Oklahoma's plan to stabilize health insurance would benefit higher earners most
Oklahoma City — Oklahoma is looking to lower premiums for people who buy their insurance from the individual market, but the plan might not help those who are least able to afford coverage.
The state is seeking a waiver from the Centers for Medicare and Medicaid to redirect some federal funds toward setting up a “reinsurance” program. Reinsurance acts as a kind of backstop for insurance companies. If the cost of insuring a patient exceeds a certain amount, the state will add contributions from the reinsurance pool. The Oklahoma State Department of Health hasn't released how much an insurance company will have to pay out before it qualifies for help.
Buffy Heater, chief strategy officer at Oklahoma Health Care Authority, estimated the reinsurance backstop could lower premiums for people buying individual coverage by about 30 percent. Insurance companies that knew they could appeal to the state for help with unusually expensive customers wouldn't have to set their prices as high to cover the cost of treating sick members.
In theory, the lower premiums would entice younger, healthier people to buy insurance, further diluting the impact of the sickest customers. Projections about how many people might enter the insurance market aren't yet available, but Heater said the state hopes to attract at least 20,000. About 130,000 Oklahomans enrolled in plans through the federally-operated exchange in 2017.
“The waiver is looking at decreasing premiums not only for those 130,000 people, but also for the other two-thirds of (eligible) people who haven't signed up,” she said.
The waiver would have the most benefit for people who are purchasing plans through the exchange, but who don't qualify for tax credits because they earn too much, Heater said. The tax credits end at 400 percent of the poverty line, which is $47,520 for an individual or $97,200 for a family of four.
“Those would be the consumers that are going to see the biggest positive impact,” she said.
People earning less than the poverty line are covered by Medicaid in states that have expanded it, but Oklahoma hasn't elected to do so, leaving low-income adults in the so-called “Medicaid gap.” Even if prices fall by 30 percent, as the state projects, it likely won't be enough to make insurance affordable for people are below the poverty line.
If the lowest-priced plan available to a 30-year-old in Oklahoma County was 30 percent cheaper, its annual premiums would fall from $3,717 to $2,602. Even at the lower price, insurance premiums would take up nearly one-quarter of the income of a person living just below the poverty line, which is $11,880.
The state could seek more extensive changes, including a solution for people in the Medicaid gap, in a future waiver, Heater said.
People who receive tax credits may not notice much difference. Oklahomans receive the fourth-highest tax credit of any state, and the average monthly premiums after tax credits actually has fallen from $83 in 2015 to $78 in 2017. A lower premium price would mean a lower tax credit, and roughly the same bill for qualifying people.
Who might pay more?
Insurance customers who don't buy on the individual market could pay more, however. About $112 million of the $350 million needed to set up the waiver would come through an “assessment” on plans not sold on the individual market, like those available through employers.
The state would charge plans $5 each month for each covered member. If the insurance company passed that cost on to its customers, a family of four would pay an additional $240 per year for coverage.
The rest of the money would come through repurposing about $238 million federal funds. The federal government already pays for tax credits to lower the cost of premiums for people with qualifying incomes. If the backstopped insurers set their prices lower, the federal government would pay out less in tax credits — and redirect that money to reinsurance.
Carly Putnam, a policy analyst at the left-leaning Oklahoma Policy Institute, said it isn't clear if a reinsurance program would lower premiums enough to attract young adults, who are the “toughest sell” on health insurance. Other factors, such as negative messages about the exchange, have pushed away some young people who already could have afforded insurance because of tax credits, she said.
“There's a lot of question marks,” she said. “It's hard to read the tea leaves when you don't know what the tea is going to be.”
A similar program, without federal dollars, has helped to hold down premium increases in Alaska, Putnam said. The Alaska program held premium increases to about 7 percent in 2017, according to Modern Healthcare. Centers for Medicare and Medicaid only approved adding federal dollars to the Alaska program earlier this month.
The waiver would take effect Jan. 1 if federal officials approve it, and would last five years.
Heater cautioned that the plan assumes that the ACA framework remains in place. That's not guaranteed as the Senate debates plans to repeal parts of the law.
“Uncertainty is certainly one of those words to underline and put in all caps,” she said.
The Oklahoma Health and Human Services Cabinet Secretary will hold a public meeting about the proposed waiver at 3:30 p.m. Monday at the Oklahoma State Capitol, Room 535. If you can’t attend the meeting, you can submit comments at www.ok.gov/health/Organization/Center_for_Health_Innovation_and_Effectiveness/1332_State_Innovation_Waiver_/index.html.