Philadelphia Medicine Fall/Winter 2019 - 20

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Feature

Pennsylvania Begins
Its Transition to a
State-Based Exchange
By: Robert Miyamoto, PCMS Assistant Dir. of Communications and Marketing

Pennsylvania will implement a state-based exchange (SBE) for the
2021 health insurance plan year. The legislation was enacted in 2019
with the aim of making health insurance coverage more stable and
affordable and allowing the state to have more control over its local
individual market. Over 400,000 Pennsylvanians are enrolled through
the market, which provides coverage for those who cannot receive
health insurance through other means. Since the implementation
of the Affordable Care Act in 2010, Pennsylvania has relied on the
federal health insurance exchange HealthCare.gov. The state joins
more than a dozen states that have built their own exchanges.
The user fee collected from Pennsylvanians by the federal
government for services such as the HealthCare.gov website and
the federal call center amounts to $98 million in 2019, or 3.5% of
premiums. For 2020, the user fee will drop to $88 million, or 3%.
A state-based exchange could operate at a significantly lower budget,
approximately $30-35 million annually. This figure was calculated
based on discussions with other states currently operating their
own SBEs as well as a health care consultant firm. Pennsylvania
will continue to charge the same user fee as the federal government
and use the savings to fund a reinsurance program. The reinsurance
program is where the savings will go back to the enrollees, who will
see an estimated 5-10% reduction in premium rates compared to
the federally-run exchange.
The reinsurance program does not directly lower premium costs.
It is directed towards insurers. The program will provide contributions
to assist insurers in covering high cost medical expenses incurred by
some members. These high cost expenses can drive up premiums.
By alleviating them, insurers can lower their costs for all of their
members. The program will be designed to be flexible, with specific
parameters being adjusted year by year based on anticipated costs.
In addition to the state's own savings, the reinsurance program
is expected to receive funding from the federal government as well.
The federal government will save money as a result of the program.
It would pay less in subsidies, which are relative to premiums for
20 Philadelphia Medicine : Fall/Winter 2019

individuals who have received their coverage through the exchange.
(The federal government currently provides $2 billion in health care
premium subsidies to low-income Pennsylvanians.) Their savings
would be put into the reinsurance program. The state will provide
25% (around $40-50 million) of the funding while the federal government is expected to provide 75% (around $150-$250 million). A
1332 waiver would need to be approved for the state to receive the
federal government's funding for the reinsurance program.
The 1332 waiver, also known as the Section 1332 State Relief and
Empowerment waiver, allows states to use federal money currently
being used for Affordable Care Act financial assistance programs
for state-based initiatives. The Department of Health and Human
Services (HHS) is currently encouraging states to use the waiver to
form their own solutions for their health care systems instead of
relying on the federal system which may not fully meet the needs
of populations on a state level. To date, the Centers for Medicare
and Medicaid Services have approved waivers from 13 states. Seven
states had submitted waivers which were not approved for reasons
including timing or incompleteness. The state government has been
working closely with HHS to ensure its waiver's approval. States that
have implemented a reinsurance program after being approved for
the 1332 waiver have been able to reduce premiums by 6%-43.4%
in the first year of enactment.
The state expects that Pennsylvania enrollees will save up to a
combined $250 million annually on their health insurance premiums.
While Pennsylvania has some oversight over the federal exchange's
operations in the state, including regulating to an extent health insurers
and reviewing products sold through the exchange, a state-based
exchange would give Pennsylvania more control over determining
which plans would be sold on the exchange as well as individuals'
eligibility for enrollment and financial assistance, and would grant
better access to enrollment data, which would allow the state to
tailor the exchange to further meet the needs of Pennsylvanians. The
transition would also allow the state to alter the open enrollment

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Philadelphia Medicine Fall/Winter 2019

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