Thursday, February 8, 2018

Obamacare reinsurance and rural WEDC

I wanted to go into detail on a couple of pre-election bills that were part of Scott Walker's State of the State address, now that both bills have been officially introduced and are now in legislative committees.

The first involves Walker's newfound embrace of the Affordable Care Act (ACA). In looking at the bill text, it looks like that this new reinsurance program would be set up in time for payments to be made on 2019 plans bought on an Obamacare exchange, which people would sign up for in the months before the November 2018 elections.
This bill creates the Wisconsin Healthcare Stability Plan (WIHSP), which is a state-based reinsurance program for health carriers, subject to the approval of a waiver of the federal Patient Protection and Affordable Care Act. WIHSP makes a reinsurance payment to a health carrier if the claims for an individual who is enrolled in a health benefit plan of the carrier exceed a threshold amount, known as the attachment point, in a benefit year. The commissioner of the Office of the Commissioner of Insurance in this state administers WIHSP. After consulting with an actuarial firm, the commissioner sets the payment parameters for the reinsurance payment as specified under the bill. In addition to the attachment point, the other payment parameters are the reinsurance cap, which is the maximum amount of claims eligible for a reinsurance payment, and the coinsurance rate, which is the percent of the claim amount eligible for a reinsurance payment. The commissioner must design and adjust the payment parameters with the goal to stabilize or reduce premium rates in the individual health insurance market, increase participation by health carriers in the individual market, improve access to health care providers and services for individuals purchasing individual health insurance coverage, mitigate the impact high-risk individuals have on premium rates in the individual market, and take into account any federal funding and the total amount of funding available for the plan. If the funding amounts available for expenditure are not anticipated to fully fund the reinsurance payments as of July 1 of the year before the applicable benefit year, the commissioner must adjust the payment parameters and then allow the health carrier to adjust its filing of insurance premium rates. If funding is not available to make all reinsurance payments in a benefit year, reinsurance payments will be made proportional to the health carrier's share of aggregate state resident premiums, as determined by the commissioner. Under the bill, health carriers are required to calculate the rates the carrier would have charged for a benefit year if WIHSP was not established and submit those rates as part of its rate filing.

The commissioner must calculate a reinsurance payment to be made to a health carrier as specified in the bill. If the claims cost amounts for an individual enrollee of the health benefit plan do not exceed the attachment point threshold, the commissioner may not make a reinsurance payment. If the costs exceed the attachment point, then the commissioner makes a reinsurance payment that is the coinsurance rate multiplied by whichever of the following is less 1) the claims cost minus the attachment point or 2) the reinsurance cap minus the attachment point. When a health carrier meets criteria set in the bill and any requirements set by the commissioner, the carrier may request a reinsurance payment. A health carrier, however, is not eligible to receive a reinsurance payment unless the carrier agrees not to bring a lawsuit over any delay in reinsurance payments or reduction in the payments for insufficient funding. The commissioner must notify the carrier of any reinsurance payments for the benefit year no later than June 30 of the year following that benefit year.
But here’s the kicker, in order to pay for it, there are $80 million in unspecified cuts savings in other Medicaid funding.
The bill requires the secretary of health services to ensure a lapse is made to the general fund of up to $80,000,000, as determined by the secretary of administration, from the general purpose revenue appropriation for the Medical Assistance program.
If we keep seeing savings in Medicaid due to lower enrollment numbers along with lower costs due to Obamacare, like we did in the 2015-17 budget, then there won’t be any effect on the overall state budget. But if we get a recession and/or costs end up being more than expected, then things get very dicey, and benefits will have to be modified and/or cut.

There’s also a mechanism in the bill which would funnel any “savings” from not paying an ACA fee into this reinsurance fund, if Americans are stupid enough to keep the GOP in power and they actually do repeal Obamacare.
Under the bill, if a fee imposed under the Affordable Care Act is no longer applicable to insurers participating in the state's group health insurance program or the Medical Assistance program, the secretary of administration must calculate the expected savings to state agencies from avoiding the fee. The secretary must then transfer, in the biennium in which the savings calculation is made, to the general fund the program revenue based on the savings calculated or adjust state agency employer contributions for state employee fringe benefit costs in the biennium following the biennium in which the savings is calculated or both. The secretary may transfer any program revenue transferred based on calculated savings to an appropriation account to be used for WIHSP or reinsurance.
Right now, this bill is in the Joint Finance Committee, but hasn't had a hearing or any other action scheduled.

The other bill I want to talk about is a Walker proposal to start up a new rural development fund for $50 million. There are two key provisions that are part of this bill. First of all, what is a “rural” part of Wisconsin? Let's see what the bill tells us
In this section, “rural county” means a county with a population density of less than 155 residents per square mile.
I don’t see a date that those “population density” figures are based on, but if we base it on the 2010 Census, that would include 58 of Wisconsin’s 72 counties, including “rural” counties such as Eau Claire, Calumet, Fond du Lac, Jefferson, and Manitowoc. But I've also heard 55 counties being eligible, and the most recent estimates from the Wisconsin Department of Administration has 16 counties above that 155 person/square mile standard,meaning that 56 counties qualify. So I would think that should be sorted out before this bill goes forward.

But more importantly, what is “rural development” and how would this program handle taxpayer funds? Basically, it would give WEDC $50 million in taxpayer dollars to give away to “expend moneys for any economic development program the corporation is administering...., if that expenditure assists economic development in a rural county.” That's pretty damn broad, and seems to largely leave it up to WEDC to decide what developments to kick back campaign funds to fund with this $50 million.

Is this what rural WEDC will be funding?

Fortunately, there is a backstop, unlike most WEDC handouts.
1. Before [WEDC] first expends moneys on each program under this paragraph, the corporation shall notify the joint committee on finance in writing of the corporation's intention to expend the moneys on the program. The notice shall describe the program and purposes for which the corporation proposes to expend the moneys under this paragraph.

2. If, within 14 working days after the date of the corporation's notice under subd. 1., the cochairpersons of the joint committee on finance do not notify the corporation that the committee has scheduled a meeting to review the corporation's proposal, the corporation may make the expenditures as proposed in the corporation's notice. If, within 14 working days after the date of the corporation's notice under subd. 1., the cochairpersons of the committee notify the corporation that the committee has scheduled a meeting to review the corporation's proposal, the corporation may make the proposed expenditures only upon approval of the committee.
So given WEDC’s shaky-at-best record of taxpayer-funded handouts, it would seem to be wise to object and require a hearing for at least the first few of these projects under this $50 million “rural WEDC” program, to see what (and who) we are dealing with.

What’s also interesting is that unlike the reinsurance program, this rural WEDC plan doesn’t use already-existing money, but adds this $50 million to what already exists. And since the program is designed to last 20 years, that means there would be another $100 million to be set aside for this program in the 2019-21 budget, raising the state’s structural deficit even higher.

The rural WEDC bill got a hearing in a Senate Committee yesterday, but hasn't moved at all in the Assembly. But given the plans announced today about how Walker and the Assembly GOP plan to blow nearly half of the small cushion this state has in this budget on pre-election tax cut gimmicks, I wonder if rural WEDC might go down the tubes in these last weeks of the legislative session. And that might be a good thing.

Let's see if either of these ideas progress in the coming weeks, or if they prove to be empty Walker posturing ahead of an election that he seems to already be trailing in.

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