The Pennsylvania Insurance Department has taken a step in advancing the goal of lowering the cost of health insurance premiums by submitting the Commonwealth’s 1332 State Innovation Waiver application to the Center for Medicare and Medicaid Services (CMS).
The creation of a state reinsurance program through the Affordable Care Act’s (ACA) Section 1332 waiver process will further strengthen Pennsylvania’s individual health insurance marketplace by lowering gross premiums and increasing access to affordable marketplace coverage.
“My administration is thrilled to announce that Pennsylvania has submitted the waiver application for our reinsurance program, because it will directly scale down health care costs for hundreds of thousands of Pennsylvanians and their families,” said Gov. Wolf. “Making health care more affordable in our state has been one of my priorities since I took office, and this waiver is an important step toward achieving that goal.”
A reinsurance program pays a portion of high cost claims in the individual market, such as those incurred after major accidents or costs associated with serious health conditions. By reimbursing carriers for a portion of their higher-cost claims and spreading that risk across the broader marketplace, a reinsurance program will lower the premiums for individual health insurance plans from where they would otherwise be without reinsurance.
“The 1332 waiver, if approved, will help provide Pennsylvanians with tempered premiums and will increase affordability of health insurance in Pennsylvania’s individual Affordable Care Act market,” said Insurance Commissioner Jessica K. Altman. “Pennsylvania’s individual market for health insurance is stable and has recently welcomed new insurers to the market and service area expansions of existing insurers. But a stable market does not necessarily mean an affordable market, and Pennsylvania has seen individual market rates rise in recent years. Pennsylvanians who are not eligible for financial assistance made available by the ACA are finding the full cost of premiums to be high and, for some, unaffordable. This waiver is designed to address that issue.”
Pennsylvania’s waiver request under Section 1332 is for a period of up to five years beginning in the 2021 plan year. The waiver will not affect benefits afforded to Pennsylvanians under the ACA, including coverage of required essential health benefits in individual and small group plans, and the prohibition of pre-existing condition exclusions in major medical plans.
The reinsurance program will be funded through a combination of federal “pass-through” funds and revenue provided by the commonwealth’s new Pennsylvania Health Insurance Exchange Authority. The pass-through funds represent the reduction in federal expenditures, via premium tax credits, resulting from lower premiums due to the predictability and financial assistance provided by the reinsurance program.
Gov. Wolf signed historic legislation creating the state-based health insurance exchange in July. Recent technological advances allow states to operate their own exchanges more affordably and Pennsylvania is on track to have its exchange up and running in 2021.