N.J. gets federal approval, funds for health reinsurance program

New Jersey is now among three states approved by the federal government to implement a reinsurance program through the Section 1332 State Innovation Waiver, the state’s Department of Banking and Insurance announced late Thursday.

Reinsurance is a tool that was first used by the Affordable Care Act to help soften the impact of the new law, as well as help keep the marketplace competitive. It works by making insurance companies whole in the face of steep claims that come from the ever-shifting population on the health insurance marketplace. Because people tend to take whichever plan costs them the least, and includes the doctors they like, it becomes hard to depend on a consistent set of claims.

“Under the waiver, New Jersey will receive federal funds to cover a substantial portion of state costs for the reinsurance program. The state has requested $218 million in federal pass-through funds to support the program for 2019,” according to DOBI.

Gov. Phil Murphy signed the law to create the reinsurance program in May, and the state applied in July.

If an insurer is hit with a sudden increase of high-risk members and high-cost claims, the state can reimburse them for a certain percentage from a pool of state and federal funding.

“Specifically, the reinsurance program will reimburse individual health carriers for a proportion of the cost of certain high-cost claimants between a minimum and maximum threshold. Under the parameters for 2019, the program will reimburse 60 percent of claims between a $40,000 minimum threshold (attachment point) and the $215,000 maximum threshold (reinsurance cap). The program will be funded by three sources: (1) funds collected by the state pursuant to the law continuing an individual mandate in New Jersey and establishing a shared responsibility tax; (2) federal pass-through funding granted by the waiver; and if necessary (3) an annual appropriation from the general fund,” according to DOBI.

DOBI anticipates a 15 percent reduction in what premium rates would be without the program, and has already seen a decrease from other ACA-like laws signed by Murphy.

“The Murphy administration has made it a priority to pursue policies that protect the health of New Jersey families by improving access to affordable quality health coverage,” said DOBI Commissioner Marlene Caride. “The reinsurance program is an innovative way to increase stability in the insurance market and reduce costs to consumers. Ultimately, this is about creating greater access for residents in the state to the coverage and care they deserve.”

In the statement from DOBI, Murphy said health care is a right, not a privilege.

“This program is a significant step in our effort to link families to the health care access they need. We are committed to continuing our work to make sure that as many New Jerseyans as possible enroll in coverage and get the care that is so critical to their health and well-being,” he said.

The approval will affect the final rates that insurers are expected to file in the fall.