North Dakota Insurance Commissioner Jon Godfread says the proposed state-based reinsurance program developed by the North Dakota Insurance Department for the individual health insurance market has been approved by the federal government.
The reinsurance program will be in place for the 2020 health insurance plan year. It was established within the parameters of the Affordable Care Act (ACA), specifically under Section 1332, which allows for state innovation waivers.
The program creates a reinsurance mechanism known as “invisible” reinsurance. The approach of invisible reinsurance allows enrollees to remain in the individual market with their current plan and carrier while a portion of their claims are reimbursed by the reinsurance pool. The enrollee is not aware that their claim is being paid via the reinsurance pool meaning there is no effect on the enrollee as the task of ceding claims to the reinsurance pool is completed on the back end of the process and is without consequence to the enrollee.
For 2020 and 2021, the proposed reinsurance program will cover 75% of paid claims between $100,000 and $1,000,000. The enrollee’s health insurer will cover the remaining 25%.
The reinsurance program will be funded by a combination of federal funds and state assessments. The state assessments will be placed on insurance companies selling in North Dakota’s group health insurance markets and will be tax deductible, meaning the state’s portion of the funding will ultimately be in the form of reduced tax revenues for the state and not increased costs for the state’s group health insurance markets.
According to the North Dakota Insurance Department, the state-based reinsurance program will:
- Lower rates to keep consumers in the market and attract new entrants. The program will provide significant financial relief for those not eligible for subsidies. The estimated rate reductions will average between 8% and 20% for plans purchased on the individual market.
- Retain federal subsidies for individuals with incomes between 100% and 400% of the federal poverty level, which will ensure that those with access to affordable coverage due to federal subsidies keep their coverage.
- Assist insurers in managing high-risk enrollees and create a broader pool of people to absorb all other risk. This will likely prevent insurance companies from leaving the state’s individual market in the coming years, encourage additional insurers to write business on North Dakota’s individual market and improve consumer access.
House Bill 1106 relating to the establishment of an invisible reinsurance pool for the individual health insurance market was signed into North Dakota law by Gov. Doug Burgum on April 18, 2019.
Source: North Dakota Department of Insurance
Topics Reinsurance
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