A bill to give states $10 billion to help Obamacare insurers cover their sickest customers could offset increases in premiums from repealing the law’s individual mandate, according to a new study.
The legislation would reverse a 10 percent premium hike on Obamacare’s exchanges expected from losing the mandate, according to the preliminary modeling in the analysis, funded by the Council for Affordable Health Coverage and provided to the Washington Examiner.
Sens. Susan Collins, R-Maine, and Bill Nelson, D-Fla., sponsored legislation to give states $10 billion in 2019 and 2020 to set up a reinsurance program. Reinsurance pays an insurer for the highest medical claims, which in turn would reduce premiums for everyone else.
It also includes $500 million to help states develop and implement federal 1332 waivers for reinsurance programs. The waivers give states a way to tailor their own programs.
The nonpartisan Congressional Budget Office estimates that eliminating the mandate would increase premiums on the law’s exchanges by 10 percent and reduce the number of uninsured by 13 million over the next decade.
The council, which is an advocacy group comprised of insurers, pharmacists, drug manufacturers, and patient groups, estimates that the Collins-Nelson measure would lead to a 9 to 11 percent decline in premiums in 2019 and 2020.
But the results could differ based on how the states use the funding.
“Importantly, it is quite possible that some states would either decline the funding or would not be able to apply for and implement their 1332 waiver in time to use the federal funding,” the analysis said.
States that receive 1332 waivers can also become eligible for pass-through savings from lower federal subsidies, the analysis said.
“Under 1332 waivers, when states modify the [Affordable Care Act] in ways that reduce federal liabilities for premium subsidies, states get the federal savings returned to them as a ‘pass-through,’” the analysis said.
The extra savings from the pass-through funding could lead to states contributing more money to insurers for reinsurance and lead to lower premiums, the analysis said.
Collins has been pressing for votes on both her legislation and separate legislation from Sens. Patty Murray, D-Wash., and Lamar Alexander, R-Tenn., to blunt the impact of premium increases from repealing the mandate. The Alexander-Murray bill would provide Obamacare insurer payments for two years in exchange for giving states more latitude to waive the Affordable Care Act’s insurer regulations.
President Trump in October halted the insurer payments, which reimburse Obamacare insurers for lowering the copays and deductibles of low-income customers. The move led insurers to raise prices by double digits on the individual market, which includes the law’s exchanges and is used by people who don’t have insurance through work or the government.
The CBO estimated in August that halting the payments would lead to a premium increase of 20 percent or higher in 2018 and 25 percent higher by 2020 for silver plans, the most popular of Obamacare’s four metal tiers.
The consulting firm Avalere found that the Alexander-Murray deal and the $5 billion of reinsurance funding over two years, in tandem, would reduce 2019 Obamacare premiums by 4 percent and increase enrollment by 180,000 people.
But the firm added in an analysis this month that the stabilizing effects would be overshadowed by the mandate repeal. Avalere's model was based on only current law and doesn’t factor in the mandate repeal.
While the bills are likely to get through the Senate, it is not clear if the House will pass them. Senate GOP leadership plans to add the bills to a must-pass spending bill.