Approved 1332 waiver implemented reinsurance and reactivated MGARA

In 2011, Maine implemented the Maine Guaranteed Access Reinsurance Association (MGARA) to provide reinsurance coverage for the individual market. The program was funded by reinsurance premiums paid by insurers, as well as a $4 per member per month assessment on all health insurance plans in the state (except state and federal employee benefits plans).

MGARA helped to stabilize Maine’s individual market starting in 2012, and kept premiums lower than they would otherwise have been. The program was suspended at the end of 2013, to make way for the ACA’s reinsurance program that took effect in 2014. But the ACA’s reinsurance was temporary, and only lasted for three years, through the end of 2016.

Now that the federal reinsurance program has ended, more than a dozen states have implemented their own reinsurance programs, using 1332 waivers to receive federal funding. The idea is that reinsurance results in lower premiums across the board, which means premium subsidies are also lower.

That reduces the amount that the federal government has to spend on premium subsidies in the state, and the 1332 waiver allows the federal savings to be passed on to the state, in order to fund the reinsurance program. The result is lower premiums and more people insured, since coverage becomes more affordable for people who aren’t eligible for premium subsidies and have to pay full price.

In 2017, Maine enacted LD659, which reauthorizes MGARA, but on the condition that the state had to submit and receive federal approval for a 1332 waiver that provides federal pass-through funding for the state’s reinsurance program.

In March 2018, the state published an actuarial analysis of the proposed 1332 waiver, and accepted public comments on the proposal until May 2, with two public informational meetings in April. Following the public comment period, Maine submitted a 1332 waiver proposal to CMS on May 9. CMS determined on June 8 that the application was complete, and opened a public comment period from June 8 to July 8. Federal approval was granted on July 30.

The state re-activated MGARA as of January 2019, providing reinsurance in the individual market (on and off-exchange), using federal pass-through funding in addition to re-activating the $4 per member per month assessment on all health insurance plans in the state. For 2019, federal pass-through funding for Maine’s reinsurance program was initially estimated at $65 million, but was subsequently revised slightly lower, to $62.3 million. The change was primarily due to Maine’s Medicaid expansion, which took effect in early 2019 and switched low-income residents with income between 100 and 138% of the poverty level from subsidized private plans to expanded Medicaid (in other words, the federal government no longer has to fund premium subsidies for those individuals, so the state doesn’t get pass-through funding to account for the smaller subsidies that those individuals would have received if they hadn’t transitioned to Medicaid).

Insurers filed two sets of rates for 2018, since rate filings were due before they knew whether the 1332 waiver would be approved. With reinsurance, the average proposed rate increase was 6.17%, and without reinsurance, it would have been 9.58%. The actuarial analysis of the waiver proposal notes, however, that despite the lower premiums with MGARA in effect, the rate of premium increases in Maine’s individual market over the next decade is still expected to outpace inflation.

Under Maine’s new reinsurance program, which has received approval for federal pass-through funding through 2023, MGARA covers 90% of claims that are between $47,000 and $77,000, and it will pay 100% of claims that range from $77,000 up to $1 million (this is considerably more generous than the reinsurance programs in some other states; Wisconsin, for example, has a reinsurance program that pays 50% of claims that are between $50,000 and $250,000). Maine’s program also includes a condition trigger; when an enrollee has claims associated with one of eight high-cost medical conditions (uterine cancer; metastatic cancer; prostate cancer; chronic obstructive pulmonary disease (COPD); congestive heart failure; HIV infection; renal failure; and Rheumatoid Arthritis), their claims are ceded to MGARA (the insurer gives 90% of the enrollee’s premiums to MGARA, and MGARA then pays a portion of the claims for that enrollee). But as described above, Maine is seeking federal approval to eliminate this prospective model of having insurers cede coverage to MGARA when enrollees have specific conditions. Instead, the state is proposing a switch to a purely retrospective reinsurance model, based only on claims costs. Maine United Health medical coverage maine