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Insurance Commissioner Jon Godfread

About 21,000 North Dakotans will see more affordable health insurance premiums as a result of a new state program recently approved by the federal government, according to state Insurance Commissioner Jon Godfread.

He announced Thursday the approval of the state's reinsurance program, which he said could result in an estimated average rate reduction between 8% and 20% for residents who don't have insurance through their employer, or people who purchase plans on what's called the individual market.

Those on the individual market in North Dakota are generally small business owners, farmers and ranchers, who, in recent years, have seen their premiums increase, Godfread said.

"As rates have increased on the individual market, it's really pushed out those small business owners, farmers and ranchers, because they can't afford it," Godfread said.

Reinsurance is essentially insurance for insurance companies to protect them from high-dollar claims, resulting in lower premiums for consumers. The state's reinsurance program establishes a pool of federal and state money to help cover high-risk patients.

States are able to apply for permission to establish a reinsurance program under the federal Affordable Care Act. At least 10 states have reinsurance programs, including North Dakota and Colorado, which were approved Wednesday.

Godfread and state lawmakers have criticized the Affordable Care Act, which they say has driven health care costs up.

With no apparent appetite for health care reform at the federal level, Godfread said, his department launched a study two years ago to look at what the state can do to drive down premiums.

What resulted was a bill that made it's way through the Legislature earlier this year, which set the structure for the reinsurance program and authorized the state to apply for federal approval.

The state estimates about 42,000 North Dakotans get their insurance on the individual market, and about half of them do not qualify for a subsidy.

"That's a significant number in our opinion," Godfread said. "It's a big deal. And frankly, since the implementation of the ACA, they haven't received any subsidies, they haven't received any relief and they've faced year-over-year increases of health insurance."

Gov. Doug Burgum on Thursday praised news of the program's approval.

"This is a terrific example of how empowering states to seek solutions in the health care sector, rather than relying on a one-size-fits-all approach, can expand options and reduce costs for consumers," Burgum said in a statement.

Godfread said he doesn't expect the reinsurance program to "flood" the individual market, but rather "keep people that we have able to afford it."

The reinsurance program will be paid through a combination of federal funds and fees placed on insurance carriers in the state that will be based on their market share, Godfread said.

The federal government will pass down savings to the state reinsurance program, due to a drop in insurance rates and subsidies. This will equate to about $25 million to $28 million from the federal government over the next two years.

Insurance carriers will pay about $31 million for the program, according to Godfread. The fees will be tax-deductible, meaning the state's portion of the funding will ultimately be in the form of reduced tax revenues for the state.

Godfread cautioned that the reinsurance program is a short-term fix.

Included in the bill that established the program is a two-year health care study led by the state Insurance Department. Godfread said the study will look at ways to reduce the costs of health care, including pulling data from hospitals.

"The reality is, I'm not sure we're going to be able to afford this (reinsurance program) long term," Godfread said.

A sunset clause included in the law renders the reinsurance program ineffective after Dec. 31, 2021. The Legislature in 2021 will look at the results of the health care study and decide whether to reauthorize the program.

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(Reach Blair Emerson at 701-250-8251 or Blair.Emerson@bismarcktribune.com)