New insurance guidelines would undermine rules of the Affordable Care Act–alert-national&wpmk=1

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The Trump administration is urging states to tear down pillars of the Affordable Care Act, demolishing a basic rule that federal insurance subsidies can be used only for people buying health plans in marketplaces created under the law.

According to advice issued Thursday by federal health officials, states would be free to redefine the use of those subsidies, which began in 2014. They represent the first help the government ever has offered middle-class consumers to afford monthly premiums for private insurance.

States could allow the subsidies to be used for health plans the administration has been promoting outside the ACA marketplaces that are less expensive because they provide skimpier benefits and fewer consumer protections. In an even more dramatic change, states could let residents with employer-based coverage set up accounts in which they mingle the federal subsidies with health-care funds from their job or personal tax-deferred savings funds to use for premiums or other medical expenses.

If some states take up the administration’s offer, it would undermine the ACA’s central changes to the nation’s insurance system, including the establishment of nationwide standards for many kinds of health coverage sold in the United States.

Another goal of the ACA, the sprawling 2010 law that was President Barack Obama’s preeminent domestic accomplishment, was to concentrate help on the individual insurance market serving people who do not have access to affordable health benefits through a job. Prices were often out of control and discrimination against unhealthy people was more prevalent before the ACA imposed required benefits, prohibited insurers from charging more to people with preexisting conditions and created a federal health exchange and similar state-run marketplace in which private insurance companies compete for customers.

The ACA health plans have been the only ones for which consumers can use the subsidies, designed to help customers with incomes up to the middle class — 400 percent of the federal poverty line — afford the premiums.

The new advice, called “waiver concepts” because they are ideas for how states could get federal permission to deviate from the law’s basic rules, stray from both of those goals. And it would allow states to set different income limits for the subsidies — higher or lower than the federal one.

The day before they were released by Seema Verma, administrator of the Department of Health and Human Services’ Centers for Medicare and Medicaid Services, an analysis by the Brookings Institution questioned the legality of the content and method of these concepts. The analysis by Christen Linke Young, a Brookings fellow and HHS employee during the Obama administration, contends that “there are serious questions” about whether the changes are allowable under the law and that “at the very least, it is likely invalid” for CMS to issue the advice to states without going through the formal steps to change federal regulations.

In a statement Thursday, HHS Secretary Alex Azar said: “The Trump administration is committed to empowering states to think creatively about how to secure quality, affordable healthcare choices for their citizens.” He said the four recommendations issued Thursday, including new accounts in which consumers could pool federal subsidies and other funds, are intended to “show how state governments can work with HHS to create more choices and greater flexibility in their health insurance markets, helping to bring down costs and expand access to care.”

In a midday speech before a gathering of the conservative American Legislative Exchange Council, Verma delivered a broadside against the health-care law in explaining the rationale for freeing states to rework health policies on their own. “It was such a mistake to federalize so much of health care in the ACA,” said Verma, who worked as a consultant to states before becoming one of Trump’s senior health-care advisers. While the law sought to make health coverage more available and affordable, she said, “the insurance problem has not been solved. For many Americans it’s even been made worse.”

In urging states to consider the changes, CMS is renaming a provision of the law, known as 1332, which until now has mainly been used to give states permission to create programs to ease the burden on insurers of high-cost customers. CMS is switching the name to “State Relief and Empowerment Waivers,” emphasizing the administration’s desire to hand off health-care policies to states.

The changes go beyond a variety of other steps Trump administration health officials have taken in the past year to weaken the ACA, which the president has opposed vociferously.

Until now, they have focused on bending the ACA’s rules for health plans themselves. The administration has rewritten regulations to make it easier for Americans to buy two types of insurance that is relatively inexpensive because it does not contain all the benefits and consumer protections that the ACA typically requires.

The new steps go further by undercutting the basic ACA structure of the individual insurance marketplaces created for those who cannot get affordable health benefits through a job.

During a conference call with journalists, Verma said that no state would be allowed to retreat from a popular aspect of the ACA that protects people with preexisting medical conditions from higher prices or an inability to buy coverage.

She said that, in evaluating states’ proposals, CMS would focus on several considerations, including whether changes would foster comprehensive coverage and affordability and would not increase the federal deficit. She said federal officials would favor proposals that help, in particular, low-income residents and people with complex medical problems.

Verma reiterated an administration talking point that insurance rates have escalated since the ACA was passed and that health plan choices within ACA marketplaces have dwindled. However, the current ACA enrollment period, lasting until mid-December, is different from the previous few because prices for the most popular tier of coverage have stabilized in many places and more insurers are taking part in the marketplaces.


