HARTFORD, CT — (Updated 1:30 p.m.) The Access Health CT Board of Directors learned Thursday that if the General Assembly had approved legislation to apply for a federal reinsurance waiver a few weeks ago, the state might have been eligible for up to $28.4 million in federal funds to lower premiums 5%.
In the final hours of the legislative session the Senate failed to approve legislation that would allow the state to apply for the waiver, which according to the May 23 Wakely study would have required the state to spend $19.2 million to $21.2 million in order to receive the funding.
The proposal to apply for a reinsurance waiver was embedded in legislation that initially was supposed to create a state-run insurance program that would have ended up as a public option if insurance companies didn’t offer certain lower rates to individuals. That language was stripped from the legislation once the insurance industry raised objections. The House passed the bill 112-28 on June 4.
What was left of the legislation was a reinsurance waiver. However, Republicans in the Senate objected to raising the state portion of the funding through an assessment on insurance companies.
At the time, Sen. Kevin Kelly, R-Stratford, said he didn’t understand how the assessment would lower premiums because it would likely get passed along to consumers. Unable to broker a deal, the legislation died on the Senate calendar.
The Wakely study assumed that state funding would not rely on premium assessment as it was proposed in the legislation.
Kelly, who supports the concept of reinsurance, said states that rely on premium assessments get far fewer federal dollars than states who use money from the general fund to contribute the state share of funding. Kelly said Thursday that he identified spending in the budget that could have been used to fund the state share, but when he offered up those savings Gov. Ned Lamont’s administration said the money had already been used for another purpose.
Kelly said finding $20 million in savings in the state budget to use to help lower health insurance premiums should have been the first thing Lamont did when he looked at the budget.
He said it’s not a partisan issue and everyone hears from their constituents about the cost of healthcare. Kelly said a reinsurance model like the one presented in the Wakely report would have brought relief to consumers.
“Under a reinsurance program the issuer is reimbursed for some of the claims for which it previously would have been liable,” Wakely said in its May 23 study. “Consequently, the issuer can lower premiums without incurring losses.”
The Wakely study, which was based on 2020, did not take into consideration where the state would get its part of the funding for the program. It also didn’t consider the administrative costs needed to run the program.
Susan Rich-Bye, legal director for Access Health CT, said the state would likely hire a third party to administer the program.
There are currently about seven states that have received a 1332 federal reinsurance waiver and the premium savings vary, Rich-Bye said.
Paul Lombardo, an actuary with the Insurance Department, pointed out that Minnesota received far less from the federal government through the waiver than it initially expected.
“They got about half of what they were expecting so it’s not set in stone,” Lombardo said. “That’s just something to keep in mind as we go forward.”
Vicki Veltri, executive director of the Office of Health Strategy, said the study of reinsurance will help further the debate next year.
“It was helpful to us even though what we were trying to do did not make it this year,” Veltri said.
Connecticut had participated in a reinsurance program that expired in 2016 under the Affordable Care Act.
Premium savings of 6% to 11% were achieved during the last year the program was available, Rich-Bye said.
She said when the program expired premiums increased 8% to 10% based on the absence of the program.
She said reinsurance is a short-term measure and if you want to see greater savings the state will have to look at adjusting other “levers” to drive down healthcare costs.
Insurance companies participating in the individual and small group markets in Connecticut are expected to submit their rates to the Insurance Department for review on July 8 for plans that will be made available in 2020.