(KPAX) Montana’s health reinsurance pool has been approved by the federal government -- a plan state officials say will lead to lower insurance premiums for the 50,000 Montanans buying policies on the individual market.

State Auditor Matt Rosendale, whose office regulates insurance, on Friday called it “a big step in the right direction” for those on the individual market, saying their premiums should be lower starting next year.

Gov. Steve Bullock, who also supported the 2019 law that led to Thursday’s approval by the federal government, said the plan also will make it likely that more Montanans will buy policies, by driving down costs.

The pool will act as a backdrop for high-cost claims filed against individual policies. It will be funded by 1.2 percent charge on most health-insurance premiums in Montana.

By approving the program, the Trump administration also agreed to provide federal money to the pool, covering at least two-thirds of the cost.

The cost of the fund has been estimated at $36 million to $44 million a year.

Earlier this summer, the three companies selling policies on Montana’s individual market -- PacificSource, Blue Cross and Blue Shield of Montana and the Montana Health Co-op -- said they planned to reduce premiums from 8 percent to 14 percent next year, on average.

Rosendale and insurance executives said the reinsurance pool is one reason for the expected decline in 2020 premiums.

The Trump administration approved the plan and federal participation for the next five years, starting in 2020.

Rosendale first proposed the reinsurance pool in 2017, but Bullock vetoed similar bills twice that year.

A group of insurance and health-care industry officials then formed a group that included the governor’s office and Rosendale’s office to work on a proposal for 2019, that passed.