ACA Waiver Changes

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In broad strokes, the bipartisan deal from Senators Alexander and Murray would restore cost-sharing payments through 2019 in exchange for some amendments to the rules governing ACA waivers. Now that we have the bill text, we can start to wrap our hands around the practical effects of those waiver changes.

Most importantly, the bill would relax one of the guardrails governing state waivers. In its current form, section 1332 of the ACA requires any waiver to include cost-sharing protections that are “at least as affordable” as those in the ACA. Under the new bill, the waiver would just have to provide “cost sharing protections against excessive out-of-pocket spending that are of comparable affordability, including for low-income individuals with serious health needs, and other vulnerable populations.”

To my eyes, that’s a pretty modest change. The category of waivers with cost-sharing protections that are “of comparative affordability” to those in the ACA, but are not “at least as affordable,” is tiny. The new language may signal that HHS could approve waivers where the states would offer protections are slightly less robust than what we’ve already got under the ACA. But that’s it.

There’s been some talk that the language change might allow the approval of Iowa’s waiver. I don’t see it. As I understand it, Iowa wants to undo cost-sharing protections for its residents.* [See the update below; Iowa’s position has softened from its original waiver proposal.] How is an absence of cost-sharing protections the same as “cost sharing protections … that are of comparable affordability” to those in the ACA? I’ve explained before that the decision to grant a waiver can be challenged in court. If Iowa’s waiver wasn’t viable before, it won’t be viable even if the Alexander-Murray bill becomes law.

Apart from the guardrail change, the bill would require HHS to decide on waivers within 90 days, not 180 days, which should speed processing. Of particular relevance to Iowa’s waiver, the bill also creates an expedited approval pathway of 45 days for “urgent situations.”

What’s an urgent situation? It’s one where the Secretary determines that all or part of a State is “at risk for excessive premium increases or having no health plans offered.” But there’s less than meets the eye here. An urgent waiver isn’t automatically granted when that time has elapsed: the Secretary still has to approve an urgent waiver before it can take effect. The default is still “no.”

Of perhaps greater significance, the bill would prohibit HHS from yanking a state waiver for six years “unless the Secretary determines that the State materially failed to comply with the terms and conditions of the waiver.” That last clause means that, if a state’s waiver is approved, the next Secretary of HHS can’t terminate the waiver—even if it turns out that the waiver doesn’t comply with the guardrails.

It’s not hard to see how that change might make a difference if a Democrat takes office in 2020. Still, it’s a far cry from changes to the waiver rules in previous Republican bills, which would have outright prohibited HHS from terminating waivers for eight years, however recklessly or foolishly states spent their ACA money.

Finally, the legislation would undo HHS guidance and regulations pertaining to waivers. The Obama administration, for example, declined to allow states to package their 1332 waivers with Medicaid waivers, and use savings from one waiver to offset an increase in spending from the other. The field would be clear for the Trump administration could revisit that. Then again, the Trump administration could have revisited those Obama-era rules anyhow, so I can’t see why vacating the regulations and guidance makes much of a difference.

All in all, the changes to the waiver rules are real but minor. To borrow from Hamilton, it looks like Senator Murray got more than she gave, and wanted what she got.

* Update: David Anderson has pointed me to an October 5 revision that Iowa made to its waiver request that would extend cost-sharing protections to individuals up to 200% of the poverty line (the ACA affords protection up to 250%). With those protections in place, Iowa says that people up to 150% of poverty “will not see an increase in their out-of-pocket costs,” and that people between 150% and 200% of poverty will have a “lower average total cost of care,” taking into account premiums and out-of-pocket spending. Those in the 200% to 250% range won’t receive out-of-pocket protections.

Are Iowa’s revised cost-sharing protections comparably affordable to those under the ACA? The protections are certainly thinner, and for people in the 200% to 250% range, nonexistent. Whether that package as a whole is “comparable” is a question of degree: I can see an argument either way. Which is to say that the revised Iowa waiver might be approved under the new standard, but I wouldn’t be surprised to see a lawsuit over any such approval.

Section 1332 State Innovation Waivers: Current Status and Potential Changes

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Section 1332 of the Affordable Care Act (ACA) authorizes states to waive key requirements under the law in order to experiment with different health coverage models. As Republicans in Congress debate repeal and replacement of the ACA, renewed attention is being paid to these waivers as a mechanism for giving states flexibility to restructure their health care markets. The waiver authority is generally broad, though certain process and outcome standards must be satisfied. State interest in 1332 waivers to date has been limited; however, changes to the statutory waiver requirements included in the Senate Better Care Reconciliation Act of 2017 (BCRA) or other signals from the Trump administration could spark increased state action. This brief describes current 1332 waiver activity and raises questions regarding the future of these waivers, particularly in the context of proposed changes under discussion.

What Does Section 1332 Allow?

