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State's reinsurance plan approved; aims to lower premiums

State's reinsurance plan approved; aims to lower premiums


The federal government on Friday approved the state's plan to implement a reinsurance program.

The Centers for Medicare and Medicaid Services signed off on the state's waiver, the governor's and auditor's office announced Friday.

In the most recent state legislative session, lawmakers approved a reinsurance program that let the state pursue the waiver. Reinsurance creates a pool of money, through a levy on insurance premiums paid by insurance companies and federal funds, to be used to pay extremely high claims. The bill was carried by Rep. Steve Fitzpatrick, R-Great Falls.

About $10 million will come from those fees and $34 million from the federal government each year, according to a legislative estimate.

In Montana reinsurance will apply to the individual health insurance market, which has generally seen increases in the premiums since implementation. While premiums have gone up, about 85% of Montanans who buy on the exchange receive a premium tax credit that offset the rate increases. 

Under the reinsurance program, once a person's claims go over $40,000, it is moved into the reinsurance pool, which pays additional claims over that amount.

In June, the three insurance companies that sell plans on the individual market in Montana -- Blue Cross and Blue Shield of Montana, PacificSource and Montana Health Co-op -- all proposed reduced rates for 2020, in part because of the reinsurance program. Decreases were from 8% to 14%.

The state submitted the waiver with help from the Montana Healthcare Foundation, which did data analysis work on the proposal.

In September last year, Montana Gov. Steve Bullock and Department of Administration Director John Lewis created a 13-person working group to explore how a state-run reinsurance program might work in Montana

Twice in 2017, the state Legislature passed bills that would have put Montana down the path of exploring a reinsurance program. But both bills were vetoed by Bullock.

Bullock's administration said last year there were concerns that vetoed legislation did not meet requirements called for under the waiver application. 

On Friday, Bullock released a statement saying the program should make health issuance less expensive.

“We are taking action for the Montanans who purchase insurance on the individual marketplace and have been burdened by unaffordable health care costs due to federal inaction,” Bullock said. “The Montana reinsurance program will lower insurance premiums, make it possible for more Montanans to enroll by driving down costs, cultivate greater certainty in the market and protect consumer’s choices.”

State Auditor Matt Rosendale, whose office oversees insurance companies, also praised the approval.

“This is a big step in the right direction for many of the approximately 50,000 Montanans who get their health insurance through the individual market,” Rosendale said. “I’d like to thank the Trump Administration for making it a priority to allow states to innovate and create solutions that work best for our citizens. I’ve been fighting for a reinsurance program since I was first elected state auditor, and now Montanans are going to see the positive results.”


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