With new legislators and governors, reinsurance programs have a bright future

Health insurance form with wood pen, basic calculator, white piggy bank, and pile of coins
Proponents of reinsurance say it makes premiums more affordable. (Getty Images/michaelquirk)

Insurance commissioners and insurance companies agree: Reinsurance programs work.

At least, that’s what those in Alaska, Minnesota and Oregon believe, according to a new issue brief (PDF) from Georgetown University’s Center on Health Insurance Reforms.

While premiums rose substantially across the nation in 2017 and 2018, reinsurance prevented dramatic increases in those three states.

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And as researchers point out, perhaps there is no better illustration for this than Alaska. After its §1332 ACA Innovation waiver requesting to establish a reinsurance program was approved in July 2017, the average rate increase dropped from 42% to 7.3%.

Reinsurance works quickly—an advantage not just for consumers, but for policymakers, according to Sabrina Corlette, one of the issue brief’s authors.

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The results of reinsurance produce “a short-term win,” she said. Plus, the insurance industry likes it, "so that stakeholder isn’t a battle.”

Many politicians on both sides of the aisle support reinsurance programs, but not all do. Citing cost concerns, ultra-conservative and libertarian individuals have voted against them in the past, so their funding is not guaranteed.

However, the midterm election results could lead to new reinsurance programs in additional states.

“If you campaigned on healthcare, you need to do something to improve healthcare for consumers and insurers,” said Rachel Schwab, lead author of the analysis.

This remains true even though the market has shown signs of stabilizing, such as milder premium increases, fewer carrier exits, and additional carrier expansions.

“I don’t think states have reason to look at the recent stabilization and just throw up their hands and say ‘we’re done,’” Schwab said.

Governors-elect in Colorado, Connecticut and Michigan have expressed interest in creating reinsurance programs, the authors said. Rhode Island and Wyoming have passed bills in their state legislatures directing their health departments to submit applications for reinsurance programs through §1332 waivers as well.

RELATED: Reinsurance drove premiums down in Maryland. Will it do the same in Montana?

Will recent guidance that expanded what’s permissible under §1332 waivers discourage states from requesting to create reinsurance programs? “Quite the contrary,” Corlette said. Rather, “it reaffirms that reinsurance programs are a viable waiver option.”  

The Senate considered the benefits of a national reinsurance program in 2017, hearing about its benefits from governors, insurance commissioners, and other stakeholders. The limited efforts to create one—such as the Collins-Nelson bill—never came to fruition.

“One of the challenges everybody talked about was that they weren’t going to get a receptive audience with the House,” Corlette said.

But with a Democratic majority in the House next year, that could change.  

“I wouldn’t say it’s outside the realm of possibility,” Corlette said.