The Maine Bureau of Insurance announced recently that the conditions have been met to move forward with filing a 1332 Waiver with CMS to combine the small group and individual markets into a single risk pool. The concept behind this move is to create a larger risk pool to stabilize the rates in the small group market which has been shrinking for some time. The most immediate impact will come from using MGARA funds to offset specific high cost claims in the small group market, similar to what MGARA has been doing in the individual market for many years. This will create a one time reduction in rates for the first year of the merger with the hope that the larger pool will help stabilize rates after that.
We have received several questions on this merger, so we created the Q&A below. If there are other questions, please send them to us at maineahu@gmail.com and we’ll add them to the list
What is the process to formalize the merger?
Since the conditions set by legislation passed last year have been met, the next step is to file a 1332 Waiver to allow the use of APTC funds, currently being used to offset high cost claims in the individual market, to be used in the small group market. The BOI has been working with CMS for some time, so approval of the waiver is expected.
What is a 1332 Waiver?
The 1332 Waiver was established by the Affordable Care Act to allow States flexibility to use Federal funds in ways not anticipated in the ACA. The basic requirement is that the approach used by the State must benefit at least the same number of people and to the same extent as prior to the Waiver.
What is the effective date of the merger?
It is anticipated that the effective date will be 1/1/2023 unless there are issues with the waiver application causing the BOI to set a different date
Are rates in the small group and individual markets going to be the same?
Yes, each specific product has to have rates that are the same for Group and Individual members. Additionally, if a product is offered in one market, it must be available in the other. However, there is no requirement that the carrier actively market that plan in both markets (i.e., can actively market Product A in the group market but not actively market Product A in the Individual market) nor does the carrier have to offer that product through Coverme.gov.
What is the anticipated rate decrease in Year One?
That will vary by carrier and by product. The press release from the BOI used decreases of 6% and 8% for the Group and Individual markets respectively. Remember that this calculation compares the impact of offering MGARA in both markets against pre-MGARA rates. This was the condition set by LD 2007 passed last year. In other words it’s a statistic without a meaning so I wouldn’t quote those numbers for any purpose.
Will all small group rates renew on 1/1 regardless of the actual policy renewal date?
No, this was an issue identified by both MAHU and the carriers. The 1332 waiver application to CMS proposes a rating scheme that would allow quarterly rating for non-calendar-year small group plans. There might still details remain to be worked out, but the intent is to base it on what’s in place in Massachusetts. Under the proposal BOI made to CMS, a small group plan renewing on July 1 would pay all 12 months at the “third-quarter renewal” small group rate. So it appears that each carrier will file quarterly rates with each group renewing in a calendar quarter getting the same renewal rate (e.g., April, May and June renewals will all use the 2nd quarter renewal rates.
Can carriers offer non-Clear Choice plans alongside the mandated Clear Choice plans?
Yes, to an extent. Carriers can offer non Clear Choice plans but only 3 in total, not 3 in each metal level as I had said earlier
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