At the end of July, CMS approved two Section 1332 State Innovation Waivers submitted by Wisconsin and Maine for the purpose of establishing state reinsurance programs. There has been a flurry of 1332 waiver activity recently as states have sought to stabilize their individual insurance markets through reinsurance programs. Currently, Maryland and New Jersey have pending reinsurance applications before CMS. For more on the Wisconsin, Maine, and Maryland waivers, click here.
New Jersey’s request, which was submitted on July 2nd, 2018, is summarized below.
New Jersey: 1332 Waiver Request
In response to increasing market instability, and in an effort to develop a state reinsurance program, New Jersey submitted an application to CMS to waive the Affordable Care Act’s (ACA) single risk pool requirement for the individual market (Section 1312(c)(1)) for a period of five years beginning in 2019. The goal of the program is to lower the market-wide index rate, thereby lowering premiums and reducing the cost of premium tax credits (PTCs) and advance premium tax credits (APTC) paid by the federal government.
Over the past several years, New Jersey’s individual health insurance market has grown increasingly unstable. Several carriers have withdrawn from the market, and remaining carriers have reduced the number of plans they offer. As of 2017, New Jersey had an uninsured rate of 7.6% and has struggled to increase enrollment.
To address these problems, New Jersey is seeking a Section 1332 waiver that will allow the state to establish a reinsurance program to be administered by the Individual Health Coverage Program Board of Directors (IHC Board). The authorizing legislation for the program is the New Jersey Health Insurance Premium Security Act, signed into law on May 30th, 2018. The Act gives the IHC Board the authority to request a Section 1332 waiver and adjust the payment parameters of the reinsurance program each year.
The IHC Board has estimated that New Jersey’s reinsurance program will cost approximately $323.7 million in 2019. The funding will come from three sources: federal funds in the amount of the federal savings from reduced APTC and PTC payments (the state is requesting $218 million in pass through funding), a state shared responsibility tax equal to a taxpayer’s federal minimum essential coverage penalty, and an annual appropriation out of the General Fund of the State.
Once established, the reinsurance program will operate as other state reinsurance program do by reimbursing qualifying carriers for a percentage of an enrollee’s claims between an attachment point and a cap to be determined by the IHC Board. In 2019, the attachment point will be $40,000, the coinsurance rate will be 60 percent, and the reinsurance cap will be $215,000. The IHC Board estimates that the reinsurance program will lower premiums in 2019 by 15 percent from where they would be without the program.