Bruce Tinoco is one of the reasons that Virginia decided to create its own marketplace for health insurance instead of relying on the federal government.
Tinoco, 63, knew he would pay the full price for his health insurance when he retired three years ago after a 40-plus year career in television broadcasting — and he was right. The South Richmond resident was paying $1,006 a month for a policy on the federal marketplace, and that was just for himself.
But that changed suddenly last week after Tinoco read a story in the Richmond Times-Dispatch about a sharp reduction in monthly premiums on the marketplace in Virginia because of changes in federal law under President Joe Biden and the American Rescue Plan Act.
The new law removed a cap on federal premium subsidies for anyone earning over $51,000 a year, a limit that made insurance unaffordable for many Virginians who are self-employed or, like Tinoco, retired and not yet eligible for Medicare.
After contacting the federal marketplace, Tinoco’s monthly premium fell to $415, a savings of $591 a month.
“That is huge!” he said.
But while the transformation of the federal system brought relief to Virginia consumers, at least for two years, it has complicated the state’s timetable for creating its own health insurance exchange under a law the General Assembly adopted a year ago.
The State Corporation Commission decided on March 25 to delay the launch of the Virginia Health Benefits Exchange by one year, until the beginning of 2024, to adjust to the myriad changes in federal law and regulation that have lowered the insurance premiums that prompted state action to control its own marketplace.
“It’s like trying to hit a moving target,” said Victoria Savoy, director of the new division at the SCC for the state-based exchange.
However, the changes in the federal system are “good for Virginians, so we’re happy,” Savoy said in an interview on Friday.
Sen. Jennifer McClellan, D-Richmond, and Del. Mark Sickles, D-Fairfax, who sponsored legislation last year to create the state exchange, said the delay will not hurt Virginians.
“It’s overall good news in making sure no one loses coverage, and when we transition to a state exchange, we do it as smoothly as possible,” said McClellan, who is seeking the Democratic nomination for governor in a June 8 primary.
Sickles, a leader on health care issues in the House of Delegates, said, “There are too many changes at the federal level for them to get it up and running with any certainty.”
“They were disappointed, but I think everybody understands why,” he said of the members of an advisory committee to set up the exchange.
Savoy recently informed the committee about the delay, as well as advocates, insurers and other stakeholders in the effort.
“As we continue to monitor and evaluate the evolving landscape for state-administered health benefit exchanges — in particular significant changes at the federal level in recent months — we have reached the conclusion that additional time is needed to fully and successfully transition to a state-based exchange,” she told stakeholders late last month.
In addition to federal changes, she noted recent state laws that could affect how a state exchange would operate. For example, the General Assembly adopted legislation proposed by Gov. Ralph Northam this year to establish a reinsurance plan that will require the SCC to seek federal approval for a waiver to create a separate risk pool for consumers with the most expensive medical needs.
Also, the state wants more time to work on the complex transition of information technology systems, including the connection between the insurance exchange and Virginia’s Medicaid program, run by the Department of Medical Assistance Services, to enroll eligible consumers in the program with the most benefit to them.
State and industry officials have not forgotten the political firestorm sparked by the rocky rollout of the federal marketplace at the beginning of 2014.
“Getting it right is of paramount importance, given the previous experience at the federal level,” said Doug Gray, executive director of the Virginia Association of Health Plans and a member of the advisory committee.
Gray also noted that the more generous federal subsidies will expire in two years.
“The big question is whether they make them permanent or not,” he said.
A state exchange has been a goal of health care advocates since then-President Barack Obama signed the Affordable Care Act into law in early 2010, but Virginia, then led by Gov. Bob McDonnell and a largely Republican-controlled legislature, declined to create its own marketplace or expand Medicaid eligibility under the new law.
The state expanded Medicaid under Northam in 2018, resulting in the current enrollment of more than 542,000 Virginians in the program, many of them parents who previously had not been eligible for coverage.
The same year, the Northam administration began looking for ways to reduce health insurance premiums for Virginians who earn too much to qualify for Medicaid or federal subsidies, but couldn’t afford health insurance on the private market, especially in Charlottesville and other markets with little competition among private insurers.
The state concluded a reinsurance program and a state exchange were the best options, given an ongoing political war between Democrats and Republicans in Congress over the future of an ACA program that then-President Donald Trump tried unsuccessfully to repeal. Advocates say Trump undercut the marketplace by reducing funding to help consumers find and afford coverage, and enable insurers to offer more affordable plans.
The administration saw a state exchange as a way to give Virginia more control over money from a federal tax to support the marketplace and use it to encourage people to enroll for coverage. The SCC governs the health plans offered on the marketplace, but not enrollment or eligibility for federal subsidies.
The legislation enacted last year calls for Virginia to transition to a full state-based exchange, effective for the plan year that begins in January 2023, “unless the commission determines that postponement of such date is necessary to complete the establishment of the exchange.”
The Biden administration has reset the marketplace system. It extended the enrollment window from Feb. 15 to May 15 and then to Aug. 15. The president signed the American Rescue Plan Act into law on March 11, widening eligibility for federal insurance premium subsidies at both ends of the income spectrum.
The law has made an estimated 390,000 Virginians eligible for “zero-dollar plans,” meaning little or no monthly premiums based on their incomes.
On the other end, people such as Bruce Tinoco, who earned too much for subsidies, now get a big break on their monthly premiums if they earn between 400% and 600% of the federal poverty level, or $51,520 to $77,280 a year for one person.
“Specifically, the lifting of the income cap made a dramatic improvement in the affordability of my health insurance,” Tinoco said.
More than 269,000 Virginians enrolled in insurance plans on the federal exchange last year, according to the Kaiser Family Foundation. This year, after Biden first extended the enrollment deadline, 14,859 Virginians enrolled between Feb. 15 and March 31. That represented a 149% increase from the previous year, even before the new law’s changes became effective on April 1.
The law also made people who received unemployment insurance last year eligible for low-cost coverage and covered the entire cost of premiums through September for people who have lost their jobs and have to pay for replacement insurance under the federal COBRA program.
“It’s really not changing the cost of health care,” said Gray, representing insurers. “It’s changing how much you pay.”
Still, McClellan said the changes make the delay in the state exchange easier to accept.
“I’d be panicked if this was still the Trump administration,” she said. “Given the steps the Biden administration is taking to shore up the federal system, I think this will be better.”