biden administration plans to announce New Jersey's funding "at a later time," per Tuesday's release.
In April, HHS and the Treasury Department announced $1.29 billion in pass-through funding for the 2021 plan year, while noting additional funding would result from the ARP.
In addition to the 13 states that received additional pass-through funding and New Jersey, Georgia also has a section 1332 waiver to create a reinsurance program, approved by the Trump administration in November.
However, the waiver — which would also dismantle its use of the Healthcare.gov federal insurance marketplace, without replacing it with a state-based marketplace — has been a source of significant controversy. Critics argue it would result in marketplace functions being decentralized among a handful of private sector players, fragmenting and complicating enrollment for beneficiaries.
In late August, Georgia denied for the second time a request from CMS for updated data regarding the waiver.
Yet top health officials in the Biden administration have reiterated support for section 1332 waivers, noting how they can build on the Affordable Care Act to make healthcare more affordable and accessible. When the coronavirus pandemic hit the U.S., some policy experts pointed to reinsurance programs as a way to provide additional stability in the markets for payers and state governments alike.
Georgia, New Hampshire and Pennsylvania all received approval for their reinsurance programs during the pandemic.
Section 1332 waivers have been available since 2017, and can be extended in five-year periods. In August, Colorado received approval from the government for a five-year extension of its current reinsurance waiver, while Alaska, Hawaii, Maine, Oregon and Wisconsin have also submitted letters signaling their intent to apply for extensions without substantive changes to their existing programs.