Every Coloradan should have access to high-quality, affordable health care. Reinsurance is a proven approach to reducing insurance premiums and providing relief to people that buy insurance in the individual market.
Over the last four years, the average cumulative premium increase in the individual market has amounted to approximately 82%.
Coloradans on the individual market are struggling to afford health care. By reducing system-wide costs and paying for a portion of high cost claims, a reinsurance program lessens the impact of those claims on the insurance pool. This will lead to a reduction in premiums.
How does reinsurance work?
The reinsurance program will pay a percentage of claims, also known as the “coinsurance rate,” beginning at the “attachment point” and will continue to pay up to the “reinsurance cap.” While the reinsurance program is paying, providers would also be paid pursuant to a fee schedule that will reduce costs. This reduces the impact of those high cost claims on the insurance pool and reduces Coloradans premiums in the individual market as a result.
Successes of reinsurance:
The first state to establish a reinsurance program was Alaska in 2017. In 2018, Alaska’s reinsurance program resulted in a 26.5% rate reduction at a total estimated cost of $59.5 million.
Oregon launched a reinsurance program for 2018 that is estimated to result in a 7.2% rate reduction in 2018 and a 7.0% rate reduction in 2019 at an annual estimated cost of $90 million.
Minnesota established a reinsurance program for 2018 that is estimated to result in a 20% rate reduction and an estimated enrollment increase of 50,000. The total estimated cost for Minnesota’s program is estimated at $271 million.
Both Republican and Democratic leaning states have recognized that a reinsurance program creates stability in the market. Market stability encourages insurers to remain in the state and could incentivize carriers to expand into underserved areas.