Galen Senior Fellow Doug Badger has a new paper out this week, published by The Heritage Foundation, showing how a few states that gained waivers to escape some of Obamacare’s expensive, restrictive mandates are helping to lower health insurance premiums for their residents.
In his new paper, “How Health Care Premiums Are Declining in States That Seek Relief from Obamacare’s Mandates,” Doug shows that premiums declined significantly in the seven states that obtained federal waivers to operate risk-stabilization programs and increased in the 44 states and the District of Columbia that did not have such waivers in place. Premiums fell by nearly 7.5% in the seven waiver states and rose by more than 3% in the others.
Doug looks at the actuarial estimates of premiums in five more states that have applied for risk-mitigation waivers for the 2020 plan year. Premiums for benchmark plans rose in all five states in 2019. Actuarial analyses forecast that 2020 premiums will decline in all five states if the federal government approves their waiver applications.
Risk-stabilization waivers afford states the opportunity to reduce premiums without requiring additional federal outlays. All propose to use a portion of funds that would otherwise have been spent on ACA premium subsidies to finance a reinsurance program.
For example, North Dakota proposes a reinsurance fund that would pay 75% of claims between $100,000 and $1,000,000. Colorado, by contrast, would set the claims range at $30,000 to $400,000 and would vary coinsurance.
The ability of a state to tailor its waiver program to its market (and to vary the program to reflect market variations within the state) is an essential feature of the ACA’s Section 1332 waiver program.