PA 1332 Waiver Frequently Asked Questions
Pennsylvania intends to submit a 1332 waiver application to the U.S. Department of Health and Human Services and the U.S. Treasury (the Departments) which, if approved, would establish a reinsurance program in the Commonwealth's individual health insurance market. Through the combination of transitioning to a state-based exchange (SBE) and securing a 1332 State Innovation Waiver for reinsurance, Pennsylvania anticipates health insurance premiums for consumers may be 5-10 percent lower than they would otherwise have been, without investing additional state dollars.
If approved and implemented, the waiver application will take effect for the 2021 plan year and reimbursements will be made in 2022.
What is reinsurance and how does it work?
When a company provides health insurance, they provide insurance coverage for many people. There are times when claims costs are extremely high due to the nature of an illness or injury of an individual. Insurance companies need to collect enough premium from all their insureds to pay all of their claims, including potential claims with high medical costs.
Under this program, reinsurance will reimburse health insurers for claims costs above a certain threshold (attachment point) and up to a set cap (reinsurance cap). By removing some of the high medical cost claims from their calculation of premium rates, insurers can reduce the amount of premium you pay because some of those high medical costs are paid by reinsurance.
How will the state pay for the reinsurance program?
The federal government currently collects an exchange user fee from Pennsylvania health insurers.
In 2021, the Commonwealth will be transitioning to an SBE. By charging the same exchange user fee, but operating its own exchange, the Commonwealth will be able to use the money saved towards the reinsurance program.
If the 1332 waiver is approved, Pennsylvania expects to receive additional "pass through" dollars from the federal government to supplement the program. When premiums are lowered by the reinsurance program, the federal government will realize a savings because it will not need to pay as much in premium tax credits. The federal government will then share these savings with the state to use as additional funding for the reinsurance program.
What impact will this have on insurance rates for Pennsylvanians?
Pennsylvania expects this program to help with continued stabilization of the individual market because rates for monthly premiums will be less volatile from year to year. Premium rates will also be moderated due to the high cost claims being covered by reinsurance. This will positively impact all consumers, but will most directly impact those who do not receive federal premium tax credits (PTCs).
What additional steps must be taken before Pennsylvania's 1332 waiver application is approved?
To meet Federal requirements for a 1332 waiver for 2021, the Commonwealth is seeking public comment on a summary document of its draft Section 1332 State Waiver Application. The Insurance Department will be accepting public comments beginning Wednesday, November 13, 2019 through Saturday, December 14, 2019.
Also, two public hearings must be held prior to submission of the application. These public hearings are currently scheduled to take place:
December 3, 2019 December 5, 2019
11:00 a.m. - 2:00 p.m. 11:00 a.m. - 2:00 p.m.
The Nittany Lion Inn Keystone Building – Hearing Room 3
200 W. Park Ave. 400 North St.
State College, PA 16803 Harrisburg, PA 17120
After the two public hearings have been held, Pennsylvania intends to submit its 1332 waiver application to the Departments for approval.
How long will this program last?
Pennsylvania intends to request this waiver for the maximum period allowed by the federal government: five years. However, at that time, Pennsylvania will have the opportunity to seek additional waiver(s) to continue the reinsurance program.
Who will administer the reinsurance program?
The reinsurance program will be administered by the Insurance Department. The Insurance Department is reviewing options used by other states, as well as the possibility of contracting with appropriate experts, to determine the most efficient way to administer the program.
What is the timeframe for the program in Pennsylvania?
The Federal government has up to 45 days following receipt of the application to determine its completeness and, once it is complete, another 180 days to make a final decision regarding approval.
The goal is to have the waiver approved in time to impact the 2021 premium rates.
What happens if Pennsylvanian's 1332 waiver application is not approved?
If the application is not approved, it is expected that the Commonwealth would no longer proceed with the implementation of a reinsurance program for plan year 2021.
Where can I learn more?
Please visit www.insurance.pa.gov/PA1332Waiver to learn more.