As a federal deadline looms, a state effort to stabilize Obamacare by creating a fund to help insurers cover the most expensive claims may have hit a snag.
The two insurers who sell plans in the state under Obamacare, CareFirst BlueCross BlueShield and Kaiser Permanente of the Mid-Atlantic States, disagree about whether the state plan favors CareFirst.
The state is proposing to establish a $462 million reinsurance fund with money raised by a state levy on insurance companies plus some federal funds. The program would allow CareFirst and Kaiser to offer lower premiums and prevent Obamacare in Maryland from failing.
Maryland faces a deadline of May 31 to file an application asking the Centers for Medicare & Medicaid Services for permission to establish the reinsurance program.
But during hearings about the reinsurance program, Kaiser officials said CareFirst also would be able to tap a federal risk adjustment program, allowing it to “double dip” into two programs meant to help insurers pay for expensive customers.
Under the risk adjustment program, insurers with the healthier patients make payments to insurers with the sicker patients. The program is meant to spread the cost burden of insuring patients with many health problems who are more costly to treat.
CareFirst, the state’s largest insurance company with a wide variety of plans, tends to get the sickest patients and higher risk adjustment payments.
If CareFirst is getting paid twice for losses on the same patient, it would hurt Kaiser because its customers would not experience the same premium savings as CareFirst customers, Kaiser officials said.
CareFirst CEO Chet Burrell said the reinsurance and risk adjustment programs are two distinct programs that should not be looked at as intertwined. He also said there is not a good way to measure any redundancy.
“There may be a small overlap, but no massive overlap to say we need to change the whole calculation,” said Burrell, warning Kaiser’s concerns could risk the state’s application and threaten both insurers’ ability to offer lower premiums in 2019.
Kaiser officials say the potential for double dipping is significant enough to find a way to account for it when paying insurers for treating the very sick.
“It is really the responsibility of Maryland to be proactive and try to construct something to try to stabilize the market, lower premiums and keep people insured,” said Kim Horn, Kaiser regional president. “It just has to be structured in the right way.”
The Maryland Health Benefit Exchange, which runs the marketplace that sells Obamacare plans, has asked the independent actuarial firm Wakely to determine the magnitude of any potential “double-dipping” that might occur. Both insurers advocated for the analysis. The study should be completed by June 30, a month after the state must file its application for the reinsurance fund.
Open enrollment for health plans is this fall.
CareFirst and Kaiser have asked state insurance regulators for average premium rate increases for 2019 that ranged from 18.5 percent to 91.4 percent, depending on the type of plan. With a reinsurance program, rates could be reduced by as much as 30 percent. The administration must decide on rate increases by Sept. 1.
The full Maryland congressional delegation sent a joint letter Thursday to the secretaries of the U.S. Treasury and Health and Human Services departments in support of Maryland’s application for a state reinsurance program.
“The Governor and both Democratic and Republican leaders strongly support this effort to address premium costs and access to affordable healthcare in our state,” the letter said.