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IN-DEPTH: Reinsurance Resources  

Reinsurance Institute

Reinsurance Institute Final Report

Microsimulation Model of Reinsurance

Chollet, D. "The Role of Reinsurance in State Efforts to Expand Coverage," State Coverage Initiatives Issue Brief, October 2004.

Cohn, D. et al. "More Answers on Reinsurance," State Coverage Initiatives In Focus, June 2005.

State Coverage Initiatives, Profiles in Coverage: Healthy New York, January 2005.

Swartz, K. "Reinsurance: How States Can Make Health Coverage More Affordable for Employers and Their Workers," The Commonwealth Fund, July 2005.

Swartz, K. "Government As Reinsurer for Very-High Cost Persons in the Nongroup Health Insurance Markets," Health Affairs, October 2002.

State

Reinsurance Description

Arizona

Starting in 1986, the Arizona Health Care Cost Containment System (AHCCCS) has operated a healthcare coverage program, Healthcare Group of Arizona (HCG). In 2000, the legislature subsidized the program with $8 million of general funds. In 2004, the subsidy was cut in half to $4 million, and HCG was directed to become financially self-sufficient (funded by premium only) as of July 1, 2005.

Since July of 2005, the state does not subsidize premiums. Employers and employees pay the entire cost of the product. HCG protects carriers using aggregate stop-loss reinsurance financed from member premiums. As of December 2006, HCG reported enrollment of over 24,000 lives (over 8,500 small business groups). More than 90 percent of businesses enrolled have three employees or less.

HCG operates a reinsured product for small business, the self-employed, and political subdivisions. No income limits apply, but HCG does have employee participation requirements and firms must not have offered group insurance for six months. These guaranteed-issue products are delivered by managed care organizations and employees can select between several benefit plan options. In 2006, HCG expanded benefit package choices, creating a statewide PPO product and adding dental and vision benefits.

Connecticut

The state of Connecticut operates a non-subsidized reinsurance pool for the small group market (groups of 1 to 50). Any insurer may purchase reinsurance from the pool, with a $5,000 deductible per covered life, for individuals, dependents, or small groups. The choice to reinsure is determined by individual carriers.

The pool is funded by reinsurance premiums paid by carriers that cede risk into the pool, and is augmented with an annual assessment paid by carriers based on their small group market share. The Connecticut reinsurance pool (legislation: Sec. 38a-569) is credited by state officials with keeping the small group market competitive.

Idaho

The state of Idaho operates reinsurance pools for both the small group and the nongroup (individual) markets. In the small group market, the insurer is responsible for the first $13,000 worth of claims as well as 10 percent of the next $12,000 in the basic plan, $87,000 in the standard plan, and $130,000 in the catastrophic plan. Above those amounts, the pool pays claims up to maximums of $25,000 for the basic plan, $100,000 for the standard plan and $200,000 for the catastrophic plan. Carriers determine whether they want to reinsure individuals, dependents, or small groups but all carriers participating in the health insurance market are assessed to cover loses incurred by the pool so, in essence, all carriers participate.

In the nongroup (individual) market, the state operates the Individual High-Risk Reinsurance Pool that reinsures five guaranteed issue products and sets premiums for the guaranteed issue products. The primary insurer is responsible for the first $5,000 in claims and 10 percent of the next $25,000. All claims exceeding $25,000 are covered by the reinsurance pool, up to the lifetime maximums of the guaranteed issue products.

Massachusetts

Massachusetts has a reinsurance pool for both the small group and the individual markets. The small group market pool, the Massachusetts Small Employer Health Reinsurance Plan, reinsures commercial plans but HMOs do not participate. Carriers, who select to cede risk into the pool, pay a deductible of $5,000 and pay co-insurance of 10 percent for the next $50,000. The pool pays all claims above $55,000. Carriers may be assessed for pool losses but premiums are designed to reduce the probability of pool loss.

The Massachusetts Nongroup Health Reinsurance Plan requires the primary insurer to pay the deductible of $10,000 and 10 percent co-insurance for claims between $10,000 and $50,000. The pool, funded by the insurers, pays all claims above $50,000.

New Hampshire

In 2005, New Hampshire passed legislation (SC 125) establishing the New Hampshire Reinsurance Pool by January 1, 2006. The legislation requires all health insurance carriers become members of the reinsurance pool. The reinsurance pool board has developed a standard benefit package for small employers that on which reinsurance premiums are based. Any insurer may purchase reinsurance from the pool, with a $5,000 deductible per covered life. The choice to reinsure is determined by individual carriers, but if pool expenses exceed premiums, all member carriers will be assessed proportionally on the number of lives they cover.

New Mexico

New Mexico Health Insurance Alliance (HIA) was created in 1994 by the state legislature to provide increased access to health insurance for small businesses, self-employed individuals, and other qualified individuals. HIA is an alliance of independent health insurers that operates without medical or industry underwriting, sets yearly rates, and simplifies participation for employers. Carriers in the state are assessed an annual administrative fee withheld from gross premiums. Costs not paid via premium assessments are collected from the carriers proportionately by market share.

Legislation passed in 2005 (HB 294) reduced premiums for small businesses by changing the HIA premium structure. The bill also expanded the HIA's responsibility for outreach, public awareness, and assistance to employers in obtaining and maintaining health insurance.

HIA is part of the Insure New Mexico ! model. It offers three types of broker-assisted comprehensive plans: PPO, Indemnity, and HMO through 11 participating commercial carriers. Employee and dependent share of premiums depend on employer contribution. NMHIA policies are available to those who currently offer insurance coverage. It is available for employees and dependents of small businesses (2-50 employees), self-employed persons with at least one dependent, and individuals.

New York

The Healthy New York Program is a state-subsidized reinsurance mechanism that reimburses health plans for 90 percent of claims paid between $5,000 and $75,000 on behalf of a member in a calendar year. All Health Maintenance Organizations (HMOs) are required to write Healthy NY. Since its inception in 2001, Healthy NY has enrolled more than 300,000 workers and their families. As of December 1, 2006, the program had approximately 131,000 enrollees. Approximately 55 percent of enrollees are working individuals, 17 percent are sole proprietors, and 28 percent are enrolled through small-groups.

Qualifying small employers, sole proprietors, and individuals are eligible for the program provided they have not been insured in the past 12 months or lost their insurance due to a qualifying event. Small employers may buy into the program if they have less than 50 employees, 30 percent of whom earn less than $35,500 annually (adjusted annually for inflation). Employers must contribute at least half of the premium, and at least 50 percent of employees must participate in the program or have coverage through other sources.

Starting January 2007, Healthy NY will also offer a high deductible health plan option that is designed to be compatible with health savings accounts.

To learn more about the Healthy New York program, read SCI's Profile in Coverage.