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Bill would safeguard Virginia’s reinsurance program

Del. Sickles listens
Shaban Athuman
VPM News
Del. Mark Sickles (D–Fairfax), chair of the Health and Human Services committee, listens during a prevention to his committee on Thursday, Jan. 25, 2024.

The Commonwealth Health Reinsurance Program reduces premiums on the state’s exchange.

A Northern Virginia lawmaker submitted legislation to safeguard a state program that cuts premiums for health insurance plans sold on Virginia’s marketplace by 15%. The program was nearly suspended for 2024 due to a prolonged fight over updating the state’s budget.

The Commonwealth Health Reinsurance Program is effectively insurance for insurance companies, allowing them to get partially reimbursed for covering individuals with high medical costs. Companies that sell insurance on the state’s health exchange can apply to the State Corporation Commission for reimbursement.

The SCC is also responsible for annually setting the program’s specific parameters, including the minimum and maximum eligible amounts and the reimbursement rate. To do that, the agency needs direction from the General Assembly about cost reduction levels.

Last year, after state lawmakers failed to agree on an update to the budget before the beginning of the fiscal year, the SCC was forced to plan for the program’s suspension in only its second year. (Virginia’s fiscal year runs from July 1 to June 30 each year; Gov. Glenn Youngkin signed the amended budget in mid-September.) Without the program, people purchasing insurance on the state exchange would have paid 20% more in 2024 premiums, about $95 per month on average.

While the program was salvaged by September’s budget agreement, the uncertainty spurred Del. Mark Sickles (D–Fairfax) to submit a bill to prevent future similar disruptions. If lawmakers fail to set a target reduction in the pending state budget, the SCC would simply use the same target as the prior year.

The bill has the support of the Virginia Association of Health Plans, an industry group that represents insurance companies. Executive director Doug Gray told a House panel in January that the suspension would have threatened access to health insurance.

“It really would have been destructive to the market,” Gray said. “We would have lost a large number of insured people if we had not, at the last minute, implemented the program.”

Bradley Marsh, a health insurance policy adviser with the SCC, told the House Appropriations Committee in January that the bill would allow the SCC to continue offering the program going forward.

“We need direction on where to set the parameters this year, and there currently exists none,” he said. “[The bill] clears up that issue.”

Sickles’ proposal has thus far passed a handful of House panels, and will next be considered by the appropriations committee.

The reinsurance program is largely paid for with “pass-through” funding from the federal government, which saves money on tax credits it offers to certain low-income Virginians so they can afford insurance. To access that money, the state must agree to cover the program’s other costs.

“That’s largely driven by individuals who purchase health insurance coverage without premium tax credits,” Marsh said. “There are no savings from that, therefore we don’t get pass-through funding.”

In 2023, the program saved the federal government an estimated $330 million in tax credits, money it granted to Virginia to reimburse insurance companies. The commonwealth, meanwhile, is expecting to contribute just under $45 million to cover its share of the cost for 2023.

For 2024, the program’s costs are expected to increase, with the state’s estimated share up to $67 million.

“The main driver of that is going to be more folks being in the market,” Marsh said. “With things like Medicaid unwinding, quite a few things grew the individual market during this time period and may grow it more next year.”

While he said the SCC doesn’t yet know exactly how many people purchased insurance on the state exchange, an SCC deputy director told Cardinal News in December 2023 that enrollment topped 390,000.

Funding for the state’s expected costs for 2023 and 2024 is included in Youngkin’s proposed budget for the next two fiscal years, which must still be approved by the General Assembly.

The program is run under a “state innovation waiver” from the federal government, part of the Patient Protection and Affordable Care Act passed during President Barack Obama’s administration. Virginia’s waiver authorizes the program through Dec. 31, 2027.

Connor Scribner is the assistant news editor at VPM News and also reports on the housing market and public housing.