RD644 - Report of the Virginia Market Stability and Reinsurance Work Group – December 9, 2020

Executive Summary:

The purpose of this report is to provide an overview of recent trends in Virginia's individual and small group markets and present findings and recommendations of the 2020 Virginia Market Stability Work Group (Work Group) to stabilize Virginia's commercial insurance markets. Building on recommendations of the 2019 Work Group. priori ties included: (1) increasing the availability of quality, affordable, and comprehensive health care coverage for Virginians; (2) establishing a reinsurance program to reduce the cost of health care; and (3) ensuring policy recommendations strengthen and protect the Patient Protection and Affordable Care Act (ACA) market.

The Secretary of Health and Human Resources (HHR) established the Work Group pursuant to two directives resulting from the 2020 General Assembly Session.

1. The 2020 Appropriations Act, Item 29 l D, which states:

D.1. The Secretary of Health and Human Resources shall develop a state innovation waiver under Section 1332 of the federal Patient Protection and Affordable Care Act (42 U.S.C. 18052) to implement a state reinsurance program to help stabilize the individual insurance market by reducing individual insurance premiums and out-of-pocket costs while preserving access to health insurance. The Secretary shall convene stakeholders to include representatives of health insurers, the State Corporation Commission (SCC) Bureau of insurance (BOI), consumer advocates, and others deemed necessary to assist in developing the reinsurance program.

2. The State Corporation Commission Bureau of Insurance shall provide technical assistance to the Secretary of Health and Human Resources as requested.

3. The Secretary shall report on the reinsurance program to the Chairs of House labor and Commerce and Senate Commerce and Labor Committees and the House Appropriations and Senate Finance and Appropriations Committees by October 1, 2020. Such report shall include an analysis of the costs and assumptions of such a reinsurance program and potential options to fund the non-federal share of costs. In addition, the report shall include suggested legislation to implement the program. Implementation of the reinsurance program shall be subject to appropriation of the non-federal share of costs by the General Assembly and approval by the United States Secretary of Health and Human Services.

2. Governor Northam's veto language for 1) Senate Bill 235 and House Bill 795, which would have codified the U.S. Department of Labor federal rule that expands the availability of Association Health Plans (AHPs) beyond what is currently allowed in Virginia, and under the more lenient regulatory standards of large group employers (over 50 employees), including less consumer protection than is provided by the Affordable Care Act;, and 2) Senate Bill 861, which would have expanded Virginia's Multiple Employer Welfare Arrangements (MEW As) to allow small employers, to join together as a single self-funded group. Although different fundamentally, the Administration believes that these bills would undermine the Commonwealth's new investments in the Health Benefit Exchange, and pose a potential threat to destabilize the individual and small group markets. The veto language for SB 235/HB 795 and SB 861 states:

Pursuant to Article V, Section 6, of the Constitution of Virginia, I veto Senate Bill 235. This legislation allows associations with more than 50 members to offer association health plans (AHPs) to members. The legislation also expands the availability of and the rules regulating AHPs beyond what is currently allowed in Virginia.

I am concerned that Senate Bill 235 addressed the health care concerns of only a segment of Virginians, possibly at the cost of other Virginians. This bill would undermine current efforts to stabilize the Virginia health insurance marketplace. Virginians who enroll in AHPs may be disproportionately healthy when they enroll, leading to higher premiums for Virginians who do not qualify for an AHP and remain in the marketplace.

Virginia took a positive step to increase the availability of quality, affordable, and comprehensive health care coverage through Medicaid expansion. The Governor and General Assembly worked together to begin implementing a state based exchange and to lay out steps to create a reinsurance program. Our responsibility is to look at solutions like these to improve the quality and cost of health care for all Virginians, not pick winners and losers based on employment status. This is why I am directing the Secretary of Health and Human Resources to convene a workgroup in collaboration with the State Corporation Commission Bureau of Insurance to identify strategies to reduce the cost and improve the quality of health care co1,erage and increase the number of Virginians with comprehensive coverage. The workgroup will build off of the recommendations of the 2019 Market Stability Workgroup. We look forward to working together holistically to ensure all Virginians' have lower health care costs and ensure the overall market is at a minimum held harmless by future reforms. All Virginians have a right to quality, affordable, and comprehensive coverage.(*1)

The Work Group was composed of a diverse group of stakeholders, including members from the following state agencies, organizations, and groups:

• Secretary of Health and Human Resources
• Commissioner of Insurance and other representatives of the BOI(*2)
• Virginia Association of Health Plans
• Kaiser Permanente
• Medical Society of Virginia
• Virginia Hospital and Healthcare Association
• Virginia Chamber of Commerce
• Virginia Association of Realtors
• National Federation of Independent Business
• Virginia Poverty Law Center
• AARP Virginia
• Washington and Lee University
• Georgetown University Center on Health Insurance Reforms

Various representatives from related industries, including insurance carriers and physician member organizations, and members of the General Assembly, were also involved in the discussions.

The Work Group met seven times from August 5, 2020 to October 31, 2020. During the first four meetings, the Work Group examined Virginia's individual and small group markets, including current market trends, 2021 rate information, states' reinsurance programs through 1332 state innovation waivers, and additional approaches other states have taken to improve affordability and stabilize both the individual and small group markets. Experts from the State Corporation Commission Bureau of Insurance (BOI), National Governors Association, Georgetown University's Center on Health Insurance Reforms, and Manatt's State Health and Value Strategies, led these respective discussions. The final three meetings involved discussions of state options to stabilize Virginia's individual and small group markets, including advantages and considerations associated with each option, and how the approach could be operationalized.

From the aforementioned discussions, the Work Group viewed the following policy actions as most promising to stabilize Virginia's individual and small group markets:

Individual Market

1. Pursue a reinsurance program through a 1332 state innovation waiver (1332 waiver).

2. Direct the BOI to structure a state-based subsidies program that makes coverage more affordable.

3. Upon full transition to a state-based marketplace (SBM), the Health Benefit Exchange should establish standing extended open enrollment periods (OEPs) and special enrollment periods (SEPs) to maximize enrollment and to promote seamless coverage (e.g., to coincide with tax filing, and for emergency situations such as COVID-19).

Small Group Market

1. Pursue a reinsurance program to decrease premiums in the small group market.

2. Direct the Exchange, navigator programs, and benefit manager organizations to increase outreach and marketing to small businesses, providing education and technical assistance to small businesses regarding:

a. Small-employer Health Options Program (SHOP) and small group opportunities, including the value of narrow networks, with employee choice.

b. Education and technical assistance information about Health Reimbursement Accounts (HRAs) through Virginia benefit manager organizations, registered agents and brokers, and provide technical assistance to small employers and employees for using HRAs.

3. Direct the State Corporation Commission to pursue additional data collection pertaining to the small group market. Such data should include:

a. Self-funded plans, including, but not limited to obtaining: marketing and outreach strategies, the number of employers that have shifted to self-funded plans, claims profiles of self-insured small employers, relative to the fully-insured small group market.

b. Professional employer organizations (PEOs), and impacts on the small group market enrollment.

This report further details Work Group member feedback and provides considerations brought forth during discussions.
(*1) Virginia's Legislative Information System, 2020 Session, SB 235 Governor's Veto, https://lis.virginia.gov/cgi-bin/legp604.exe?201+amd+SB235AG accessed 11.12.2020.
(*2) Non-voting representation, providing technical assistance only