Wisconsin Commissioner: Wisconsin Continues to See Success in Stabilizing Its Individual Health Insurance Market, but the Future Presents Challenges

A note from AgentSync: The Commissioners’ Corner is an ongoing series where the AgentSync blog team invites state insurance commissioners to share their unique perspectives on industry regulation. While we often speak about a nationwide insurance perspective, each state has a culture of regulation specific to their state’s politics, attitudes, and demographics.

This blog aims to provide insight into state-level insurance concerns; it isn’t legal advice, a crystal ball on regulation, or an editorial endorsement by the AgentSync team.

This Commissioners’ Corner is brought to you by Wisconsin’s Commissioner of Insurance, Nathan Houdek.

In 2018, Wisconsin received approval from the U.S. Department of Health and Human Services and the Department of the Treasury to operate a state-run reinsurance program under a Section 1332 State Innovation Waiver. This program, named the Wisconsin Healthcare Stability Plan (WIHSP), was created with the goal of stabilizing the state’s individual health insurance market and ensuring more affordable coverage options. The Office of the Commissioner of Insurance (OCI) is responsible for administering the program.

Wisconsin’s individual market had been experiencing significant instability prior to 2019 with insurers exiting the market, double-digit rate increases, and shrinking service areas. This market volatility left consumers with unaffordable and dwindling plan options.  For example, during the 2018 open enrollment period, approximately 75,000 enrollees were forced to choose a new insurer and thousands of consumers across the state had only one or two insurer options on the Federally Facilitated Marketplace (FFM) in counties previously having three or more options. Rate increases averaged 44 percent across the state and in some areas were as high as 105 percent. 

WIHSP was designed to offset high-cost individual market health insurance claims, allowing insurers to offer their plans at rates lower than they would without WIHSP in place.  Under the new administration of Governor Tony Evers, WIHSP became operational in January 2019, and it has resulted in consecutive year-over-year reductions in average premium rates.  OCI’s contracted actuarial consulting firm estimated the program reduced premium paid by Wisconsin consumers by approximately 10.3 percent, 11.4 percent, 12.5 percent, and 13.2 percent in years 2019, 2020, 2021, and 2022, respectively.

In addition to premium stability, insurers have re-entered the individual market and have expanded their service areas since 2018.  There are currently 15 insurers participating in the individual market, with 14 of those offering coverage on the FFM.  In 2022, 27 out of 72 counties have five or more insurers offering plans, compared to zero counties in 2018.  Multiple insurer offerings across the state have expanded plan options, which has also increased accessibility to more health care providers for many consumers.

Enrollment in Wisconsin’s individual health insurance market has ranged between 192,000 in 2018 to 212,000 in 2022. This market represents approximately 3.5 percent of the state’s total population.

Total expenditure authority under WIHSP was capped at $200 million from 2019 to 2021. The program is financed primarily through federal funds, accounting for 63.9 percent and 71 percent of total funding in 2019 and 2020, respectively. If available federal funds are not sufficient to cover all claims eligible for reimbursement, state funds are authorized up to the total expenditure authority. Under the program, health insurers were reimbursed $174.3 million for plan year 2019 and $183.5 million for plan year 2020.

For plan year 2021, total eligible claims exceeded the WIHSP expenditure authority by approximately $3 million, coming in at $202.8 million. Fortunately, a recalculation of federal funds for 2021 resulted in WIHSP having a total federal fund balance of $229 million. This allowed OCI to request approval from the legislature’s Joint Finance Committee to exceed the $200 million expenditure limit without having to use any state funds.

Ensuring the ability of WIHSP to hold down rates in the individual market is both a priority and a key challenge.  The program’s experience in 2021, as well as actuarial estimates for future plan years, highlighted the fact that $200 million could not sustain a meaningful impact on market rates. For example, in working with OCI’s contracted actuarial consulting firm to project claim amounts for plan year 2022, it was estimated that using the same payment parameters from plan year 2021 would result in total eligible claims likely exceeding the total expenditure authority by almost $30 million.  Adjusting the payment parameters to limit program spending to $200 million would reduce the impact of WIHSP and potentially undermine the goal of market stability and affordability.

In response, OCI successfully worked with stakeholders to include a provision in the State Biennial Budget to increase the WIHSP expenditure authority to $230 million beginning with plan year 2022. Although this amount is expected to fully cover all eligible claims in 2022, more expenditure increases may be needed in future years if claims trends continue as they have over the past four years.

Additionally, federal policy and program changes will likely impact individual market rates in the near future, and thus, the extent that WIHSP is able to offset consumer premiums. The potential for the American Rescue Plan subsidies to expire at the end of the year and the process of unwinding Medicaid enrollment in the coming months are two impending changes that raise questions about the potential impact to Wisconsin’s individual health insurance market.

Since the passage of the legislation that created the Wisconsin Healthcare Stability Plan in 2018, this program has been widely supported by stakeholders and legislators from both sides of the aisle. WIHSP has received full funding in the last two biennial state budgets, which were signed by Governor Tony Evers and approved by the Republican-controlled legislature.

As the Office of the Commissioner of Insurance continues to administer WIHSP, we remain optimistic that the strong bi-partisan support for the program will allow us to respond to challenges that arise in the future and ensure that we continue to have a stable, competitive, and affordable individual health insurance market in Wisconsin.