State reinsurance helps lower premiums, but fails to lure insurers

Reinsurance programs have successfully stabilized individual insurance premiums and boosted enrollment in Alaska, Minnesota and Oregon, but the programs have been less effective at attracting more insurers to sell individual plans in those states, according to a report released Tuesday.

The three states were the first to implement reinsurance programs in 2018 under Section 1332 waivers in hopes of shoring up their individual markets amid rising premiums and dwindling insurer participation. Their efforts have proven mostly successful, illustrating the value of pursuing state solutions when federal policy is uncertain, researchers at Georgetown University's Center on Health Insurance Reforms concluded. The report was funded by the Altarum Institute and the Robert Wood Johnson Foundation.

The findings are good news for the handful of newly elected governors considering creating reinsurance programs in their own states, including in Colorado, Connecticut and Michigan. Maine, Maryland, New Jersey and Wisconsin have already received CMS approval for reinsurance programs beginning next year.

According to Georgetown researchers, Alaska, Minnesota and Oregon sought reinsurance programs to stabilize and mitigate premium hikes, increase consumer enrollment, maintain and attract insurer competition and generate federal savings. Each state directly reduced individual market premiums after implementing reinsurance.

Alaska initially proposed increasing rates by more than 40% in 2017, but the reinsurance program allowed the state to limit average rate increases to 7% that year. In 2018, average individual market rates decreased 26% in Alaska. Minnesota's reinsurance program helped reduce its 2018 rates about 11.3%, according to the report. Individual rates in Oregon that year ranged from a decrease of 1.6% to an increase of 14.8%, but the state estimated that the reinsurance program helped lower rates by about 6% from what they otherwise would have been.

Meanwhile, the national average rate increase for the lowest-priced silver plan on the exchanges was 32% in 2018.

Each of the three states experienced growth in individual market enrollment in 2018, though they didn't all meet their enrollment goals, according to the report. But none of the states saw an increase in the number of insurers selling plans in the ACA marketplace. Fewer insurers sold plans in Oregon in 2018 than in 2017, while Alaska and Minnesota maintained the same number of insurers.

Still, the researchers noted that participating insurers in the states reported that reinsurance gave them an incentive to stay, even as other insurers left the market. Insurers also said it's too early to say if their reinsurance programs will generate any federal savings.

Researchers noted that while reinsurance programs have proven successful so far, maintaining state funding for the programs could be a challenge. Changes in state government leadership could present roadblocks to continued funding. Insurers and regulators interviewed by the researchers supported a federal reinsurance program that could be tailored to states' needs.