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PA Bulletin, Doc. No. 23-550

NOTICES

INSURANCE DEPARTMENT

1332 Waiver—Request for Comment on Proposed Reinsurance Program Suspension; Notice 2023-05

[53 Pa.B. 2273]
[Saturday, April 22, 2023]

 The Insurance Department (Department) is proposing to submit a request to the Centers for Medicare & Medicaid Services (CMS), a division of the United States Department of Health and Human Services, and the Department of the Treasury for suspension of its approved Affordable Care Act (ACA) Section 1332 Innovation Waiver (2020 Waiver).

 The Department's 2020 waiver was submitted in 2019 under the act of July 2, 2019 (Pub.L. 294, No. 42), which authorized the Department to create and implement a reinsurance program for the individual health insurance market's Qualified Health Plans (QHP). The 2020 waiver is valid for a period of up to 5 years, which began with Plan Year (PY) 2021 and is set to end with the conclusion of PY 2025, with the option to extend the program.

 The Department seeks public comment on a proposed plan to suspend the 2020 Waiver beginning on January 1, 2024. Federal health insurance legislation in 2021 and 2022, known as the American Rescue Plan Act (ARPA) (Pub.L. No. 117-2), and Inflation Reduction Act (IRA), increased the number of individuals who qualify for ACA Advanced Premium Tax Credits or subsidies through the State-based health insurance exchange, Pennie® and increased the amount of the subsidies available through 2025. This important Federal legislation had the unintended consequence of minimizing the impact of the reinsurance program on insurance affordability.

 The Commonwealth's individual market for health insurance is stable and has continuously welcomed new insurers to the market and service area expansions of existing insurers. Pennsylvania's Reinsurance program (PA-Re) currently reimburses eligible individual health insurers for a percentage of individual qualified claims between an attachment point and a cap. Since 2021, the program has set an attachment point of $60,000 with a cap of $100,000, while the coinsurance rate has fluctuated between 53% to 64% depending on the expected size of the reinsurance pool. Before ARPA, reinsurance saved about 4% to 6% of premium for Pennie® customers with incomes above 400% of the Federal poverty level (FPL) as well as for individuals that purchased individual market coverage outside of Pennie®, since these populations are not eligible for subsidies.

 However, ARPA and IRA eliminated the ''subsidy cliff,'' meaning that health insurance premiums for individuals at any income level (including above 400% FPL) are capped at 8.5% of household income. Customers previously benefiting from reinsurance saw the impact of reinsurance minimized and, instead, the ARPA subsidies available through Pennie® are now the main mechanism to ensure affordability. Following ARPA and IRA, nine out of ten Pennie® enrollees now qualify for enhanced subsidies.

 The Department is considering innovative programs, such as a possible State subsidy wrap, to address and meet the unique needs of its markets and its residents. As ARPA/IRA subsidies continue to provide financial relief to customers above 400% FPL, the Department believes the State funding currently allocated to reinsurance could be put to better use addressing affordability challenges experienced by lower income customers enrolling in coverage through Pennie®. Having the flexibility to adjust to market needs will allow the Department to provide stability to consumers in these times of uncertainty following the end of the novel coronavirus (COVID-19) public health emergency. A focused subsidy program could also substantially increase enrollment, given that the end of the COVID-19 public health emergency is expected to increase the uninsured population. The reduced impact of reinsurance, coupled with Medicaid unwinding, presents the Commonwealth with an opportunity to redirect funding from reinsurance to a program that will more effectively address health insurance affordability for households with lower incomes.

 To develop this proposed flexibility, legislation is needed. If legislation is enacted by July of 2023, the State portion of the reinsurance program funding would be redirected to a State-affordability program for lower income populations beginning January 1, 2024. Without timely-enacted legislation, reinsurance will continue for PY 2024. The request to suspend the reinsurance program will reserve an option to revert back to the reinsurance program in the future if deemed a beneficial option.


Draft Phase Out Plan

PID DatesActivity
March 2023Draft legislation to amend Act 42 to provide for Affordability Program is socialized.
March 2023Department communicates proposed Phase Out plan to insurers and other stakeholders.
April 24, 2023PA-Re proposed suspension Phase Out plan public comment period begins.
May 17, 2023QHP rates and forms due for initial submission (assumes no reinsurance).
May 23, 2023PA-Re proposed suspension Phase Out plan public comment period ends.
July 1, 2023Proposed State reinsurance suspension request submitted to CMS with public comments or responses.
July to August 2023PY 2022 PA-Re reimbursement commences.
July 31, 2023Deadline for Affordability Program legislation to pass to impact PY 2024.
August 2023If legislation does not pass by July—PY 2024 PA-Re parameters announced.
October 1, 2023PY 2024 final rates published.
November 1, 2023PY 2024 open enrollment begins.
January 1, 2024If legislation is passed by July—Affordability Program implemented instead of reinsurance.
July to August 2024  PY2023 PA-Re reimbursement commences.

 The Commonwealth is accepting public comments on the proposed Section 1332 Reinsurance request for suspension and phase out plan beginning Monday, April 24, 2023, and ending Wednesday, May 24, 2023. Comments may be directed to the Insurance Department by e-mail to RA-IN-PA1332Waiver@pa.gov or by mail to the Insurance Department, 1332 Innovation Waiver, Attn: Katie Merritt, Director of Policy and Planning, 1326 Strawberry Square, Harrisburg, PA 17120.

MICHAEL HUMPHREYS, 
Acting Insurance Commissioner

[Pa.B. Doc. No. 23-550. Filed for public inspection April 21, 2023, 9:00 a.m.]


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