Oklahoma is preparing to unveil a $350 million plan designed to reduce health insurance premiums and avert a scenario where the state is left with no provider offering plans on the federally run marketplace.
But the effort comes with a catch: The more than 1.7 million Oklahomans who receive health insurance outside of the marketplace, including from employers, would pay more – a per-person fee of up to $60 a year.
The fee is part of a federal waiver the state is seeking to begin a reinsurance program through the Affordable Care Act or the GOP’s proposed replacement plan.
The request, which the state is finalizing, would essentially offer government-backed insurance to health insurance companies to cover their costs when they face unexpectedly high claims on the Obamacare exchange, which now covers 124,000 individuals. If the plan passes an expedited federal approval process, it could take effect on Jan. 1.
A state-commissioned report projects the reinsurance program could reduce premiums on the exchange by up to 35 percent. That could entice an extra 5,000 to 15,000 Oklahomans to enroll in the marketplace and get health care they otherwise would go without. Many of them qualify for few or no tax-credit premium subsidies because their income is too high.
Buffy Heater, strategy officer for the Oklahoma health commissioner, said accomplishing this would be a “critical first step” in stabilizing the individual marketplace, which has seen average monthly premiums rise from $277 in 2015 to $571 this year.
Insurers have pulled out of the state exchange in recent years, citing high costs. Blue Cross Blue Shield of Oklahoma now is the only remaining insurer on the exchange.
“There is a strong belief this will bring other competitors into the marketplace,” said Mike Rhoads, deputy commissioner of life and health insurance for the Oklahoma Insurance Department. “It may not be for 2018, but we’re taking a long-term look at this thing.”
Waving the Rules
Oklahoma is one of a handful of states exploring the reinsurance program through what is called a 1332 waiver – a provision of the ACA that, starting this year, allows states to seek flexibility in federal health-care rules. The state plans to submit its waiver application after a 30-day public comment period that will begin later this summer and expects the federal government to expedite its decision.
Reinsurance is one of the few health-care cost-control strategies championed by both liberals and conservatives.
The Democratic-crafted Affordable Care Act included reinsurance assessment fees on most insurers across the county from 2014 to 2016. Similar to Oklahoma’s waiver request, this was designed to create a pool of money to reimburse insurers for high costs on the exchange.
Under the Trump administration, Health and Human Services Secretary Tom Price has encouraged states to seek 1332 waivers to start their own reinsurance programs. Even if the GOP’s repeal-and-replace efforts are successful, the latest House and Senate proposals both include provisions to allow states to continue to seek reinsurance programs through waivers.
One of the reasons reinsurance has gained support in Congress is because the federal government’s portion of the funding –– $244 million with Oklahoma’s proposal – would be recouped through savings. The federal government would have to pay out less in subsidies as premiums decrease. Still, some state funding would also be required.
Oklahoma’s plan differs from approaches in some other states, such as Minnesota, that are using some general revenue funds to pay their shares.
Because of Oklahoma’s budget problems, this wasn’t a viable option here, Heater said. Instead, lawmakers passed a bill on the final day of this year’s session allowing for the creation of a nonprofit board to collect assessments from insurers and determine the amount.
That board has yet to be created. But Heater said the state determined it would need to raise $112 million to pay for the state’s share if it wanted to achieve a 25 percent to 35 percent decrease in premiums on the individual market.
Absorb or Pass on Cost?
In order to raise that amount, a $5-per-member monthly reinsurance fee would have to be assessed on the nearly 1.9 million insured Oklahomans, excluding those on Medicare or Medicaid. This includes the 1.7 million Oklahomans who receive coverage from employer-sponsored group or self-funded plans.
Laura Brookins Fleet, executive director of the Oklahoma Association of Health Plans, said it would be up to each off-exchange insurer to decide whether they would eat that cost or pass it along to consumers.
“However, there is a likelihood that group plans – both self-funded and fully funded – will see higher premiums in order to offset the assessment placed on each health plan to stabilize the individual market,” she said.
This has prompted murmurs of disapproval among in the state’s business community. This includes Oklahoma City-based Devon Energy, whose self-funded plan requires it to assume the financial risk for providing health-care benefits to employees.
Devon spokesman Tim Hartley noted that Devon insures thousands of employees, retirees and their families. “Because of this, we’ll be concerned about reinsurance fees or any proposal that would increase the costs borne by companies providing health insurance to employees and the premiums those employees pay,” he said.
Some health advocates have said the reinsurance proposal could have unintended consequences.
Pam Cross-Cupit is the executive director of the Health Alliance for the Uninsured, which works with 13 charitable clinics for the uninsured across the state.
She said finding reasonably priced plans is difficult for many in the so-called coverage gap – those who make too much to qualify for Medicaid but make too little to qualify for premium assistance tax credits.
Reinsurance could be “wonderful” for this population if premiums decrease, she said. But for small employers like her nonprofit, the new fee might lead to higher deductibles and lower-quality plans.
“As an employer who has a small group plan, (Health Alliance for the Uninsured) is very close to being priced out of the market,” she said, adding, “Each cost passed on to the employer may end up being passed on to the insured.”
Jonathan Small, head of the right-leaning Oklahoma Council of Public Affairs, said he supports the waiver program as a way for states to gain flexibility and relief from the federal law.
But he said he also has issues about how the state wants to fund the reinsurance program.
“I think it is concerning anytime there is a proposal that is based on further requiring people who are not part of the problem to pay more,” he said.
Rhoads, the insurance commissioner, said any extra costs that consumers might see could be offset over the long run. He said if reinsurance helps Blue Cross Blue Shield or any other insurer that joins the exchange become more financially sound, they might not have to pass along the reinsurance fee to consumers.
He added that having a stable individual market that attracts a larger and more diverse pool of consumers could strengthen the insurance industry and lower prices for everyone in the long run. Many Oklahomans’ health would also improve, he said.
“I think it’s kind of a win-win for the consumer,” Rhoads said. “And it also provides all the things we what we want in having a marketplace: affordability and accessibility.”
Other Possible Changes
The reinsurance waiver application is the first recommendation from the 1332 Waiver Task Force that the state is taking on. The group was created in 2016 to explore ways to gain flexibility from federal health-care mandates.
The group is looking at other possible changes in future years, depending on what happens with congressional efforts to repeal and replace the Affordable Care Act:
- Eliminating the bronze, silver, gold and platinum tiers for individual plans and replacing them with two standardized options.
- Changing the age band to allow insurers to charge older customers up to five times as much as younger ones instead of the current rule allowing three times as much.
- Adjusting premium tax-credit eligibility to provide more assistance to lower-income customers in exchange for lowering the amount of credits for higher-income customers.