The board of trustees of the Maryland Health Benefit Exchange has approved parameters for an application for a reinsurance waiver from the federal government, opening the door to lowering rates for the 2019 plan year on the individual health exchange.
The General Assembly cleared the way for the exchange to make the application with emergency legislation passed and signed by Gov. Larry Hogan earlier this month.
“It is really an important move we’re making,” said Robert Neall, chairman of the trustees and the state’s secretary of health.
The state expects that instituting reinsurance will limit rate increases for 2019, compared with increases that have been between 30 and 50 percent the last several years. Insurers had warned that without any action, rates could have increased by another 50 percent next year.
A reinsurance program reimburses insurers for a percentage of costs above a certain threshold and below a cap. That threshold is known as the attachment point.
As part of the approval, the board approved coinsurance rates and caps for the reinsurance program but did not yet set an attachment point.
Insurers participating in the reinsurance pool will be subject to a coinsurance rate of 80 percent, meaning they will pay about 20 percent of the costs of claims paid through the reinsurance pool. That leaves the insurers with an incentive to continue to try to keep costs down, said Chet Burrell, president and CEO of CareFirst BlueCross BlueShield, one of two insurers on the individual market.
“If anyone could ever have an incentive to try to contain costs, I can’t imagine anything more powerful,” Burrell said, noting the company has lost $500 million on the individual market in Maryland.
There will also be a $250,000 cap on claims submitted to the reinsurance pool. That means only claims between the yet-to-be-determined attachment point and the cap will be subject to reinsurance.
The attachment point has not been determined because the state is still waiting on data, including where Oregon sets its attachment point. The state is following Oregon’s model in instituting reinsurance.
“Any number we pick now could be wrong,” Neall said as he suggested the attachment point be determined after getting more information.
One piece of data the state is waiting on is an actuarial and economic analysis by Wakely Consulting Group. When that data comes in, the state may have the information it needs to set an attachment point, John-Pierre Cardenas, the exchange’s policy director, said.
The waiver application would allow the state to access federal pass-through funding for the reinsurance pool. That funding would join with a health insurance fee assessed at the state level, estimated to raise $365 million.
The fee is normally assessed at the federal level every year but was set aside for 2019 as part of the federal tax legislation. That means the tax is already built into insurance rates and would not lead to increased rates.
The first part of the application requires the state to hold a public comment period. That comment period would include two public hearings.
After that public period, the state can begin the formal application with the federal Treasury and Health and Human Services Department.
At a conference this month in Colorado, the government indicated that so long as Maryland follows another approved state’s model, as it is doing with Oregon, there should not be problems with the application, Michele Eberle, the exchange’s executive director, said.
“They are very supportive,” she said. “They keep stating as long as it follows another state … they see no reason why this won’t go through the process and there should be no undue delay in getting it through for 2019.”