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Lombardo to move forward with public option with a new twist — reinsurance

Nevada would be the sole state to fund the reinsurance program with only federal funding. Most states use a combination of state and federal funds.
Tabitha Mueller
Tabitha Mueller
Health CareState Government

Despite his well-documented hostility to a state-managed public health care option, Gov. Joe Lombardo’s administration is moving forward on implementation with a twist — establishing a reinsurance program for the state.

As part of implementing the public option, state officials are applying for a federal State Innovation Waiver, which allows states to apply for funding to help increase access to high-quality, affordable health insurance.

Although filing for that waiver is required under the 2021 state law that set in motion the state’s move to a public option, the Lombardo administration plans to specify that the waiver establishes a reinsurance program — a system that essentially works as insurance for insurance companies, paying a portion of high-cost claims and thus allowing insurers to lower the premiums for individual health insurance plans.

As reinsurance programs help lower insurance premiums, the amount of federal dollars spent on Affordable Care Act (ACA) tax credits also goes down. Instead of reverting those dollars, the federal government passes that money through to the state to help fund the reinsurance program and maintain lower premiums and market stability.

“My plan to use these new federal funds to support our state’s healthcare infrastructure and workforce will help offset the instability created by the public option,” Lombardo said in a statement to The Nevada Independent. “Reinsurance is a proven method of protecting consumers and will help Nevadans avoid the higher costs of insurance they would face through the cost-shifts driven by the public option.”

The public health insurance option aims to leverage the state’s purchasing power with Medicaid managed care organizations — private insurance companies that contract with the state to provide insurance coverage to low-income populations, children, pregnant people and people with disabilities — to get insurers to also offer public option plans. Those plans will resemble existing qualified health plans on the state’s health insurance exchange, though they will be required to be offered at a 4 percent markdown with the goal of reducing the plans’ premium costs by 15 percent over four years. 

“The governor is committed to implementing Senate Bill 420 in good faith and in doing so in a responsible manner,” said Nevada Medicaid Administrator Stacie Weeks during the Wednesday Interim Finance Committee (IFC) meeting where she unveiled the plan.

But implementing a reinsurance program through the public option represents a significant philosophical shift from the original law.

Though Sen. Majority Leader Nicole Cannizzaro (D-Las Vegas) spearheaded the 2021 public option law, the executive branch has authority over what the public option waiver requests from the federal government. Because the law is already going into effect, it’s unclear whether Democrats could take any steps to change the governor’s course of action.

In an emailed statement Friday afternoon, Cannizzaro celebrated that Lombardo had “reversed course and embraced his legal obligation to implement” the public option.” She did not directly address the governor’s reinsurance proposal but noted “many details of the Governor’s revised plan” were forthcoming and likely to be discussed at a December IFC meeting.

“We have an exciting opportunity to bring unprecedented federal investment into our state’s health care system and lower the costs Nevadans pay for individual health insurance plans,” she said. “We shouldn’t waste it.”

Weeks said that Lombardo’s administration intends to use the federal waiver to stipulate that the estimated $500 million in federal funding from adopting the public option will go through a waterfall, or three “buckets” targeted at stabilizing the health care market. The funding would only proceed to the next tier if the financial needs of the first tier are met.

The first funding priority would be the creation of a reinsurance pool. The second would establish an incentive payment program for health care insurers offering public option plans meeting certain targets and goals (allowing insurers to recoup dollars lost through lowered premiums required under the public option law); and the third would invest in the health care workforce (money that could be used to incentivize health care providers by offering loan forgiveness to providers working in underserved communities for at least four years).

The use of the State Innovation Waiver for a state-based reinsurance program is not new. Seventeen out of 19 states that received approval for the waiver have used the funding for a state-based reinsurance program. Hawaii used the waiver to replace a program providing small business tax credits that had to end because it conflicted with the Affordable Care Act. Washington used the waiver to allow all state residents, regardless of immigration status, to enroll in qualified health plans. 

Per the governor’s office plan, Nevada would be the sole state to fund the reinsurance program with only federal funding — most states use a combination of state and federal funds. The basis for this is because of premium reduction targets set by the public option. 

“What's nice about this avenue is that it would be free to the state, and we would design the program around how much funding we would get,” Weeks said. “And that would be what we would prioritize the funding for and then at whatever money would be leftover in the future years we would use … for the incentive payment program focused on quality.”

Previously, Lombardo called the public option “bullshit” on the campaign trail and “political theater” during his State of the State address earlier this year, advocating for a significant revision or outright repeal. 

However, with the plan for the waiver, Weeks said that the governor views this as a “market stabilization program” that will invest in the entire health care system and deliver a better return on investment for health care consumers in the state.

Though the plan is still largely conceptual, additional details will solidify during the creation of the waiver, including two federally mandated public comment periods that open on Oct. 16 and end on Dec. 6. Officials are still finalizing the scheduled dates for the meetings, and the state will need to complete an updated actuarial analysis.

During the Interim Finance Committee meeting Wednesday, state lawmakers expressed concerns about unveiling a new plan less than four months before the waiver is due and noted that details of the plan had not been shared prior to the meeting. 

Weeks responded that officials can amend the waiver as part of the submission process and she said she believes this plan will strengthen the public option.

“I think we need reinsurance to ensure that the high costs that are in our market are covered and that any risks associated with the public option being new in the market can be addressed,” she said. “It will actually bring in more than we anticipated.”

State officials must submit the federal waiver application by Jan. 1, 2024, under the 2021 public option law. The federal government will then have 45 days to determine if Nevada’s application is complete and an additional 180 days to evaluate the application.

This story was corrected on 10/12/2023 at 8:32 a.m. to indicate that insurers will be required to offer public option plans at a 4 percent markdown instead of 5 percent. 

This story was updated on 10/13/2023 at 1:08 p.m. to include a statement from Sen. Majority Leader Nicole Cannizzaro (D-Las Vegas).


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