To Curb Health-Care Costs, Insure the Insurers

To Curb Health-Care Costs, Insure the Insurers

Last week, the Centers for Medicare and Medicaid Services (CMS) announced that it had approved a reinsurance proposal in Wisconsin and Maine in an effort to keep health premiums down. Reinsurance is essentially insurance for insurers: The government helps pay for the cost of exceptionally high-cost claims.

It’s no wonder states have been working on innovative ways to keep premiums affordable for their residents. It seems each day we hear of yet another state announcing double digit premium increases for health insurance: 11 percent in Kentucky, 19 percent in Washington, and a whopping 24 percent in New York. These are just the proposed rates; increases won’t be made final until immediately before the midterm elections. 

Sixty-five percent of Americans reported in a recent Reuters/Ipsos poll that they are “very concerned” about the overall cost of health care — particularly insurance premiums, deductibles, and copays. Rising health care costs affects all Americans: A majority of millennials and baby boomers, whites and minorities, and Democrats and Republicans all reported concerns about increasing costs.

For people who don’t get health insurance from their employers, the cost of health insurance is soaring out of reach. The reason? A relentless campaign by President Trump and Republicans to sabotage the Affordable Care Act (ACA).

For example, the Trump administration refuses to pay cost-sharing reduction payments that help insurers offer discounts to low-income enrollees. The administration has allowed the sale of short-term and association health plans, which do not have to offer the same protections and benefits as ACA approved plans. And it has repealed the individual mandate penalty, which the Congressional Budget Office (CBO) projects will increase premium costs by 10 percent annually.

But states like Minnesota and Alaska have bucked this trend by passing reinsurance programs. In Minnesota, premiums in the individual market jumped 50 percent or more in 2017. To hold down premium spikes, the Republican-led legislature approved a reinsurance program. As a result of that program, prices for the coming year will hold steady or decline. In fact, four of the five insurers selling individual policies in Minnesota had premium decreases averaging between 7 and 12 percent.

In Alaska, after punishing 40 percent premium increases in 2014 and 2015, the legislature passed a reinsurance bill to help stabilize the market. The legislature earmarked $55 million of the $64 million collected through an existing 2.7 percent premium tax on Alaskan insurers to subsidize high-cost claims. It led to a smaller premium hike in 2017 as well as a decrease in premiums of more than 20 percent in 2018

Reinsurance is not a new or partisan idea. It is currently used in Medicare Advantage and the Medicare Part D Prescription Drug Program, and has been approved by Republican-led states. However, as discussed in a new paper by the Progressive Policy Institute, progressives seem to be the only ones pushing for a national reinsurance program. Unfortunately, it’s clear that reinsurance won’t be a priority for lawmakers — at least as long as the GOP controls both the House and Senate.

Senate Majority Leader Mitch McConnell announced that the Senate will be working this August to confirm nominees and to pass appropriations legislation. Progressives should use this opportunity to craft a broad-based, permanent reinsurance package that can bring down premiums in the individual market. This could be either a version of a bipartisan deal that fell apart earlier this spring or a new, stand-alone reinsurance program. Reps. Kurt Schrader (OR-05), Ami Bera, M.D. (CA-07), Ann McLane Kuster (NH-2), and seven other members have laid out a framework for a permanent federal reinsurance program. 

Beyond resisting further assaults on the ACA by the Trump administration, progressives should take the lead on reinsurance to offer voters relief from high health-care premiums. With health care continuing to be the number one issue on voters’ minds, progressives should demonstrate they have solutions to the GOP sabotage of the ACA and policies that will limit the cost of premiums. 

Arielle Kane is director of health care at the Progressive Policy Institute.

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