Oregon's Reinsurance Program Cuts 10.7 Points From 2027 Health Rates

Oregon’s approved 2027 individual health insurance rates rose 21.6% on average, and the state’s 1332 reinsurance waiver subtracted 10.7 percentage points from that filing (Oregon Division of Financial Regulation, August 18, 2026). A state reinsurance program never touches a carrier’s claims experience directly. It reroutes the highest-cost claims into a separately funded pool before that experience reaches index-rate development, which is how the credit and the increase coexist in one rate order.

The Division of Financial Regulation’s final rate order, issued August 18, closed a filing season that had already drawn attention for its size. Trend, morbidity, and carrier exits pushed the net number to 21.6% even after the credit. Strip the credit out, and the gross cost pressure on Oregon’s individual market runs closer to 32 points.

Key Takeaways

• Approved 2027 individual rates rose 21.6% on average, but the Oregon Reinsurance Program offset 10.7 percentage points of the filing, implying gross cost pressure near 32 points.
• One full point of that credit was bought by $15 million in new state funding for 2027, a rare public link between a marginal reinsurance dollar and a marginal rate effect.
• Federal 1332 pass-through funding fell from $86.0 million in 2025 to $65.4 million in 2026, and for the first time in the program’s nine years of reducing filed rates, Oregon backfilled the shortfall with state assessment dollars.
• The final individual number landed 4.1 points above carriers’ original 17.5% weighted-average ask, driven by a near-13% enrollment decline and the exits of Providence Health Plan and PacificSource.
• The program’s CMS authorization ends after plan year 2027, so 2028 rate indications must carry an explicit renewal-risk assumption on a credit worth nearly half the net increase.

The Gross-to-Net Bridge Behind 21.6%

Individual market carriers requested a weighted average increase of 17.5% in May (ACA Signups, Oregon 2027 rate tracker). The requests spanned a wide range.

Carrier	Requested 2027 increase
BridgeSpan Health	11.7%
Regence BlueCross BlueShield	12.2%
Moda Health	25%

Moda attributed 4 of its 25 points directly to the expiration of enhanced federal premium tax credits (ACA Signups). By the time DFR finalized rates three months later, the approved average had climbed past every carrier’s original ask to 21.6%. Small-group plans landed at 15.5%, roughly where DFR had proposed back in June (Oregon DFR, August 18, 2026).

DFR’s release pairs the two figures that matter: individual rates rose 21.6% on average, and the Oregon Reinsurance Program’s offset averaged 10.7 percentage points of that filing. Read together, they describe a gross-to-net bridge. Before the credit reaches the index rate, the underlying cost pressure runs closer to 32 points: medical trend, pharmacy and tariff-driven durable-equipment cost growth, and a morbidity load from a shrinking, sicker-skewing risk pool.

That is a materially larger credit than the programs operating in most of the other thirteen 1332 states and the District of Columbia that the Peterson-KFF Health System Tracker reviewed for 2027. The median proposed increase across that group came to 14% (Peterson-KFF Health System Tracker, 2027 brief).

Oregon’s carriers were asking for more than that median before reinsurance ever entered the calculation. The state’s final approved number, even net of a double-digit credit, still landed well above it. The reinsurance program is not making Oregon’s 2027 market look normal. It is preventing an outlier gross number from becoming an outlier net one.

What the Marginal $15 Million Bought

The most granular detail in DFR’s release ties a dollar figure to a rate effect. Of the 10.7-point credit, a full percentage point came from an additional $15 million the state added to the 2027 program budget, on top of what was already funded (Oregon DFR, August 2026).

That is a rare piece of public rate-filing data. Roughly $15 million of marginal reinsurance funding bought roughly one point of statewide individual-market premium relief. Most reinsurance-program news coverage reports only the aggregate percentage. Oregon’s filing lets a reader back out the marginal rate of return on the state’s last dollar of funding.

A Shrinking Federal Pass-Through

That elasticity did not appear in a vacuum. Oregon’s federal 1332 pass-through funding, the money CMS returns to the state because lower gross premiums reduce federal premium tax credit outlays, has been sliding (CMS, Oregon 1332 pass-through funding letters, 2023-2026).

Calendar year	Federal pass-through funding
2023	$77.1 million
2025	$86.0 million
2026	$65.4 million

As enhanced subsidies expired and enrollment thinned, the pass-through formula, built around the premium tax credits the reinsurance program indirectly saves the federal government, has less subsidy spending to redirect back to Oregon. The state’s $15 million top-up is a direct response to that shortfall. With the automatic pass-through shrinking, DFR reached for state insurance-assessment dollars to hold the credit near its historical size.

The program is now in its ninth consecutive year of reducing filed rates. This is the first time state officials have had to backfill a declining federal input with new state money to keep the percentage credit from eroding.

How a 1332 Waiver Reaches the Index Rate

The mechanism explains why a reinsurance dollar and a subsidy dollar do not have the same effect on a filed premium. Oregon’s waiver is one of seventeen state 1332 reinsurance waivers CMS has approved nationally. It permits the state to exclude expected reinsurance payments from the ACA’s single risk pool requirement, which otherwise would force insurers to price as if they were bearing the full cost of their highest-severity claims (CMS, Section 1332 State Innovation Waivers).

Structurally, most state programs, Oregon’s included, are claims-cost models (SHADAC, State-Based Reinsurance Programs via 1332 Waivers). Once an enrollee’s covered claims exceed a defined attachment point, the reinsurance pool reimburses a set coinsurance percentage of costs above that threshold, up to a ceiling.

