Alaska Approved for Reinsurance Plan

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On Tuesday, July 12, the White House took a step towards Obamacare pricing stabilization in Alaska, a primarily rural state where healthcare costs are sufficiently high. This comes in the form of approving the state’s 1332 request, the first of its kind.

According to a HHS report, the average monthly premiums had increased 203% – from $344 in 2016 to $1041 in 2017 – before subsidies and tax credits were applied. Thus, intervention was mandated and a 1332 was submitted.

What is a 1332

The intervention came in the form of a 1332 waiver, also known as a state innovation waiver. The waivers allow states – in this case Alaska – to come up with budget-neutral plans to help increase insurance rates among their residents. They can do so through abatement of the individual mandate, for example, if they believe that they have a better system to replace it.

The waivers have to meet certain criteria, including comparable coverage rates if no waiver is granted; comparable affordability; comparable coverage; and federal deficit-neutrality. If a waiver is accepted, then a state will receive the money through what’s called “pass through: funding. This means that that they receive the money that they would have had they continued using the financial assistance offered by the ACA.

These 1332 waivers were not allowed to be submitted until January 1 of this year. Alaska was the first to get theirs approved, and other states, such as Minnesota, have submitted waiver requests.

The Alaskan Story

The reason that Alaska filled the bill was because premiums had been so greatly rising, as was stated before. Because of rising premiums, some were worried that individuals would pull out of the market, leaving the sick in the market and paying higher premiums. The fear was that the sick would end up in a death spiral, a cause that republicans gave great power to in the early ACA days.

Because of this, Alaska drafted the Alaska Reinsurance Program, or ARP, for 2018 onward. The ARP allows the state to consider multiple risk pools, rather than one, in order to allow for reinsurance payments. This means that the state will operate a reinsurance program, or a form of insurance for the insurance, to help cover costs. The insurer – Alaska has only one – will be able to turn towards the state and request funding assistance for individuals who have one of 33 different conditions that are deemed high cost. The idea is that the state will help to share the financial burden of coverage for these individuals.

It is anticipated that, because of the 1332 waiver, coverage will be expanded to 1,460 new enrollees. Additionally, premiums are anticipated to be 20% lower in 2018 before tax credits and subsidies than in 2017. The state will receive money in the form of pass-through funding, receiving funding based on the premium tax credits that would have been applied if the waiver was not prevented. The plan will not increase the federal deficit, and thus fits the bill for a passable 1332.

Looking Forward

As it turns out, the 1332 waivers have potential for good. If Alaska is able to use the waivers and maximize the funding, then it could prove a success and serve as a model to come.

However, its model could exist outside of just 1332 waivers. The model could serve as a framework for ACA repair. Many have advocated for more state leverage when it comes to healthcare, including Senators Cassidy and Graham. Although their proposal is vastly different than the 1332 waivers, lawmakers could use 1332s as a model for progress and price mitigation.

Here’s some reading on Alaska’s reinsurance plan, as well as 1332 waivers as whole:

https://www.vox.com/health-care/2017/7/12/15961644/trump-administration-saved-obamacare-alaska

http://healthaffairs.org/blog/2017/06/09/how-states-are-addressing-uncertainty-with-1332-waivers/

 

 

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