UPDATED: Michigan: Gretchen Whitmer officially pushing reinsurance program (& more)!

2019 OPEN ENROLLMENT ENDS (most states)

Time: D H M S

UPDATE 3:50pm: OK, it sounds like you can completely disregard all the Medicaid-related stuff below; apparently there was a communication error. I've confirmed with the Whitmer campaign that the proposed reinsurance plan would not be tied in with Michigan's ACA Medicaid expansion program at all, nor would it have any impact on the Medicaid eligigibility threshold, which means this would indeed be a standard ACA individual market reinsurance program after all...which is what I assumed in the first place, and which would be perfectly fine!

Note that Chad Livengood has revised his article and headline accordingly, with a note at the bottom regarding the correction.

The impact on unsubsidized individual market premiums could vary widely depending on how the program is structured. For comparison, Maine's program is only knocking 2019 rates down by 7.8 percentage points next year...but Maryland's is so robust, 2019 rates will be a whopping 43 percentage points lower than they otherwise would have been without it. It's safe to assume that, if structured properly, Michigan's would probably knock a good 20-25% off of 2020 premiums if put into place in time.

Back in July, I wrote up an Open Letter to every Democratic nominee for Michigan's state House and Senate offices, along with Democratic gubernatorial nominee Gretchen Whitmer, which included a healthcare Wish List of 26 recommendations to help protect, repair and strengthen the ACA at the state level.

The first dozen or so are mostly items which Michigan Democrats have already been touting for a year and a half as part of their "Healthcare Bill of Rights", but the rest of the items on the list go beyond protection to actual improvements upon the current status quo.

One of the most important of these was adding a reinsurance program to the ACA individual market.

Today, I'm thrilled to report that Whitmer has officially rolled out her own healthcare proposals, and one of the biggest pieces of it is indeed pushing for a robust reinsurance program. The only head-scratcher is that the article makes repeated references to the reinsurance program being "integrated into Medicaid", which makes no sense to me whatsoever since one thing generally has nothing to do with the other. Via Chad Livengood of Crain's Detroit:

Whitmer proposes further Medicaid expansion, raising tobacco age to 21

...With five weeks until Election Day, Whitmer rolled out a health care plan Tuesday that seeks to lower the number of uninsured residents, stabilize the cost of private insurance premiums and create contrasts with her Republican opponent Bill Schuette ahead of two televised debates later this month.

Whitmer is proposing Michigan start a reinsurance program to stabilize the individual private insurance market by adding a layer of coverage for individuals with higher medical claims.

Wisconsin and at least four other states have created reinsurance programs where the state provides tax dollars to private insurers to cover the claims of individuals with a higher propensity to use medical services.

So far, so good...but then we get to this part:

Whitmer wants to seek federal approval to integrate the program into the Medicaid system, which is run by private managed care companies.

The additional state spending would allow Michigan to draw down a two-to-one match in federal Medicaid dollars and expand the income eligibility beyond the current threshold of 133 percent of the federal poverty level, Whitmer said.

Huh. Again, I have no problem with increasing the Medicaid expansion threshold, but I'm not sure how a reinsurance program similar to those of other states would do this--reinsurance programs in Wisconsin, Oregon, Alaska and so forth lower costs for unsubsidized enrollees on the private market (that is, those earning more than 400% of the Federal Poverty Level), not low-income enrollees on Medicaid.

However, the quotes from Whitmer seem pretty clear that this is intended for further expanding Medicaid enrollment itself:

"If you had this most expensive uber-utilizer covered by reinsurance, I think it would improve our ability to open up (Medicaid) expansion to more people," Whitmer said in an interview with Crain's.

Whitmer said the higher income threshold for Medicaid eligibility and how many new people would be eligible for the program would depend on a waiver from the federal Centers for Medicare & Medicaid Services.

I've given Whitmer's just-released 19-page healthcare proposal a look; here's the relevant portion:

» Reinsurance

  • Michigan is ranked in the 10 worst states in smoking per capita, 10 worst states in obesity and 10 worst states in hospital readmissions, making us some of the unhealthiest people in the nation. People who have extreme health needs, who lack access to primary medical care providers, who have unhealthy habits, or who suffer the symptoms of social-determinants of health (like poverty) have much higher demands of the state’s healthcare system and use it more frequently - consequently driving higher healthcare costs across the board.

    Reinsurance programs are a tool that other states are successfully using to spread out the risk of insuring unhealthy individuals and super utilizers of healthcare who would otherwise pose a very large of a burden on a single coverage provider. Reinsurance is an extra layer of coverage for high-risk individuals who have very high claims that raise the cost of healthcare for everybody. States use reinsurance to protect their health systems from these drivers of rising costs, stabilize their insurance markets, and ensure coverage is more available and affordable.