Inside the CMS Unified Rate Review Template, that reimbursement flows through a defined sequence:

• The carrier’s actuary builds base period claims experience and applies trend and morbidity adjustments.
• Expected reinsurance recoveries are netted out as a negative adjustment to projected allowed costs, the same worksheet cell where risk adjustment transfers and other market-wide adjustments land.
• The credit is baked into the index rate before plan-level factors, network differentials, or age curves are applied, so its effect scales proportionally across every plan a carrier sells on and off the exchange.

That is also why the credit shows up as a flat percentage in DFR’s release rather than a dollar figure per enrollee. It is a rate-level adjustment, not a per-claim subsidy an individual policyholder sees.

2027 Is the Last Authorized Year

Oregon’s current extension, approved by CMS for plan years 2023 through 2027, makes 2027 the final year of the state’s existing five-year authorization (Oregon DFR, five-year extension announcement, 2022). Renewal beyond 2027 is not automatic. It requires a new state application and a new CMS approval. Because the shrinking federal pass-through already forced Oregon to substitute state dollars for federal ones in 2027, the next extension cycle will be negotiated against a materially different funding baseline than the one the program launched under.

Why the Approved Number Beat the Original Ask

The sequence between May and August explains the size of the final jump. In its June update on the preliminary filings, DFR said it intended to trim both markets’ requests, a combined reduction it estimated would save consumers and businesses about $30 million relative to what carriers had originally filed. The final order held that line for small group only (DFR rate order coverage, Elkhorn Media Group, August 2026).

Market	May request	June DFR proposal	August final
Individual	17.5%	~16%	21.6%
Small group	17%	~15.5%	15.5%

The final individual number came in not below the original 17.5% ask but 4.1 points above it. DFR’s own explanation cites “new data and updated rate requests” behind the revision.

Enrollment Contraction and Carrier Exits

The most consequential piece of that new data is the market’s own contraction. Oregon’s individual market enrollment fell from roughly 161,000 people in 2025 to about 140,000 in 2026, a decline of nearly 13%. Small-group enrollment slipped a comparatively modest 6%, from about 142,000 to 134,000 (figures reported via DFR budget materials, Grants Pass Tribune, August 2026).

Two carrier exits were still being finalized as carriers revised their spring filings (ACA Signups, Oregon carrier exit tracking):

• Providence Health Plan decided to exit most of its Oregon insurance operations, after covering more than 421,000 Oregonians across all plan types.
• PacificSource withdrew fully from the individual market.

Every enrollee those two carriers are not renewing has to land somewhere. A residual pool redistributed from an exiting carrier skews older and sicker than the market average. That is exactly the kind of late-arriving morbidity signal a May filing, built on data collected before an exit was contractually final, would understate.

DFR’s release names the same underlying drivers: continued marketplace uncertainty from the loss of enhanced ACA subsidies, heightened medical costs, and tariff pressure on durable medical equipment and pharmaceuticals. It adds that carriers “gained more experience in the market and re-evaluated their market presence” between the spring and summer filing windows.

A Different Trajectory for Small Group

The small-group market’s stability against that backdrop is the clearer of the two data points, precisely because it did not move. Carriers requested 17% in the spring, DFR signaled roughly 15.5% in June, and the final order landed at 15.5%, with some plans seeing cuts as steep as 8% (Elkhorn Media Group, August 2026).

Small-group risk pools are employer-anchored rather than individually underwritten choice pools, so they are far less exposed to the adverse-selection dynamic driving the individual market. An employee does not typically drop employer coverage the way an individual-market enrollee drops an unsubsidized plan when the net premium rises. Small-group enrollment fell 6% against the individual market’s nearly 13%. That gap in exposure to voluntary lapse is a large part of why one market absorbed a mid-cycle regulatory reversal and the other did not.

State Rep. Cyrus Javadi, a Tillamook dentist who sits on the House Health Care Committee, framed the small-group burden in terms familiar to any pricing actuary explaining a rate action to a non-technical audience: “I know that for someone running a small business, working for themselves, or working a job that doesn’t provide health insurance, a big increase in premiums can be a serious burden” (Grants Pass Tribune, August 2026).

A 15.5% increase is still a serious number for an employer group. But it is built on a comparatively stable loss-cost trajectory rather than the compounding morbidity spiral reshaping the individual book.

Reinsurance Continuation as a Pricing Assumption

For carriers and their pricing actuaries, the program’s continuation has become an explicit rate assumption, not a background policy detail. A credit worth 10.7 points of premium is nearly half the size of the entire net rate increase. Its disappearance would not shave a few points off next year’s filing; it would swing the gross rate double digits in a single cycle.

Because Oregon’s CMS authorization runs only through plan year 2027, a carrier building a 2028 rate indication now has to price three linked uncertainties:

• Whether the state secures a new five-year extension at all.
• How large a future credit would be if it does.
• Whether a federal pass-through that has already fallen from $86.0 million to $65.4 million in two years keeps shrinking, forcing the state to keep substituting its own assessment revenue to hold the credit steady.

That is a different kind of assumption than a standard trend or morbidity load. It depends on a legislative and regulatory approval process external to the insurance market, not on claims experience a carrier’s own actuaries can project. A carrier that treats the 10.7-point credit as a fixed, permanent feature of its 2028 and 2029 index-rate development is making an implicit bet on a state budget appropriation and a federal waiver renewal. Both carry more binary risk than a trend assumption ever does.

The Oregon filing is a live illustration of what a state reinsurance program is actually worth in dollar terms to a rate filing, and of how exposed that value is to funding sources that, unlike claims trend, do not move gradually.