North Dakota: Good News: They may join the Reinsurance brigade! Bad News: They may follow Idaho's lead instead

A few minutes ago I posted about North Dakota's approved 2019 rate hikes, which are coming in at a mere 3.2% on average (but which would likely be dropping nearly 20 points without both last and this year's #ACASabotage factors).

However, there was something else equally interesting included in the ND DOI press release: Like Montana and several other states, North Dakota is also considering jumping onboard the state-based reinsurance waiver train!

BISMARCK, N.D. – Insurance Commissioner Jon Godfread today presented the findings from a study preformed to better understand the options available and potential impact of attempting to stabilize the individual health insurance market in North Dakota to the interim Health Care Reform Review Committee. The goals of the study were to attempt to increase affordability, competition and consumer choice in both the short and long term as early as the 2020 health insurance plan year. The health insurance premium rates for Affordable Care Act (ACA)-compliant individual and group plans offered in North Dakota beginning Jan. 1, 2019 were also included in the study.

...Section 1332 of the ACA permits a state to apply for a State Innovation Waiver to pursue strategies for providing its residents with access to high quality, affordable health insurance while retaining the basic protections of the ACA.

The study initiated by the Department was conducted to access the feasibility and desirability of a North Dakota 1332 waiver by exploring the following options:

  • The modification of North Dakota’s current high-risk pool, the Comprehensive Health Association of North Dakota (CHAND), to allow a greater number of high-risk North Dakotans to obtain their health insurance from CHAND, along with an analysis of the corresponding insurance company assessments necessary for CHAND to successfully operate with an increased high-risk membership.
  • The modification of CHAND into an invisible high-risk pool where high-risk North Dakotans can obtain their health insurance.
  • The creation of an invisible reinsurance program independent of CHAND. An invisible reinsurance program would limit the amount of risk insurance companies would take on for the high-risk North Dakotans they insure.

The study also analyzed Idaho’s state-based plan initiative and how a similar state-based plan allowance could operate in North Dakota. The state-based plan initiative would allow insurance carriers to offer health insurance plans, outside of the existing ACA exchange, that would be more flexible in how they are underwritten and designed. These state-based plans would still be required to offer all ACA mandated essential health benefits, be guaranteed issue, but would allow for credits for healthy behavior or other health-related factors. The state-based plans would also be a part of the single risk pool for the general marketplace, which could incentivize young and healthy membership into the risk pool and help stabilize the rates.

Upon completion of the study, two main options were presented as the best options for North Dakota: (1) the creation of an invisible reinsurance pool and (2) the creation of a state-based plan to be sold by insurance companies.

The study shows that an invisible reinsurance pool has the ability to reduce individual health insurance premiums between an estimated 10-20 percent in 2020, compared to the baseline premium depending on the attachment point chosen. Due to the reduced premium, membership in the 2020 individual market is estimated to increase 1 percent compared to the baseline without the waiver.

The reinsurance mechanism would be what has been referred to as “invisible” reinsurance. The approach of invisible reinsurance allows enrollees to remain in the individual market with their current plan and carrier, but a portion of their claims are reimbursed by the reinsurance pool. The enrollee is not aware that their claim is being paid via the reinsurance pool meaning there is no effect on the enrollee as the task of ceding claims to the reinsurance pool is completed on the back end of the process and is without consequence to the enrollee.

For 2020, the proposed reinsurance program would cover 75 percent of paid claims between the attachment point and $1,000,000. The attachment points being considered are $100,000 and $200,000. This level of reinsurance was assumed in projections but North Dakota could have the flexibility to change the parameters in the future.

THIS would be a very good thing. All ACA policies would still be kept to current minimum standards, but unsubsidized premiums would drop 10-20%, similar to the half-dozen other states which have implemented a reinsurance program to date. Frankly, every state should strongly consider setting one up.

Unfortunately, ND is also considering weakening ACA policies along the lines of what Idaho tried (but failed) to do earlier this year:

The intent of the North Dakota Plan offering a state-specific plan similar to the one proposed in Idaho is to have an affordable option for healthier individuals who have foregone purchasing health insurance in the past and to inject healthier risk into the single risk pool. Healthier individuals would pay a reduced premium.

The North Dakota plan would cover all essential health benefits but would allow a higher cost sharing compared to the ACA metal level plans. The plans are still guaranteed issue, but in the event of a coverage lapse, carriers would be allowed to implement a waiting period that is consistent with the provisions of the ACA before pre-existing conditions would be covered.

I don't know exactly how similar to Idaho's proposal North Dakota's idea here would be, but in Idaho, the proposal was to start selling "alternative" plans which included lifetime benefit limits of $1 million, significantly higher out-of-pocket cost sharing for the enrollees, a five to one age rating band (as opposed to the ACA's 3:1 band), wouldn't include maternity care (one of the 10 EHBs mandated by the ACA) and, most critically, wouldn't include community rating--people could still be charged more based on their medical history/health status. It sounds like the North Dakota plans would include maternity care and might not be quite as watered down in some other ways, but they'd effectively be "Copper" plans with deductibles which make even the worst Bronze plan seem like a delight by comparison.

In their defense, there's one good thing about both Idaho and North Dakota's proposals for "state plans": They'd both still be included as part of the ACA single risk pool, which would prevent total bifurbication. However, it's still a lousy idea on the whole (and Idaho's implementation of it was actually prevented by Trump's own CMS administrator, not because she didn't like the idea but because the way they were going about it was flat-out illegal.

Between the two, I strongly recommend just going with a "vanilla" reinsurance program instead, which is doing wonders in several other states without screwing with ACA patient protections whatsoever.