Reinsurance Waiver

Virginia’s ACA Section 1332 State Innovation Waiver

During 2021, the Virginia General Assembly passed HB 2332, the Commonwealth Health Reinsurance Program, which was signed into law on March 31, 2021 as Chapter 480, of the 2021 Virginia Acts of Assembly. This bill requires the State Corporation Commission to submit a waiver request for federal approval to establish a reinsurance program beginning January 1, 2023.

Section 1332 of the Affordable Care Act permits a state to apply for a State Innovation Waiver (also referred to as a section 1332 waiver) to pursue innovative strategies for providing residents with access to high quality, affordable health insurance while retaining the basic protections of the ACA. The program also provides pass-through funding to the state for federal savings from approved initiatives.

The proposed reinsurance program would be funded through state general funds and federal pass-through funding provided under the waiver. It would reimburse carriers in the individual health insurance market for a proportion of the claims of covered individuals with high annual costs. The program is designed to increase affordability in the individual market with a statutory goal of decreasing premiums by up to 20 percent.

On December 30, 2021, we submitted an initial waiver application to secure federal authorization and pass-through funding to support the establishment of a reinsurance program in Virginia. On January 28, 2022, we received a letter stating that federal reviewers had made a preliminary determination that the application is complete. A federal public comment period began on that date and ended on February 27, 2022. We then responded to questions from federal reviewers regarding the content of our waiver, proposed structure and funding of the proposed reinsurance program, and issues raised during the comment period. This final version of the waiver application contains those questions and our responses as Appendix F.

On May 18, 2022, federal reviewers issued a letter approving Virginia’s State Innovation Waiver application to establish the Commonwealth Health Reinsurance Program (CHRP) for an initial period of up to five years, beginning in 2023. Per enactment language, the remaining Virginia statutes establishing the CHRP will become effective on June 17, 2022, 30 days after the Commission provided notice of federal approval.

The CHRP is designed to operate as a traditional reinsurance program by reimbursing ACA individual market health insurers for a percentage of an enrollee’s claims costs exceeding a specified threshold (or “attachment point”) and up to a specified ceiling (or “reinsurance cap”). Specifically, in 2023, the approved program would reimburse claims between an attachment point of $40,000 and an estimated $155,000 cap with a coinsurance rate of 70%. This program is projected to reduce individual premiums in the ACA marketplace by 15.6% for plan year 2023.

The CHRP is designed to be funded in large part through pass-through funds provided by the federal government based on federal premium tax credit savings from lower premium costs in the Virginia marketplace.  In order to receive these funds, Virginia must demonstrate that the state has secured funding for the state share of the CHRP in a passed state budget. This requirement, along with other requirements for reporting and conduct of the program, can be found in the Special Terms and Conditions provided by federal reviewers as a part of their waiver approval.

Review SCC Case number INS-2021-00110 for additional information. Questions about the waiver can be sent to reinsurance.waiver@scc.virginia.gov.

The state public comment period on Virginia’s Section 1332 Draft Waiver Application ended on November 1, 2021. Information regarding the comment period, including copies of submitted comments, can be found in the documents section for Case No. INS-2021-00110. 

The State Corporation Commission held two virtual public hearings on Virginia’s Section 1332 Draft Waiver Application on Thursday, October 14, 2021 at 10:00 am and 7:00 pm. At these hearings, the Bureau of Insurance provided an overview of the reinsurance program. Members of the public were given the opportunity to comment on the contents of the waiver application during this hearing. While these hearings have concluded, written comments can be submitted through November 1, 2021.

Due to the ongoing COVID-19 public health emergency, we requested and received federal approval to conduct these hearings virtually.