North Dakota: *Preliminary* (unweighted) avg. 2020 premiums: 7.9% *reduction* thanks to ACA reinsurance program

Unfortunately, North Dakota is another state where the carriers have redacted their rate filings. I was able to garner some info about one of the three carriers participating in the Individual Market next year: Medica's filing redaction wasn't done properly, so I was able to extract that they're looking at medical trend of 7.7%, a morbidity reduction of 1.5%, a 2.3% increase due to the reinstatement of the ACA's insurer fee...and a 20% reduction due to the implementation of the state's reinsurance program, which I first reported on last fall and followed up with this spring.

Sure enough, a week or so ago it was made official:

Insurance Commissioner Jon Godfread announced today that the proposed state-based reinsurance program developed by the North Dakota Insurance Department for the individual health insurance market has been approved by the federal government and will be in place for the 2020 health insurance plan year. The program was established within the parameters of the Affordable Care Act (ACA), specifically under Section 1332, which allows for state innovation waivers. 

(I highlighted the last sentence to reiterate that reinsurance waivers are part of the ACA itself and have been since it became law in 2010...they just couldn't be implemented until 2017.)

“I’m pleased that the federal government has approved this plan to reduce the cost of health insurance for the thousands of North Dakotans who purchase their health insurance on the individual market,” Godfread said. “This program will stabilize our market and benefit our state’s farmers, ranchers and small business owners. These groups form the backbone of our economy and have felt the full effects of the tremendous ACA rate increases over the years.”

The program creates a reinsurance mechanism known as “invisible” reinsurance. The approach of invisible reinsurance allows enrollees to remain in the individual market with their current plan and carrier while a portion of their claims are reimbursed by the reinsurance pool. The enrollee is not aware that their claim is being paid via the reinsurance pool meaning there is no effect on the enrollee as the task of ceding claims to the reinsurance pool is completed on the back end of the process and is without consequence to the enrollee.

For 2020 and 2021, the proposed reinsurance program will cover 75% of paid claims between $100,000 and $1,000,000. The enrollee’s health insurer will cover the remaining 25%.

The reinsurance program will be funded by a combination of federal funds and state assessments. The state assessments will be placed on insurance companies selling in North Dakota’s group health insurance markets and will be tax deductible, meaning the state’s portion of the funding will ultimately be in the form of reduced tax revenues for the state and not increased costs for the state’s group health insurance markets.

This state-based reinsurance program will:

• Lower rates to keep consumers in the market and attract new entrants. The program will provide significant financial relief for those not eligible for subsidies. The estimated rate reductions will average between 8-20% for plans purchased on the individual market.
• Retain federal subsidies for individuals with incomes between 100-400% of the federal poverty level, which will ensure that those with access to affordable coverage due to federal subsidies keep their coverage.
• Assist insurers in managing high-risk enrollees and create a broader pool of people to absorb all other risk. This will likely prevent insurance companies from leaving the state’s individual market in the coming years, encourage additional insurers to write business on North Dakota’s individual market and improve consumer access.

House Bill 1106 relating to the establishment of an invisible reinsurance pool for the individual health insurance market was signed into North Dakota law by Governor Doug Burgum on April 18, 2019.

“We greatly appreciate the federal government for approving this waiver, and we thank Commissioner Godfread for his leadership and the Legislature for recognizing how this will lower costs for North Dakotans and provide greater stability in the individual insurance marketplace,” Burgum said. “This is a terrific example of how empowering states to seek solutions in the health care sector, rather than relying on a one-size-fits-all approach, can expand options and reduce costs for consumers.”

Godfread added, “This is a state-based program that will work for North Dakota. I’m pleased that the Administration has recognized that North Dakota is in the best position to determine what will work best for its people.” 

The unweighted average unsubsidized premium change for 2020 across Blue Cross, Medica and Sanford is a 7.9% reduction. Medica specifically states in their filing that they would have asked for a 3% increase without the reinsurance waiver, but instead will be reducing rates by 17%. I don't know how much of an impact it's having on the other two carriers.

Meanwhile, the small group market in North Dakota is seeking an (unweighted) average 7.9% increase next year.