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Reinsurance Innovation Waiver under Section 1332 of ACA

Overview

On May 6, 2022, the Idaho Department of Insurance applied to the Centers for Medicare and Medicaid Services (CMS) and to the United States Department of the Treasury for a Section 1332 State Innovation Waiver. The purpose of this Innovation “Reinsurance Waiver” is to reduce the cost of individual market health insurance by offsetting the premium impact of high-cost health conditions. The proposed effective date for the waiver is January 1, 2023.

Background

In 2017, Idaho legislation was passed which amended Chapter 55, Title 41, Idaho Code, to create an “invisible” reinsurance program within the Idaho Individual High Risk Reinsurance Pool, allowing for reinsurance of individuals and dependents already enrolled in individual health insurance. Eligibility for reinsurance is based on a diagnosis of one or more serious health conditions, as determined by the Pool’s Board. By ceding these high-risk individuals to the Pool and paying a reinsurance premium, carriers are able to mitigate the impact of the costliest health claims to the individual market premiums, as the Pool pays a percentage of the claims once the claims reach an annual threshold. This helps to stabilize the individual health insurance market, resulting in lower premiums than would otherwise occur.

Under section 1332 of the ACA, states can petition for access to federal funding equal to federal healthcare savings created by a state program. Idaho’s Pool is able to save federal tax dollars used to pay Premium Tax Credits for eligible Idahoans, and therefore is expected to meet the criteria for a federal 1332 innovation waiver approval. To date, sixteen other states have approved section 1332 waivers for federal approval and passthrough funding for state-based reinsurance programs, reducing health insurance premiums for plans sold in the individual insurance market.

A public comment period was held from April 1, 2022 through May 1, 2022 in order for stakeholders and members of the public to provide input on the proposed waiver. In addition, four public hearings were held throughout the state (two hearings in Boise, plus a hearing in Idaho Falls and in Coeur d’Alene) in order to provide information and solicit comments on the waiver.

What this means

If approved, Idaho Department of Insurance projects that the Reinsurance Waiver will generate at least a 7% reduction in premium, compared to what would be needed without the waiver. This reduction will provide Idahoans needed premium relief going forward.

Timelines

March/April 2022Publish draft section 1332 waiver application on state website and notify the public.
April 1, 2022Begin public comment period.
April 2022Conduct public hearings facilitated in major cities/counties/regions across the state.
February, March, April, and May 2022Conduct Tribal consultation.
May 1, 2022End public comment period.
May 5, 2022Submitted final section 1332 waiver application to the Departments.
June 2022Target to receive approval from the Departments for the section 1332 waiver.

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