Beginning in 2017, states can request 5-year waivers of certain ACA provisions through Section 1332. States may seeks waivers of requirements related to the essential health benefits (EHBs) and metal tiers of coverage (bronze, silver, gold, and platinum) along with the associated limits on cost sharing for covered benefits. They may alter the premium tax credits and cost-sharing reductions, including requesting an aggregate payment of what residents would otherwise have received in premium tax credits and cost-sharing reductions. States may also modify or replace the marketplaces and change or eliminate the individual and/or employer mandates (See Appendix A for more detail on these provisions).

The ACA includes guardrails limiting how 1332 waivers can be used by states. The current statutory language requires that state waiver applications must demonstrate that the innovation plan will:

  • Provide coverage that is at least as comprehensive in covered benefits;
  • Provide coverage that is at least as affordable (taking into account premiums and excessive cost sharing);
  • Provide coverage to at least a comparable number of state residents; and
  • Not increase the federal deficit.

Additionally, while states can submit ACA innovation waivers in conjunction with Medicaid waivers (under Sec. 1115 of the Social Security Act), innovation waivers cannot be used to change Medicaid program requirements.

In 2012, the Department of Health and Human Services (HHS) issued final regulations outlining the procedures for state innovation waiver applications. In 2015, HHS and the Treasury Department issued guidance on how they would interpret the law’s requirements for waivers to provide for comparable coverage, comprehensiveness, affordability, and budget neutrality. Unlike regulations and statutes, guidance is not legally-binding, and therefore, can be more easily changed by subsequent administrations.1 On his first day in office, President Trump issued an executive order suggesting that states would be given increased flexibility with regard to ACA implementation.

The 2015 guidance offered a fairly strict interpretation of the statutory guardrails for 1332 waivers. It emphasized the need to protect access to care and affordability for vulnerable populations, including the poor, the elderly, and those with high health needs and risks, noting that impacts on these populations would be considered in assessing whether any waiver met the statutory guidelines. The guidance also specified that coverage and affordability would be measured annually as well as over the life of the waiver and that comprehensiveness of coverage would evaluate coverage under all ten essential health benefit (EHB) categories and under any one EHB category. In calculating deficit neutrality, states cannot use savings from a separate 1115 waiver to offset spending under a 1332 waiver, and any changes in the cost of Medicaid that might result from a waiver would also be measured. Finally, with respect to waiver administration, the guidance noted that to the extent waiver programs envision new methods for determining eligibility for or delivering subsidies, states would need to build their own systems and could not rely on IRS or HHS to customize operations of or the federal tax system to accommodate individual state programs.

Changes to state innovation waivers in the Senate health bill undermine coverage and open the door to misuse of federal funds

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Editor’s Note:This analysis is part of USC-Brookings Schaeffer Initiative on Health Policy, which is a partnership between the Center for Health Policy at Brookings and the University of Southern California Schaeffer Center for Health Policy & Economics. The Initiative aims to inform the national health care debate with rigorous, evidence-based analysis leading to practical recommendations using the collaborative strengths of USC and Brookings.

On June 22, Senate Republicans released their much-awaited health reform bill, the Better Care Reconciliation Act of 2017 (BCRA). Much attention has rightfully focused on the bill’s myriad changes to the Medicaid program and to subsidies for the purchase of private insurance. But the legislation also makes potentially highly impactful changes to state innovation waivers, which are included in section 1332 of the Affordable Care Act (ACA).

Under current law, section 1332 provides broad flexibility for states to waive key ACA provisions so long as health coverage is not jeopardized and federal deficits not increased. Waivers can affect a wide range of provisions, including the premium tax credit, the definition of essential health benefits, the requirement that insurance plans cap annual out-of-pocket spending, and the requirement for states to operate a Marketplace, among others.

The changes in the Senate bill would upset this structure, removing the coverage-related guardrails and thereby opening the door for states to pursue waivers that would result in substantial losses in health coverage and affordability. The weakened guardrails would also allow states significant latitude to misuse federal health care dollars.

CMS Checklist For State 1332 Waivers Focuses On High-Risk Pools, Reinsurance

On May 11, 2017, the Centers for Medicare and Medicaid Services and the Department of the Treasury released a checklist for state 1332 innovation waiver applications. Following up on Health and Human Services Secretary Price’s letter to state governors of March 13, 2017, the checklist specifically focuses on state 1332 proposals to support high-risk pools or reinsurance programs.

Indeed, the checklist begins by stating:

The Department of Health and Human Services and the Department of Treasury (the Departments) are interested in working with states on Section 1332 waivers that would lower premiums for consumers, improve market stability, and increase consumer choice. In particular we welcome the opportunity to work with states to pursue Section 1332 waivers incorporating a high-risk pool/state-operated reinsurance program. State-operated reinsurance programs have a demonstrated ability to help lower premiums, and if the state shows a reduction in federal spending on premium tax credits a state could receive Federal pass-through funding to help fund the state’s reinsurance program.

