The Polis Administration wants to help insurance companies cover high-cost claims through a reinsurance plan. But will the proposed reinsurance program reduce health insurance premiums by 16%?
CLAIM: Based on information from the Polis Administration, the Colorado Sun reports “the state will be able to reduce premiums on the individual market by an average of 16 percent statewide.”
FACT: Reinsurance programs – which help manage the cost of the most expensive insurance claims – are generally considered an effective way to help consumers pay less in premiums. The claim, however, that this reinsurance plan will reduce premiums by 16% overestimates the potential benefits.
To set up the program, the Polis administration needs federal approval and recently submitted a request for a Section 1332 State Innovation Waiver. Midway through the request, it states the following:
“Note that the 16% statewide average decrease is a comparison of 2020 baseline premiums to 2020 premiums with the 1332 Waiver reinsurance program in effect. This does not suggest that an individual’s actual rate decrease from 2019 to 2020 will be 16%…”
To track the cost of exchange-purchased insurance plans, the state measures average monthly premiums per member per month. The table below shows the estimates for this year and for 2020, with and without the reinsurance program in place:
|2019 estimated premium (per member per month)||2020 estimated premium without reinsurance||2020 estimated premium |
|$586.77||$644.91 (i.e. 9.9% higher than 2019)||$541.81 (i.e. 7.7% lower than 2019) and 16% lower than 2020 estimate without reinsurance)|
Therefore, the potential reduction in premiums from 2019 to 2020 under the reinsurance program is not 16% but 7.7%. There is a 16% decline when you compare the 2020 baseline (without the reinsurance waiver) to the 2020 with the reinsurance program, but that 2020 baseline is hypothetical.
That reduction would be a welcome change to consumers, of course, but it’s a little less than half the number being promoted. Additionally, the promised reduction in health exchange premiums – whether it’s 16% or 7.7% – is a statewide average that doesn’t apply across the board to the premiums individual consumers pay. In some parts of the state, there may be bigger reductions than 7.7%, and in other parts of the state, there may be smaller reductions. It all depends on where you live.