Two bills aimed at continuing the Affordable Care Act marketplace in its current form and transferring greater control to the state were voted out of the Senate Budget and Appropriations committee Monday.
One bill continues the individual mandate, and the other creates a reinsurance program to help support health insurers who take on high-cost patients.
The bill to continue the individual mandate is more widely accepted than the one to create a reinsurance program — which some believe is going to need significant work and changes before it becomes law.
The individual mandate continuation has two parts, and also includes essential benefits coverage as defined by the state — a continuation of existing ACA essential coverage — which shields the state from the greater competitive environment of association health plans green-lighted by the federal government.
In a 2017 issue brief, the New Jersey Association of Health Plans supported state oversight of such coverage in order to ensure that weak or barebones plans do not infiltrate the state market.
The state’s marketplace, which predated the ACA, had some level of essential benefits coverage, but did not have the individual mandate component.
This has previously been cited as the reason the marketplace was in a “downward spiral” by the time the ACA was enacted.
Jason Levitis, a senior fellow with the Solomon Center for Health Law & Policy at Yale Law School, testified at the hearing Monday and said similar programs in three other states have shown successful reduction of premiums.
“There is broad consensus that ending the ACA’s individual responsibility payment will lead to additional double-digit premium increases and substantial coverage losses. Enacting a state provision that seamlessly picks up when the federal provision expires would likely eliminate any harm from the federal change,” he said.
The reinsurance plan, which would be funded, in part, by the penalties from the individual mandate, faces greater trepidation.
The bill defines the program as a way to help reduce premium costs and keep the market stable, while helping to reimburse insurers for high-cost patients, those who cost more than $50,000 annually and drive higher premiums. But there is a cap, at $250,000, after which the carriers can no longer rely on the program.
The idea would be to use federal funding, after a waiver is approved, as a buffer.
Ideally, the state should apply for the waiver by the end of the month, according to bill sponsor Sen. Joseph Vitale (D-Woodbridge).
This is because the reinsurance program at the federal level has already expired, and there is no movement in Congress on existing bills to reinstate it.
“The ACA included a federal reinsurance program that operated from 2014 to 2016 and played an important role in reducing premium increases and ensuring broad participation,” Levitis said in his written testimony. “Several bipartisan bills before Congress would provide continued funding. But the fate of these bills is highly uncertain. Fortunately, the ACA includes a funding mechanism that several states have already used to support state reinsurance programs … a state can receive ‘pass-through funding’ equal to any savings the waiver produces.
“This creates a natural fit for reinsurance programs. Under the ACA, federal health insurance subsidies are tied directly to premiums. Reducing premiums through a state reinsurance program reduces federal spending on subsidies, and a state innovation waiver allows the state to receive those savings to plow back into the reinsurance program. The result is that the federal government can cover the lion’s share of the cost of a state reinsurance program.”
There are concerns over what happens if and when the federal pipeline disappears, as well as if the individual mandate penalties decline with more coverage sought on the market.
The parameters of how this would operate under state control, versus previous federal oversight, are in question.
Also, if federal funding dries up, it opens the door for assessments that would be levied on health insurers, which is likely to result in some backlash.
But many of the questions around the functionality of the program will have to wait until after the bill is passed and an actuary is brought in to help set a structure and run the numbers, Levitis said.
“These things are always based on economists’ and actuaries’ best guesses on people’s behavior,” he said. “Even when and if this is approved by the federal government, the state can still decide (it doesn’t) want to do it.”