Virginia might resurrect a long-abandoned effort to create a state health insurance exchange as part of an emerging package of proposals to provide affordable coverage to people who can’t find it in the state’s crippled market for individual health insurance.
The idea of a state exchange is part of a report by a gubernatorial work group that has looked for ways to stabilize Virginia insurance markets, especially for people who earn too much to qualify for federal premium subsidies in the marketplace currently run by the federal government at a cost of $91 million a year to the people who buy policies in it.
The report also endorses the creation of a state re-insurance program that would lower premiums in the general market by creating a separate pool for the most expensive cases, but it stops short of recommending a way to pay for it. Reducing premiums by 10 percent to 20 percent would cost the state an estimated $81 million to $162 million, the report states.
“While it’s very attractive in some ways, it comes with a large price tag,” said Secretary of Health and Human Resources Dan Carey, who leads the Virginia Market Stability Work Group.
The work group report stopped short of opposing several limited options for providing cheaper coverage through short-term health plans — which President Donald Trump’s administration increased in duration from three months to 364 days, with two one-year renewals — and for plans offered through loosely affiliated associations.
However, the work group called for more state regulatory oversight of such health plans to ensure consumers know what they would be getting for the reduced price they would pay and guard against potential damage to the individual insurance market from diverting generally healthy Virginians out of the risk pool that determines premiums.
The report also called “catastrophic plans” — low-cost, high-deductible policies currently limited by the Affordable Care Act to people under 30 — “an illusory benefit, as deductibles are extremely high, so most medical expenses are borne by the consumer.”
Senate Republicans plan to push again for bills to expand use of short-term, association and catastrophic plans in the upcoming legislative session, although Gov. Ralph Northam made clear last week that he hasn’t changed his mind about what he calls “skinny plans” after vetoing the same legislation earlier this year.
“The skinny plans, they’re just gimmicks,” Northam said after a budget-related appearance last Monday.
In his address to the General Assembly money committees the next day, the governor said, “Solutions like short-term health plans, or catastrophic health plans, don’t solve the problem of rising costs.”
Norment urges repeal
His remarks did not sit well with Senate Majority Leader Tommy Norment, R-James City, who is leading a push by the Senate Republican Caucus to advance a health care agenda that includes repeal and replacement of the Affordable Care Act after a federal judge in Texas declared it unconstitutional a week ago.
“With this decision, Washington needs to act now to repeal and replace this expensive and restrictive law, provide protections for pre-existing conditions, and enact reforms that reduce the cost of care through increased competition,” Norment said in a caucus statement in response to the ruling by U.S. District Judge Reed O’Connor.
The revived uncertainty over the future of the law — after numerous failed attempts by Trump and Republicans in Congress to kill it — won’t make it any easier to find a legislative compromise in Virginia to shore up insurance markets.
“What we want to have is robust dialogue with the General Assembly in response to our report,” Carey said in an interview.
The potential solutions are as varied as the interests represented on the gubernatorial work group — business organizations, health care advocates, insurers, doctors and state insurance regulators.
Their work began in August with a primary focus on seeking a federal waiver to allow the state to establish a re-insurance program that would lower individual insurance programs by setting up a separate pool for expensive cases that drive up the cost of coverage for everyone else.
The report calls the re-insurance proposal “a vital step to making health care coverage more affordable for Virginians,” but acknowledges no consensus on how to pay for it. “I think we would have other priorities for spending, like tax reform,” said Nicole Riley, state director of the National Federation of Independent Businesses, which generally favors Republican proposals to expand options for consumers, such as short-term, limited-duration plans.
The group also likes the idea of creating a state-operated insurance exchange, which the General Assembly initially supported and then abandoned in 2011 at the recommendation of then-Gov. Bob McDonnell. Instead, Virginia became one of 28 states that relied on the federal marketplace, although it manages participating plans through the Bureau of Insurance at the State Corporation Commission.
A state exchange could cost less to run than the federal exchange, which receives a fee from every policy issued through the marketplace in Virginia, while enhancing state control over how it operates, including its interaction with Medicaid and efforts to expand participation that have been hamstrung by the Trump administration, the report found.
“It’s possible we could run a state exchange at less cost than the federal government,” said Jill Hanken, senior attorney at the Virginia Poverty Law Center, which runs a statewide navigator program for consumers with dwindling federal support. “On top of that, it’s taking more control over the whole system for Virginia.”
Doug Gray, executive director of the Virginia Association of Health Plans, said a state-operated exchange could help by expanding participation in insurance markets.
“That’s a good thing because it could help the [risk] pool, especially if you get more healthy people to participate,” Gray said.
For the same reason, Hanken does not favor the short-term plans and other limited-benefit plans that Senate Republicans back.
“When you pull people out of the risk pool, you create more instability,” she said.
More than 334,000 Virginians have enrolled in qualified health plans in the federal marketplace during the enrollment period that ended Dec. 15, compared with about 400,000 a year ago. Most of those people qualify for federal premium subsidies, depending on how much they earn in a range between 100 and 400 percent of the federal poverty level.
About 60,000 Virginians who earn between 100 percent and 138 percent of the poverty level are expected to move from the marketplace to Medicaid, which costs the government about $5,000 less per person to pay for coverage, Gray said.
Ultimately the solution for Virginia’s insurance market is “a federal issue,” he said, but Virginians could benefit from a compromise that draws from both sides of the debate.
“You can do both sets of ideas — the Democratic ideas and the Republican ideas — while we wait for Congress to act.”