What is Health Reinsurance?

Although this law encompasses both the 1115 and Section 1332 Innovation Waiver, this article will discuss what is the Section 1332 Innovation Waiver and the significance the waiver has on changes that could have potential impacts on the ACA.

Section 1332 Innovation Waiver kickstarts the process of states creating insurance coverage programs to aid in the reduction of high healthcare costs. These proposed programs must maintain the primary objectives set forth by the ACA and can’t change how the impact that the ACA has and will have on the healthcare marketplace. An example of a new coverage alternative is a health reinsurance program. The idea behind reinsurance is to protect insurance companies from being saddled down with astronomical premium rates. Often referred to as stop-loss coverage, health reinsurance provides coverage to health care payers that are struggling to meet the demands of high premium costs.

Prior to the creation of the ACA, insurance companies were able to enforce high healthcare costs. However, it started the spiral and the eventual downfall of companies that were unable to offer affordable insurance premiums for insured claimants. Now, the ACA imposes that all individuals are entitled to the same insurance coverage regardless of their personal healthcare risk, i.e. pre-existing condition. While this process does not discriminate against any individual, it still leaves insurance providers, especially small businesses or self-insured individuals, with the continued struggle of affording high healthcare costs.

To bolster efforts to reduce the burden of health insurance costs off the backs of individuals and health insurance providers, states like Georgia are searching for an opportunity to create a health reinsurance program. Currently, there are other states which are going through the process impose this legislation.

For small business owners, a regular insurance company policy can process claims but a reinsurance policy will be able to pick up the costs once a maximum amount is achieved. The maximum amount is for this type of insurance is referred to as an attachment point. After the attachment point is reached, the reinsurance policy will be utilized.

Like small business owners, self-insured individuals can have a reinsurance policy in place to capture health insurance costs once their maximum point or deductible has been met. The reinsurance policy can protect the insurers from having to deal with high premium costs.

Even though Gov. Kemp signed the “Patient First Law”, the law is not to be considered as a cure for the ills that plague the current healthcare marketplace. State legislators including those in Georgia are still holding their breath as to whether this type of program is a one-stop shop solution for lowering healthcare costs. The waiver seems to be a good starting point but there must be other avenues to explore to make healthcare affordable and accessible for everyone.