State reinsurance programs reduce premiums nearly 17% in first year of operation: Avalere

As more states explore federal waivers for reinsurance programs, a new report found such programs can reduce individual market premiums by nearly 17% in their first year of operation.

The premium reductions in the first year ranged from as low as 6% to 43%, according to an analysis from consulting firm Avalere Health.

“If they are able to secure a source of funding, state-based reinsurance programs can reduce premiums significantly in their first year, particularly in states with higher individual market enrollment,” said Chris Sloan, an associate principal at Avalere.

So far, 12 states have created their own reinsurance programs via federal waivers under the Section 1332 program of the Affordable Care Act (ACA).

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States will get federal funding for the reinsurance program based on what they would have spent on advanced premium tax credits if the program weren’t in place, Avalere said.

Avalere’s analysis, which is based on individual market rate filings in states from 2017 to 2019, found that the annual cost of running a reinsurance program was $53.7 million.

Maryland saw the highest decline in individual market premiums by 43% in 2019, and Alaska had the second highest with 34% when its reinsurance program started in 2017.

RELATED: Premiums on benchmark plans decline by 4% for 2020: CMS

Reinsurance has become an increasingly popular option for states looking to rein in costs on and off the ACA’s exchanges.

Premiums on the exchanges for benchmark plans are predicted to decline by 4% on the federally run for the 2020 coverage year compared to 2019.

Open enrollment starts Friday and runs through Dec. 15.