    By mitigating the risk of insuring super utilizers of healthcare, we would lower costs for all Michiganders statewide and make it possible for those currently unable to afford high-cost health insurance to purchase affordable coverage. With a reinsurance program we will help expand access to affordable health insurance to the roughly 600,000 Michiganders that still lack coverage.

  • Other states – including Alaska, Maryland, Minnesota and Oregon – have had positive results lowering health insurance costs resulting from super utilizers of healthcare and leveraged federal dollars to pay for it. Oregon brought in $30 million in federal funding for its reinsurance program.16 Alaska drew down $300 million in federal funding over five years to fund its reinsurance program.17 Minnesota has brought in $271 million in federal funding per year.18 After years of double-digit increases, premiums fell by an average of 15 percent following the implementation of Minnesota’s reinsurance program.

    In Maryland, average individual market premiums for 2019 are expected to decrease by nearly 14 percent after the state received federal approval to implement a reinsurance program. Without reinsurance, 2019 premiums would have increased by 30 percent.

  • A Michigan reinsurance program would lower costs here as well by preventing insurance premiums from being driven up by over-utilization of our state healthcare system and should be examined in conjunction with a 1332 innovation waiver to pull down federal pass-through savings.

Everything in the proposal itself certainly makes it seem like it's referring to the private individual market (which, in Michigan, includes people earning more than 138% FPL; the reinsurance programs typically help those earning more than 400% FPL) as opposed to Medicaid expansion, which currently includes people earning under 138% FPL.

Furthermore, while moving the Medicaid expansion threshold up (to 200%, perhaps, for instance?) would be a Good Thing, doing so would also amount to something along the lines of the ACA's Basic Health Program (BHP). I support doing that as well.

UPDATE: Ah-hah! David Anderson may have figured out what Whitmer has in mind:

Is @gretchenwhitmer healthcare plan a play on the #Idaho 1115 waiver proposal from November 2017 to use #Medicaid as a persistent high risk payer to pull out risk/claims/premiums from QHP individual market?https://t.co/OSN3hB4iM1https://t.co/xwORcFMXRf@charles_gaba

— David Anderson (@bjdickmayhew) October 3, 2018

Here's what Anderson is referring to regarding Idaho:

The first waiver is a Section 1115 Medicaid Waiver. They are not asking for an ACA Medicaid Expansion. Instead, they are asking for the authority to create a high-risk pool in Legacy Medicaid for about 1,500 people who have certain severe, high-cost conditions including hemophilia, cystic fibrosis, and certain cancers. These folks would see lower cost sharing and lower premiums. Idaho would pay their normal state match. Cost of care would go down as Idaho pays their Medicaid providers roughly 95% of Medicare rates and Medicare tends to pay providers significantly less than commercial rates.

The objective is to pull a small number of chronically ill and very expensive people out of the ACA individual market risk pools. With those people out of the risk pool, average claims costs go down by 19% which makes insurance a whole lot cheaper for non-subsidized buyers. This makes the non-subsidized market better off as a lot of people who are reasonably healthy and currently deterred from buying because the plans are too expensive will see cheaper plans. This would lead to more people covered and an even healthier risk pool.

IF this is what Whitmer has in mind, then it starts to make sense: Instead of increasing the official Medicaid expansion income threshold, folks with high-cost conditions would instead be transferred from the ACA individual market over to Medicaid expansion, presumably regardless of income. This has precedent already--people with ALS, ESRF and those on long-term Social Security Disability are eligible for Medicare even if they're under 65 already, and it would substantially lower premiums for the ACA individual market in the process.

The only major issue I can see with doing it this way is that the enrollees would have to be moved after they're diagnosed with the conditions, since the insurance carriers aren't allowed to ask about medical history before they enroll in a private policy.

However, this would be a workable proposal, if somewhat more confusing to implement than a "vanilla" reinsurance program as implemented by a half-dozen other states. If this is what she's talking about, I'd be interested in finding out why she's going this route vs. "standard" reinsurance.

I've contacted the Whitmer campaign asking for details and will update this as soon as I receive clarification. Don't get me wrong, I'm all for increasing the eligibility threshold for Medicaid expansion as well...but that would be completely different from reinsurance for the >400% FPL crowd.

In addition, her proposal includes a bunch of other important improvements for Michiganders, such as:

  • Paid family sick leave
  • Greater prescription drug price negotiation transparency
  • Increased mental health program spending
  • Raising the tobacco purchase age from 18 to 21, and, very importantly:
  • Repealing the Michigan Product Liability Act of 1995, which prevents people from suing drug companies over damage done by their products