American Rescue Plan Provides States Additional Funding to Lower Health Coverage Costs, Increase Affordability for Americans
The Biden-Harris Administration is distributing an additional $452 million in federal funding through the Centers for Medicare & Medicaid Services (CMS) to support 13 states’ efforts to improve access to affordable, comprehensive health insurance coverage through section 1332 state-based reinsurance waivers. As a result of changes made in the American Rescue Plan Act of 2021 (ARP), residents in states implementing reinsurance waivers may have access to more affordable health insurance coverage. States will also have more pass-through funding to implement their waiver, and they may also have their own state funding—that otherwise might have been spent on 2021 reinsurance costs–available to pursue innovative state strategies to further improve affordability.
These funds, also known as “pass-through funding,” are determined on an annual basis by the Department of Health and Human Services and the Department of the Treasury (collectively, the Departments). They are available to states with approved section 1332 waivers that have also lowered premiums to implement their waiver plans.
State-based reinsurance programs created through section 1332 waivers are designed to improve health insurance affordability and market stability by reimbursing issuers for a portion of health care provider claims that would otherwise be paid by some consumers and by the federal government through higher premiums. As a result, these programs lower premiums for consumers with individual health insurance coverage, and may increase access to coverage and provide more health plan options for people in those reinsurance states, without increasing net federal costs. The additional funds announced by CMS today range from $2.5 million to $139 million per state – varying based on factors such as the size of the state’s reinsurance program. The funds are the result of expanded subsidies provided under the ARP, which will result in new individuals enrolled, and will cover a portion of the states’ costs for these reinsurance programs.
“This investment is a testament to our Administration-wide commitment to making health care more accessible and affordable,” said HHS Secretary Xavier Becerra. “This funding from the American Rescue Plan will reduce monthly health care costs for consumers, increase coverage, and provide more options. We will continue to work with states to strengthen the health care system as we respond to the COVID-19 pandemic.”
“Reducing a family or individual’s average monthly health coverage costs frees up that money for other needs,” said CMS Administrator Chiquita Brooks-LaSure. “The Biden-Harris Administration continues to work with states to reduce costs and deliver more affordable health coverage options. This is another example of how the American Rescue Plan is helping more people meet their health care needs.”
States with approved section 1332 state-based reinsurance waivers have experienced reduced premiums in the individual market. Overall, from plan years 2018 to 2021, states that have implemented section 1332 state-based reinsurance waivers for the individual market have seen statewide average premium reductions ranging from 3.75% to 41.17%, compared to premiums absent the waiver. For example, in 2021, statewide average premium reductions due to the waiver were 4.92% in Pennsylvania, 18.47% in Colorado, and 34.0% in Maryland, compared to a scenario with no waiver in place.
Beyond reduced premiums, section 1332 state-based reinsurance waivers may help states maintain and increase issuer participation, and may increase the number of qualified health plans (QHPs) available in each county in such states from year to year. For example, states like Colorado, Wisconsin, Alaska, and Maryland have seen additional issuers enter or re-enter the individual Marketplace since their state reinsurance programs have been implemented. Stronger issuer participation in the individual market may increase competition and translate to consumers having more opportunities to obtain affordable health insurance coverage. Nationally, on average, there are more QHP offerings in 2021 than in 2020, and in states with section 1332 state-based reinsurance waivers, the average number of QHPs weighted by enrollment increased by 30.6% from 2020 to 2021.
These states will receive additional pass-through funding in the following amounts:
- Alaska: $43,827,328
- Colorado: $49,892,498
- Delaware: $10,821,203
- Maine: $8,562,238
- Maryland: $139,159,548
- Minnesota: $64,969,985
- Montana: $7,129,995
- New Hampshire: $8,820,847
- North Dakota: $5,798,044
- Oregon: $18,948,114
- Pennsylvania: $28,558,672
- Rhode Island: $2,590,540
- Wisconsin: $63,408,562
New Jersey’s pass-through funding amount will be announced at a later time.
In April 2021, the Departments announced a total of $1.29 billion in pass-through funding for the 2021 plan year and posted an FAQ that noted that the Departments would inform states of additional pass-through to account for the ARP.
CMS continues to encourage other states to take advantage of section 1332 waivers as a tool to build on the Affordable Care Act and develop state solutions that will help lower costs and improve health coverage choices.