RICHMOND — Gov. Ralph Northam’s administration will convene a new work group on Monday to consider options to stabilize soaring premiums in Virginia’s health insurance market.
The Virginia Market Stability Group will consider a wide range of options to lower insurance premiums expected to average more than $833 a month next year, making coverage unaffordable to people who don’t qualify for federal subsidies for premiums or out-of-pocket expenses in the marketplace established by the Affordable Care Act.
The alternatives include two new proposals by President Donald Trump to expand availability of insurance coverage that may be more affordable but less comprehensive through short-term policies and associations of customers who band together as one buyer.
But one option could trump all others — a state budget plan to request a federal waiver for a “re-insurance” program in Virginia that would help defray the costs for the most expensive patients and relieve the expense for others by lowering the risk.
“That is the No. 1 and most promising tool to use,” said Secretary of Health and Human Resources Dan Carey, who will convene the Virginia Market Stability Group on Monday for the first of five meetings before reporting to the governor and legislative budget committees by Nov. 1.
Five states — Oregon, Minnesota, Wisconsin, Maine and Alaska — already have received federal approval of so-called innovation waivers under Section 1332 of the Social Security Act to expand access to health insurance coverage that is affordable and comprehensive. Two other states have plans pending approval.
The two-year budget that took effect on July 1 authorizes the secretary to develop and apply for an innovation waiver to find creative solutions to an insurance market paralyzed by political uncertainty and continued warfare over the Affordable Care Act in Washington.
Re-insurance is the most attractive option to state insurance regulators, who, based on the experience of other states, estimate its potential to reduce insurance premiums by up to 15 percent for people in the federally run marketplace or the commercial market.
The federal government offered a re-insurance program for the first three years of the Affordable Care Act to shield individual and small-group markets from high-cost patients, but the program expired and Congress has not revived it.
“At the end of the day, the only game in town right now is the re-insurance program,” Commissioner of Insurance Scott White said at the State Corporation Commission’s Bureau of Insurance, which is providing technical expertise to the policy work group.
But the program’s effectiveness depends on how much federal and state money is available to defray the costs of insuring people who use health care the most and require expensive treatment.
“The rub is, how do you fund it?” White said.
For that reason, the budget requires the secretary to report to the General Assembly money committees and the committees on commerce and labor before submitting a waiver application to the Centers for Medicare and Medicaid Services.
“Such report shall include an analysis of the costs and assumptions used to implement the waiver and any mechanism proposed to fund the non-federal share of costs,” the budget states.
The Northam administration expects insurance premiums to be lower after Virginia expands its Medicaid program on Jan. 1 because an estimated 89,000 Virginians who receive federal subsidies for insurance on the marketplace will become eligible for coverage under Medicaid.
Medicaid expansion in other states has reduced insurance premiums by 6 percent to 10 percent, Carey said. Preliminary rates insurers filed last month for next year’s policies are 1.5 percent to 5 percent lower because of the expectation of expanded Medicaid coverage.
“These are not final rates,” White said.
Northam vetoed four bills — all sponsored by Republicans — that would have created other options for consumers to buy less expensive insurance, including short-term plans now limited to three months but proposed by Trump to extend a full year, with two one-year options.
For a plumber making $50,000 a year, with no federal subsidies and unable to afford an individual market policy, “I can certainly understand how he might want to go and shop for that coverage,” White said at the SCC.
But short-term plans and “association plans” don’t offer coverage as comprehensive as plans under the Affordable Care Act. Most worrying, White estimates, they tend to siphon healthy people from shrinking risk pools and drive up the cost of coverage for those who remain by 4 percent to 15 percent.
Similarly, the decision by Trump and Congress to end enforcement of the “individual mandate,” which requires most adults to have health insurance or pay a tax penalty, could drive up commercial premiums by 10 percent, he said.
Northam vetoed four bills proposed by Republicans and adopted by the General Assembly this year to help people afford coverage by broadening availability of short-term and catastrophic health plans, as well as the use of association plans that chambers of commerce and other groups could use.
He signed a bill introduced by Sen. R. Creigh Deeds, D-Bath, to allow sole proprietors to become eligible for small-group insurance plans.
Deeds’ district includes the Charlottesville area, which has some of the highest marketplace insurance rates in the country.
Carey said the administration does not see the issue as partisan but acknowledged, “We likely will continue to have differences of opinion.”