The checklist restates the procedural requirements that states must meet under the current 1332 rules, such as posting a notice of the waiver proposal and accepting comments for at least 30 days, holding two public hearings, and consulting with Indian tribes where relevant.

Most elements in the checklist, however, describe specifically what information states must submit with applications for a 1332 waiver involving a reinsurance or high-risk pool program. While states must generally document state legislative authority to operate a 1332 waiver program, a state seeking a waiver to operate a high-risk pool or reinsurance program must establish that the legislation makes the program contingent on 1332 waiver approval or that the program will only become operational if the waiver is approved. Otherwise, the state would not be able to establish that federal 1332 waiver pass-through funding was necessary for the program.

A state must specify the provisions of the ACA it proposes to waive, which might, a footnote explains, include the ACA’s single-risk pool requirement for a reinsurance or high-risk pool proposal. State 1332 waiver proposals must include economic and actuarial data and analyses documenting the effect of the proposal on coverage and on comprehensiveness and affordability of coverage. A reinsurance/high-risk pool proposal would have to describe a baseline of premiums and coverage without the waiver and then compare this to projections of coverage and premiums under the waiver.

Proposals for 1332 waivers must explain how they would affect federal budget neutrality. A state seeking a reinsurance or high-risk pool waiver must establish a baseline of federal expenditures without the waiver and then show how federal expenditures or revenues for premium tax credits, shared responsibility payments, exchange user fees, and health insurance provider fees would change if the proposal is implemented.

States must further submit a timeline for implementation. They must describe whether they would use a condition-based list for a reinsurance program or an attachment-point-based model and the incentives they would offer providers, insurers, and enrollees to manage health care costs and utilization. They must describe how the program would affect other provisions of the Affordable Care Act and how it would provide out-of-state coverage for those who need it. States must report the actual second-lowest-cost silver benchmark plan premium annually, as well as an estimate of what it would have been without the program. The checklist further states, “For comprehensiveness, if there is no change to the provision of the ten Essential Health Benefits (EHB) identified in the benchmark plan, the state can indicate that it will report on any modifications from federal or state law on an annual basis.”

In sum, the checklist provides a roadmap for states that want to pursue high-risk pool or reinsurance 1332 waiver proposals, indicating again the priority that the Trump administration places on this approach for increasing the affordability of health insurance coverage.

20 Questions for President Trump

20 Questions for President Trump


The last six and a half years have been uncharted territory in our nation’s century-long debate over health reform. For the first time the fight was about how to implement an attempt at near-universal coverage rather over what this plan should look like and what could win enough support in Congress. The Affordable Care Act (ACA) has survived major political, legislative, and legal tests, including dozens of repeal votes, two Supreme Court decisions, the 2012 presidential election, and state-level resistance.

I was outside the Supreme Court on June 25, 2015 when the King v. Burwell decision was released. I was there the moment activists switched their signs from saying “Don’t you dare take my care” to “The ACA is here to stay.” I wrote that we could finally say with some certainty that they were right, the law is here to stay. They were wrong. I was wrong.

Donald Trump’s victory throws the future of health reform into complete chaos. He will take office in January 2017 with Republican majorities in the House and Senate. President Trump, Speaker Ryan, and Senate Majority Leader McConnell have all made repeated promises to get rid of Obamacare. They will face enormous pressure to follow through with their threats of repeal. Approximately 21 million people are projected to lose insurance if they follow through with their initial proposals.

The first step to figuring out where to go from here is understanding what decisions are on the horizon. Here are my first 20 questions about health reform under the Trump administration , in no particular order:

Could Trump loss spur ACA deal with Clinton?

With Donald Trump’s presidential campaign faltering, Republican health policy experts are gaming out Plan B for working with a Hillary Clinton administration to achieve conservative healthcare goals.

Their focus is on a possible “grand bargain” that would give conservative states greater flexibility to design market-based approaches to make coverage more affordable and reduce spending in exchange for covering low-income workers in non-Medicaid expansion states. A key element, conservative experts say, would be for a Clinton administration to make it easier for states to obtain Section 1332 waivers under the Affordable Care Act. Those waivers allow states to replace the law’s insurance exchange structure with their own innovative models.

While none are ready to sign on yet, congressional Republicans would have to agree to shore up the ACA’s struggling exchange markets by paying insurers for enrolling sicker populations and continuing to help low-income enrollees’ with cost-sharing responsibilities. House Republicans are challenging the cost-sharing subsidies in court.