Budget fight a premium problem

Virginia's state budget impasse is casting a shadow over a new state program that this year resulted in a 19.5% reduction in the cost individuals pay for health insurance.

The result could be a sharp rise in premium rates if the House of Delegates and state Senate cannot figure out how to resolve their $1 billion worth of differences over the budget.

The program uses state funds and a larger sum of matching federal grants to run a reinsurance program — essentially, a backstop plan that covers the cost of health insurers' biggest claims.

That reinsurance allows the insurers to cut their premium rates to reflect the benefit of the backstop. In 2023, the reinsurance program reduced premiums by 19.5%, the State Corporation Commission Bureau of Insurance said in response to questions from the Richmond Times-Dispatch.

But to offer the reinsurance next year, the draw from the state's Commonwealth Health Reinsurance Program Special Fund should increase by $10 million from what was originally budgeted for fiscal year 2024, to $38.9 million, budget documents show.

And as a condition of its contribution to the program, the federal government requires a commitment that the necessary state funds will be available.

That sum would be $216 million if the reinsurance program is to yield a 15% savings on individuals' premiums and $293 million for a 20% reduction, according to a General Assembly financial analysis when it authorized the program in 2021.

"Due to uncertainty regarding the level of state funding that will be made available, and therefore, the amount of premium reduction the SCC should seek from health insurance carriers for benefit year 2024, a zero percent premium reduction from the CHRP for benefit year 2024 may be established," the SCC said.

"Health insurers would no longer apply the rate reduction for plan year 2024 that they applied in 2023, because the CHRP would not reimburse issuers for any claims incurred in 2024. Therefore, the CHRP would not act to reduce rates in 2024," it added.

That is because the premiums insurers charge would have to be enough to cover the biggest bills that the reinsurance program now handles.

The law that set up the program says the SCC has to calculate and make public the amount of money needed for the program by May 1, but without a budget, the SCC cannot meet that requirement.

However, per the SCC, the deadline is self-imposed.

Federal administrators have not indicated that Virginia missing this self-imposed deadline would affect the state's ability to draw the federal money for next year, the SCC said.

If there is a budget agreement, if it addresses the Commonwealth Health Reinsurance Program and if the federal officials are satisfied, insurers could adjust their rate submission to reflect CHRP premium reduction until July 14, 2023 under the current rate submission timeline, the SCC said. The House of Delegates passed a budget that includes $1 billion of tax cuts proposed by Gov. Glenn Youngkin. The state Senate budget uses that money to boost state support for education.