Thursday, June 2, 2022

Due to Obamacare and Biden stimulus, Wisconsinites saving on health care and tax dollars

One of the items approved by the Joint Finance Committee this week was an item that allowed the state to pay more claims under the state's reinsurance program. This program is related to .health coverage and claims that Wisconsinites get on the individual health care marketplace (aka the "Obamacare exchanges"). At the time, I derided this as a cynical "scheme" cooked up by Scott Walker and the Wisconsin GOP in 2018 to avoid expanding Medicaid, but it does seem to have worked out surprisingly well.

(This is all the more ironic that Walker/WisGOP set it up, since they and DC Republicans were trying to sabotage the ACA at the same time when they were working to have the Feds pay for more coverage through Obamacare with this reinsurance program. But I digress.)

To back up, let’s explain how the reinsurance program works from the fiscal and operational side. We have quite a bit of data about it, because the Department of Health Services is asking to get the program renewed, and sent a report on it to the Joint Finance Committee last week.

This chart is part of the renewal report, and indicates how expensive a claim has to be for the reinsurance plan to kick in (the attachment point) , how much of the claim that state will subsidize after it hits the attachment point (coinsurance rate), and the cost of a claim where the state stops paying more to subsidize the claim (WIHSP reinsurance cap).

Given that the state is picking up quite a bit of the expense of high-cost claims, the idea is that insurance companies will lower their premiums on the Obamacare exchanges (which the Insurance Commissioner’s office (OCI) oversees) and be more likely to offer insurance in general.

You’ll also notice the WIHSP maximum, which is the total amount that is paid out to insurers as part of this formula. As the Legislative Fiscal Bureau points out, much of that total comes from the feds, as a reward for saving money due to the lack of a need to give as much of a tax break to people that but a policy on the ACA exchanges.
Reinsurance payments are made from two appropriations. First, a federal funds appropriation enables OCI to expend all moneys that the agency receives that are generated by federal savings resulting from reduced costs of federal premium tax credits. The federal Department of Health and Human Services (DHHS) notifies the state of this amount, referred to as the "pass-through funding," at the beginning of each plan year. Second, a sum-sufficient GPR appropriation funds the difference between available federal pass-through funding and the total reinsurance payments. Reinsurance payments are made in August of the year following the end of the plan year for which the claims were paid. Consequently, the 2021 plan year payments will be made in state fiscal year 2022-23.

The 2021-23 budget act included $34,233,200 GPR in 2022-23 for 2021 plan year reinsurance payments. This estimate was based on the difference between estimated total payments of $200,000,000, and federal pass-through funding of $165,766,800, the amount that DHHS had indicated would be available to the state.
Then you add in provisions from the Biden/Dem stimulus that became law in March 2021 which gave more availability and assistance for people buying insurance on the Obamacare exchanges, and instead of $34.2 million, the state is set to pay ZERO for this program in the next fiscal year. And even more savings being carried over into 2024.
Subsequent to the passage of the budget, DHHS notified OCI that the state's pass-through funding for 2021 would be increased to $229,175,400. This increase is attributable to provisions of the federal American Rescue Plan Act of 2021, which increased the value of premium tax credits and, in turn, the per enrollee federal savings associated with reinsurance. In addition, a special enrollment period running from February 15 through August 15, 2021 resulted in an increase in enrollment in exchange plans, which further increased the total federal savings attributable to reinsurance. Since the revised pass-through funding exceeds the total amount of expected reinsurance payments, the state will incur no GPR cost for reinsurance payments in 2022-23. Any 2021 federal pass-through funding not used 2021 reinsurance payments will be available to reduce the state's GPR cost for 2022 plan year reinsurance payments, paid in state fiscal year 2023-24.
The flip side of this is that because more Wisconsinites were getting their insurance from the Obamacare exchanges, it also means that more high-cost claims came in for 2021, and that the total payments are above the $200 million limit for reinsurance payments for last year.
….Due in part to higher exchange enrollment and a higher volume of high-cost individual claims, the total amount of claims for reinsurance payments submitted by insurers for 2021 was $202,587,711.24. Under provisions of the program, reinsurance payments are prorated if total claims exceeds the statutory cap; for 2021 the proration percentage would be 98.7%. However, OCI is authorized to submit a request to the Joint Committee on Finance to exceed the cap and the Committee approves the Commissioner's request. OCI has requested that the cap be increased by $5,000,000 to $205,000,000 to pay the full amount of the reported claims, plus any subsequent adjustments reported before the end of the year.
Joint Finance agreed to add this $5 million to the cap for 2021’s payments on May 31, and with the cap for 2022 payments going up to $230 million (per the waiver’s plans, as the chart shows), there shouldn’t be proration needed for that year either.

Conversely, the federal Centers for Medicare and Medicaid Services (CMS) is indicating that they will only pay $181.9 million of those 2022 reinsurance payments next August as ARPA and other stimulus assistance wanes, so the state would have to pick up some costs in the 2023-24 fiscal year. However, it would be barely half the amount of state tax dollars that went into this program 3 years prior to that.

A looming question on the reinsurance program is whether Congress and/or President Biden act to extend the ARPA-era subsidies before open enrollment starts this October. Failing to do so would raise Obamacare exchange premiums for Wisconsinites by an estimated 56% this Fall, and likely cause some to choose to go without coverage.

That uncertainty explains the two possibilities in OCI's report on how reinsurance coverage might work next year in Wisconsin.

That’s a topic to go into more at another time. But I’ll close by noting how it’s funny to me how Republicans on Finance have zero problem with using more federal funds to save state tax dollars when it pays for a complicated scheme to lower insurance premiums. But if they have the chance to do the same thing for a lot more savings if they merely expand Badger Care to people with incomes just over the poverty line? NO WAY!

Ridiculous stuff when you look at the refusal to expand Medicaid. But at least Wisconsinites that get insured through the Obamacare exchanges should continue to benefit, and at little to no cost to state taxpayers overall for the next 2 years.

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