1 year in, how did Walker's reinsurance scheme work out?

After messing around with Medicaid and other public health programs on Tuesday, the Joint Finance Committee is scheduled to discuss another aspect of our convoluted health care system on Thursday – insurance. In particular, there will be a review of the Wisconsin Healthcare Stability Plan, which was created as a pre-election maneuver by Scott Walker and the Wisconsin GOP to try to limit premium increases on the insurance exchanges that are part of the Affordable Care Act.

Basically, the idea is that the state’s insurance commission (OCI) put up $200 million to subsidize a part of high-cost claims that come from people that bought their insurance on the Obamacare exchanges. Insurance companies get a subsidy against some of these high-cost claims, and the hope is that the insurance companies would lower their premiums (and/or not drop out of the exchanges). Then the feds kick back to the state some of the reduced amount of federal tax credits for those Obamacare policies, since the premiums (and tax credits) aren’t as high.

So how did it work out? LFB has the information.

2. Based on information filed for 2019 premium rate review, OCI estimates that 2019 premiums are 10% lower than they otherwise would have been without the reinsurance program. The 2019 individual market premiums are 4.2% lower, on average, than the 2018 premiums.

So OCI says the reinsurance program encouraged insurance companies to lower Obamacare premiums by 10% this year, turning increased premiums into savings? Wow, that’s really good news. So what might be the drawback in this deal?
Here it is. The program cost state taxpayers $22 million more than what was budgeted, and more than double what Walker’s Administration was claiming it would last year. And a reason why was Trump/GOP sabotage of Obamacare in DC.

4. The estimated state's share of the reinsurance payments for the 2019 plan year is higher than the amount OCI had assumed at the time of legislative deliberations on the bill in February of 2018. In its fiscal estimate for the bill, OCI indicated that, based on an initial review, it was expected that the state would pay approximately 25% of the cost, which for a $200 million program would be $50 million. Subsequent to passage of Act 138, OCI's actuarial firm estimated that the state would receive federal pass-through funding of $166 million, leaving a corresponding state share of $34 million.

5. On November 30, 2018, the federal government notified OCI that the state's pass-through funding for the 2019 plan year was estimated at $127.7 million. Following this notification, OCI's actuary examined the federal calculations, identifying three reasons for the difference between the estimates. First, the federal Department of Treasury, which is responsible for the calculations, used different methods for calculating the impacts of reinsurance payments on premium tax credits. Detailed information on the Department's methodology for making these calculations was not available when the initial actuarial analysis was done. Second, Treasury used different assumptions on the impact of the elimination of the individual insurance coverage mandate penalty, resulting in a larger estimated reduction in enrollment than had been assumed. A lower enrollment assumption means lower federal savings for premium tax credits. Third, the savings in federal premium tax credits savings were affected by individual insurers' decisions on setting 2019 premiums, information that was not available at the time of the initial estimates. In particular, one insurer assumed a smaller impact of reinsurance payments on its premiums, a decision that reduced the amount of premium tax insurance credit savings associated with the program.

So fewer people took up ACA exchange policies last year because of the GOP sabotage, which meant that there were fewer credits to give out. In addition, because the incentive of reinsurance didn’t do much to change what insurers charged nationwide (according to the Feds, the Wisconsin OCI seems to differ), the state of Wisconsin got less of a “thank you” for that $200 million of help.

The LFB also notes that the benefit that most Wisconsinites see isn’t in the bottom line, but in the potential increase of companies offering policies. That’s because many who get insurance from the Obamacare exchanges aren’t seeing any change with how much they end up paying regardless of what the “base premium” is, since much of that is paid back by the Feds via the tax credits.

9. For the 2019 open enrollment period, there were a total of 205,200 consumers (in Wisconsin) who selected an exchange plan and of these 22,300 are not receiving a premium tax credit, meaning that they either were above 400% of the federal poverty level or did not apply for credits. Those consumers who do not receive a premium tax credit are the direct beneficiaries of the reinsurance program.

10. Although consumers who receive premium tax credits may not benefit as directly from the lower premiums resulting from reinsurance, they may receive benefit from having more insurers participating in the individual market. OCI indicates that at least one insurer has identified the reinsurance program as a reason for offering plans in the Wisconsin individual market.

So now that we have one year in the books on this reinsurance program, and a new Governor and OCI administration, we have a choice for what the state should do about it going forward. Evers’ budget includes that $72.3 million in state payments for the 2019 plan year, and does not plan to make any real changes to it over these next 2 years.

But theoretically, the reinsurance plan could be ended after this year, which would return the state to the prior ACA exchange system for 2020 (for good and for bad), and not have to spend any more state tax dollars on it. Definitely has a risk, but at least we have an idea how that might work.

Or, the state could say “we’re not paying more than $50 million of our own money” in a given year, which also could limit how much is sent to insurance companies, which might cause them to change premiums or services (you know how it works with insurance, one thing ripples into 5 other things).

It’s probably worth mentioning that the Wisconsin Association of Health Plans has given their opinions on the program, and they seem to like it a lot.

Health plans’ 2020 individual market premiums will be set during summer 2019. For the sake of stability, individual market consumers and health plans need a clear commitment regarding WIHSP funding for 2020.

Wisconsin’s community-based health plans strongly recommend fully funding WIHSP in 2019 and maintaining the state’s commitment to its share of the $200 million all funds program in 2020 and beyond (Alternative 1).

Healthcare Outreach Positions (Paper #442) Wisconsin’s community-based health plans are committed to ensuring individuals have access to and are enrolled in quality, affordable health care coverage. Consumer outreach and education efforts are imperative to achieving the goal of lowering Wisconsin’s uninsured rate. Wisconsin’s community-based health plans strongly encourage Joint Committee on Finance members to approve, at a minimum, the Governor’s proposed funding amount for health insurance education and outreach activities.

I find the reinsurance issue interesting from a policy standpoint, as it did seem to work in increasing choices and keeping premiums in check, at least for this year. But it also ended up being more costly to Wisconsin taxpayers to do so, and given that Medicaid expansion would have taken some of the lower-income members out of the equation (as they’d have insurance through Medicaid vs the exchanges), it might have also limited the costs that the state was liable for.

Plus, do Wisconsin taxpayers like the idea of giving $72 million in additional subsidies to insurance companies? They’re not exactly a sympathetic group to begin with, and it’s kind of a lame posture to have to give them this money in exchange for them actually offering their product at a more reasonable rate. And given that Scott Walker rarely did anything without a campaign kickback in mind, I’m especially skeptical.

Of course, the best outcome would be to have this country in a position where we don’t have to worry about reinsurance or Obamacare exchanges or other mishmashes, because we have Medicare for All or a similar single-payer program in a few years. But until then, you can bet there will be plenty of tinkering (or sabotage) to be done at the state level to figure out the best way to help under our current system.