Rhode Island Obtains Federal Approval For A New Reinsurance Program For Health Insurance

Rhode Island has recently obtained federal approval for its application for a state innovation waiver under section 1332(c)(1) of the Patient Protection and Affordable Care Act (PPACA).  Section 1332 of PPACA allows states to apply for a waiver from certain requirements of the PPACA (set forth in section 1332(a)(2) of the PPACA) in order to develop alternative strategies to provide residents with health insurance.  Rhode Island sought a waiver from Section 1312(c)(1) of PPACA, which requires that health issuers “consider all enrollees in all health plans (other than grandfathered health plans) offered by such issuer in the individual market, including those enrollees who do not enroll in such plans through the Exchange, to be members of a single risk pool.”

Rhode Island’s state innovation waiver will create a reinsurance program, effective 2020 through 2024, to reimburse non-group health insurers for a portion of an enrollee’s claims expenses in excess of an attachment point ($40,000 in 2020) and up to the reinsurance cap ($97,000 in 2020).  State law allows Rhode Island’s health insurance exchange to adjust the attachment point and reinsurance cap annually.

Rhode Island is hopeful that the reinsurance program will lower premiums by 5.9% in 2020 compared to what premiums would be in the absence of the reinsurance program.  The state is also hopeful that this effect on rates could attract new consumers (and keep existing consumers in the market), which could result in an increase of 0.9% in individual market enrollment in 2020.

The federal government expects to spend less on premium tax credits under the state innovation waiver, so it will provide pass-through funding to support the reinsurance program based on the amount of premium tax credits that the federal government would have provided to Rhode Islanders in the absence of the program.  The amount of pass-through funding may be adjusted because section 1332(a)(c) of PPACA requires that the state innovation waiver remains budget neutral.

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