CMS on Thursday released guidance on how states can use revamped waivers under the Affordable Care Act (ACA) to reform their health insurance markets.
Cheat sheet: What you need to know about the ACA
Background: Trump admin loosens ACA waiver restrictions
Section 1332 of the ACA allows states to apply for so-called "state innovation waivers," which allow states to use federal funding intended for the ACA to redesign their health care systems. Former President Barack Obama's administration in 2015 released guidance on the waivers that limited their scope. For example, HHS said states must demonstrate that their waiver requests would:
- Not add to the federal deficit;
- Offer health coverage to about as many residents as the current law;
- Provide health coverage with benefits at least as comprehensive as the ACA's "10 essential health benefits;" and
- Provide cost-sharing protections that would keep health coverage at least as affordable as the current law.
However, the Trump administration last month released new guidance that loosened restrictions on how states can use the waivers, and renamed the waivers as State Relief and Empowerment Waivers. CMS said state waivers under that guidance must still offer health coverage to about as many residents as the current law and must maintain access to "the same level of coverage available today." However, the guidance expanded the definition of coverage to include short-term health plans.
In addition, CMS said the guidance enabled states to:
- Broadly consider improvements in health plans' comprehensiveness and affordability—meaning states could have a larger say in which residents qualify for subsidies to help them purchase health plans, as well as which health plans qualify for subsidies;
- Seek a waiver without state lawmakers passing legislation to approve it, meaning a governor seek a waiver via executive order; and
- Redirect ACA subsidies to help consumers pay for association and short-term health plans.
CMS offers new details on how states can use ACA waivers
CMS Administrator Seema Verma during a speech at the States and Nation Policy Summit of the American Legislative Exchange Council said the guidance CMS issued Thursday builds on the guidance the agency released last month by offering recommendations on how states can use the revamped waivers.
Verma said under the new guidance, states can seek federal permission to:
- Change how they administer ACA premium subsidies, which currently are solely based on income and the cost of insurance, to account for factors such as age;
- Establish rules that enable states to use federal subsidies to help individuals purchase association health plans, short-term health plans, and other types of insurance;
- Implement risk-stabilization strategies such as reinsurance programs and high-risk pools; and
- Launch account-based programs that allow individuals to use federal subsidies for various health care expenses, including health plans that are not sold on the exchanges and that do not meet ACA requirements.
However, Verma said states could not use the waivers to change the ACA's protections for individuals with pre-existing medical conditions. "To be very clear, the ACA's pre-existing condition protections cannot be waived," she said.
According to the Wall Street Journal, the recommendations generally would increase states' flexibility to change how they distribute and structure ACA premium subsidies. For instance, states could broaden who is eligible for the subsidies, which means states could allow individuals who currently are ineligible because of their income levels to qualify for subsidies. However, industry experts note that the inverse is also true, meaning states could use the new flexibilities to limit who is eligible for federal subsidies.
For example, Sarah Lueck, a senior policy analyst at the Center on Budget and Policy Priorities, said the recommendations would allow states to "pursue policies that could reduce subsidies available for vulnerable populations, offer inadequate coverage options, or leave people with unaffordable coverage."
Industry experts say guidance will help states skirt ACA, undermine coverage protections
Some health care experts said the new guidance provides a pathway for states to skirt some of the ACA's coverage requirements after Republicans failed to repeal and replace the law in 2017. According to Axios' "Vitals," the recommendations would allow states to adopt models included in the failed repeal and replace legislation, such as allowing states to determine subsidies based on a consumer's age.
Lueck said, "Potentially, what this guidance and concept ideas are saying is: 'States, you can try to do what was rejected in Congress.'" But, she added, "whether it's the bad ideas from the repeal debate or returning to the pre-ACA-style market, it's not going to fare as well for people if they have a pre-existing condition, if they're older, low-income—those concerns are very real."
Sabrina Corlette, a senior research fellow at Georgetown University's Center on Health Insurance Reform, also said the guidance could pose a risk to individuals with pre-existing conditions. She explained that while it is "technically correct that a state cannot waive" protections for patients with pre-existing conditions, "the end result of the policies the [Trump] administration put out would basically have the same effect."
Some Democratic leaders in Congress said the new recommendations violate the ACA.
Reps. Frank Pallone (N.J.), the top Democrat on the House Energy and Commerce Committee, and Richard Neal (Mass.), the top Democrat on the House Ways and Means Committee, in a letter sent Thursday to Azar, Verma, and other Trump administration officials wrote, "We are concerned that this guidance is unlawful, will raise costs for older and vulnerable Americans, and will eliminate protections for individuals with pre-existing conditions."
Sen. Patty Murray (D-Wash.)—the top Democrat on the Senate Health, Education, Labor, and Pensions Committee—in statement said, "Congress created these waivers and included guardrails to allow for innovation while making sure people could get high-quality, affordable coverage—however the Trump administration's guidance takes us in the opposite direction."
"Vitals" reports that any waivers approved based on the recommendations could spark legal challenges (Firozi, "PowerPost," Washington Post, 11/30; Baker, "Vitals," Axios, 11/30; Armour, Wall Street Journal, 11/29; Dickson, Modern Healthcare, 11/29; Morse, Healthcare Finance News, 11/29; Lotven, Inside Health Policy, 11/29 [subscription required]; CMS release, 11/29; CMS fact sheet, 11/29).
Cheat sheet: What you need to know about the ACA
The Patient Protection and Affordable Care Act, otherwise known as the ACA, is the comprehensive health care reform bill passed by Congress in March, 2010. The law reshapes the way health care is delivered and financed by transitioning providers from a volume-based fee-for-service system toward value-based care.
Download the ACA cheat sheet to get a quick overview of this significant U.S. health care legislation.
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