Association for Public Policy Analysis & Management

State-based reinsurance represents one of the first policy strategies being implemented to stabilize the individual market through the waiver authority provided under section 1332 of the Affordable Care Act (ACA). The waiver allows states to repurpose the savings achieved from the impact of premium reductions on the Advanced Premium Tax Credit and Cost Sharing Reductions, to finance the reinsurance program. The use of 1332 waivers for reinsurance were triggered in part by a March 13, 2017, communication from HHS Secretary Price, sent to each Governor, encouraging states to consider using the 1332 waiver opportunity to implement reinsurance programs. To date three states, Alaska, Minnesota and Oregon, have approved 1332 waivers to finance their unique approaches to state-based reinsurance. We conducted a systematic literature and document review and conducted key actor interviews in the three states with approved 1332 waivers for reinsurance. We document the state approaches to reinsurance and compare key elements of the program including reinsurance strategy, financing mechanism, use of data to inform projected pass through savings, and market context. Our results provide critical information to policymakers as additional states consider reinsurance to stabilize their individual health insurance markets.

Programs: In 2016, Alaska established a reinsurance program and submitted a 1332 waiver Under this program, claims from policyholders who have one of 33 specific medical conditions will be paid at 100%. Iowa submitted its 1332 waiver on June 12, 2017, which included a traditional reinsurance program with an attachment point of $100,000 and cap of $300,000 with an 85/15 coinsurance rate. Claims over $3 million will be paid at 100%.⁷ In 2017, Minnesota also passed a plan to stabilize premiums in the individual market using a traditional reinsurance model with an attachment point of $50,000 and a cap of $250,000 with payment of claims at an 80/20 coinsurance rate.⁸ The program is contingent on the approval of a 1332 waiver, submitted on May 5, 2017.

Key Lessons Learned:

Challenges: Politics impeded (and continues to impede) solid policy decisions; Identifying a state funding source for reinsurance was contentious; States had extremely short timelines to put waiver applications together and to complete complex actuarial and economic analysis.

Facilitators: States leveraged existing infrastructure in order to get programs up and running; States had mechanisms in place in order to get analysis done quickly; Early congressional delegation involvement (AK & MN);

Future Concerns: State-based reinsurance is only a short-term fix; Overall perspective – this is a small part of the market. Policymakers still need to look at the whole continuum; It’s difficult to measure the impact of the program beyond premium rates; Reinsurance does nothing to solve the underlying problem – health care costs.