Georgia’s governor released a plan for a 1332 waiver. This waiver has two severable steps. The first is a reinsurance step. ACA reinsurance has a source of funds that are not derived from premiums cover some portion of claims. The external infusion of money means premiums don’t have to be high enough to cover all claims and all administrative costs. Instead, they just have to be high enough to cover some portion of claims and all of the administrative costs.
Georgia is proposing a reinsurance scheme that varies by geography. The health economists are going to love this, especially in rating area 13 as it provides a great source of variation and clean discontinuities. The policy objective is to bring down gross premiums in rural, expensive regions more than in urban and suburban regions. This is a valid policy objective. Colorado is running a reinsurance scheme similar to the proposed Georgia scheme for the same exact objective.
The other notable aspect of this proposal is the amount of claims that the reinsurance scheme is proposing to eat. The attachment point which is the claim value where reinsurance starts is only $20,000. That is a knee replacement or a somewhat complicated C-section. Many other states won’t start their reinsurance until the claims run to $40,000 or $50,000. And then the reinsurance program runs to $500,000. This is much higher than usual. None of this is bad. It is a lot of reinsurance.
Finally, the Georgia market has some significant premium spreads between the cheapest plan in a metal level relative to the benchmark premium. Big spreads are great for healthy, subsidized folks as they will see cheap net of subsidy plans. Small spreads push healthy subsidized folks out of the market as they are priced out. Regions with large, current spreads and high (80% coinsurance) will see much smaller spreads in 2021 than they do now. This will bring some uninsured and unsubsidized folks into the marketplace while pushing some currently insured and subsidized out. I argued in August that states have to make choices:
All states will face an environment of guaranteed issued, community‐rated, subsidized private market insurance, available Medicaid expansion for working‐age adults at an enhanced federal cost‐sharing and wide waiver authority that is constrained by law and clear administrative procedures. Within this framework, states will need to find ways to smooth the edges of the law and address issues and populations that are not well served by the law. They have the tools to do so, but the decisions to trade‐off the well‐being of some groups for the gains of others will remain a potent political and policy problem.
Georgia is making a choice.