JD Vance policy on health care, reinsurance: How might it work?

WASHINGTON — During the vice presidential debate Tuesday, Republican nominee JD Vance at long last provided a bit more clarity to the Trump campaign’s vague notions for making health insurance more affordable.

And, ironically, he referenced a plan that has been successfully executed by his Democratic opponent, Gov. Tim Walz, in Minnesota.

Asked to flesh out former President Trump’s “concept of a plan” for improving on the Affordable Care Act, Vance in prior campaign stops had said Trump wants to deregulate the Affordable Care Act and sort people into risk pools to provide different insurance depending on how sick people are. On Tuesday, Vance clarified that he was referring to “reinsurance regulation” that the Trump administration implemented.

To health policy experts like Cynthia Cox who leads the ACA program at the nonpartisan health policy research and polling firm KFF, Vance’s comment pointed to pilot programs that the Trump administration used to permit states to try to lower premiums in Affordable Care Act exchanges.

Now we’re getting somewhere.

Reinsurance is basically insurance for insurers that sell plans on Affordable Care Act exchanges. The federal government has permitted 17 states of varying political persuasions to help cover the cost of insuring patients with extremely high medical bills. Once a patient reaches a certain dollar amount in medical claims, the reinsurance program helps pay a portion of their bills. With these outliers with high medical bills being covered elsewhere, premiums for other patients in the insurance plan go down.

The state programs are designed to break even financially. It’s a circular system, according to Cox. Although the states make up-front payments to help pay for sick patients’ medical costs, they ultimately are made whole. When premiums go down, the amount the federal government pays to subsidize premiums goes down as well, and states get to keep the difference.

Minnesota was an early adopter of the pilot program, which has been a success in lowering premiums there.

“Minnesota has a reinsurance waiver that I haven’t heard Gov. “Walz complain about,” said Theo Merkel, a former Trump White House adviser who’s now working on health policy at the right-leaning think tanks the Paragon Health Institute and the Manhattan Institute.

Minnesota started its program under Walz’ predecessor in 2018, and Walz renewed it in 2022. The program, which was initially authorized by a Republican legislature and approved by the Trump administration, lowered premiums 15% to 20% for people who buy insurance on their behalf own during its first four years, according to the state’s Commerce Department.

A RAND Corporation analysis of Minnesota’s program found that people with income too high to qualify for federal help paying monthly premiums benefited the most and saw “significant savings,” while low-income patients didn’t see much impact on their premium costs.

“It really gave some relief to those unsubsidized people who had incomes that were too high to qualify for subsidies, without really doing any harm,” said Peter Nelson, who worked to implement Minnesota’s reinsurance program before taking a job in the Trump administration working on insurance regulations.

The reinsurance program in Minnesota is on its way out, however, after the state legislature in May passed legislation to create a public insurance option that would begin as early as 2027, pending funding and federal approval.

It’s not clear what Vance wants to do differently from the tools that are already available to states, as he didn’t explicitly endorse a broader national program. To complicated matters, the word “reinsurance” could apply to various plan structures. Vance’s office and the Trump campaign did not immediately respond to questions about his plan.

Democrats have seen an opportunity in the lack of detail about Trump’s and Vance’s health care policies to accuse them of trying to return to a world before the Affordable Care Act when healthy and sick people were sorted out into different insurance plans, which made plans for sick people too expensive for many to afford.

Walz said during the VP debate that letting insurers sell healthy and sick people separate types of plans would end up pricing out people with high medical costs.

“What Senator Vance just explained might be worse than just a concept,” Walz said. “Because what he explained is pre-Obamacare.”

Those protections remained in place when states adopted reinsurance pilot programs, and Vance has repeatedly said a second Trump administration would maintain those protections — although Trump in his first term tried to do away with the Affordable Care Act entirely.

“They loved the failure [to repeal the Affordable Care Act] in 2017 and are trying to conjure up images of it, even though that’s not what Vance is saying,” Merkel said.

Reinsurance programs haven’t been needed as much since Democrats in 2021 passed a law that provided extra funding to lower ACA exchange premiums for low- and middle-income people. However, that financial help runs out after next year. A big fight is expected in Congress over whether to extend that financial aid.

Sabrina Corlette, founder of the Center on Health Insurance Reforms at Georgetown University’s McCourt School of Public Policy, said a national reinsurance plan could probably get bipartisan support, depending on how it’s done. She cautioned, however, that Vance has not said that’s the Trump campaign’s plan.

She also said reinsurance is not a substitute for the additional financial help that runs out after next year. Nonpartisan congressional budget experts estimate that nearly 4 million people would drop their insurance if the financial aid goes away.