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Reinsurance Program Application Receives Federal Approval

Jul 27, 2020

Harrisburg, PA – Governor Tom Wolf announced Friday that the U.S. Department of Health & Human Services and the U.S. Department of the Treasury have approved Pennsylvania’s Section 1332 Waiver application for a reinsurance program. Pennsylvania’s Reinsurance Program (PA Re) is authorized to operate under section 1332 of the Affordable Care Act (ACA) from 2021 through 2025.

“By having a reinsurance fund that will directly pay some of the health care costs for high-cost individuals, we can lower premiums for other insured Pennsylvanians on the individual market and reduce the cost for subsidies to help low-income individuals,” Gov. Wolf said. “These savings further our goal of making sure health insurance is affordable and effective for all Pennsylvanians.”

PA Re will strengthen Pennsylvania’s individual health insurance market through state-based innovation. The reinsurance program will partially reimburse individual market insurers for high-cost claims. Minimizing the risk gap for insurers will help lower premiums from what they would have been without PA Re, and will increase access to affordable, individual-market private coverage. The reinsurance program is also expected to encourage insurers to maintain and possibly expand geographic coverage areas, and may attract additional insurers to the state.

Insurance Commissioner Jessica Altman said, “This historic step towards a healthier Pennsylvania will expand access to affordable and comprehensive health care coverage, benefitting Pennsylvania’s health insurance consumers. As a result of the waiver approval, more Pennsylvanians may have access to coverage and consumers will see moderated premiums.”

Pennsylvania is transitioning to run its own health insurance marketplace beginning this fall. The user fee insurers pay to have their products offered through the state-based marketplace will provide the state’s share of funds for PA Re. The “pass-through” funds the Federal government saves as a result of PA Re reducing premiums and thereby decreasing federal spending on marketplace subsidies will fund the greater portion of the reinsurance costs.

Zachary W. Sherman, Executive Director of the new state marketplace, added, “We are excited to partner with PA Re and for what this partnership means for our state. Particularly now, amid a public health crisis, access to high-quality coverage is vital. Today, the marketplace is open year-round for individuals that experience a change in life circumstance, such as the loss of employer-based coverage. We continue to encourage all Pennsylvanians to visit www.healthcare.gov to see if any changes in their employment or salary status may impact the resources available to help purchase coverage for the remainder of 2020. We look forward to serving Pennsylvanians later this year once we’re fully transitioned, but until then hope everyone gets, and stays, covered.”

PA Re will be a claims-based, attachment point reinsurance program that will partially reimburse health insurers for claims costs of qualifying ACA-compliant individual enrollees, where a percentage of the claims costs exceeding a specified threshold (attachment point) and up to a specified ceiling (reinsurance cap) will be reimbursed.

For the first year of the program, beginning January 1, 2021, the adopted parameters are an attachment point of $60,000, a cap of $100,000, and a coinsurance rate of 60 percent. PA Re projects that under the 1332 waiver, premiums will be about 5 percent lower in 2021 than they would have been without the waiver, thus making coverage more affordable in the individual market.

In granting the waiver, the federal departments determined that the Pennsylvania 1332 application met the requirements to:

  • Provide coverage at least as comprehensive as the coverage defined in section 1302(b),
  • Provide coverage as affordable as would otherwise be provided,
  • Provide coverage to at least a comparable number of people as would otherwise be covered, and
  • Not increase the deficit.

For additional information, please visit the Pennsylvania Insurance Department 1332 Waiver webpage.

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