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Analysis

Verma Lambastes ACA, Giving States 4 Ways to Bypass It

By Steven Porter  
   November 29, 2018

The new waiver concepts aim to give states inspiration on how they might construct applications for waivers under the law with new flexibility the Trump administration announced last month.

Centers for Medicare & Medicaid Services Administrator Seema Verma strongly criticized the Affordable Care Act in a speech Thursday and invited states to sidestep provisions of the Obama-era law in four ways, outlining a policy path forward that critics worry could undermine the ACA's central protections.

The four waiver concepts CMS released Thursday stem from revisions to a guidance document the Trump administration released last month to grant states greater flexibility under the ACA's Section 1332 waivers, which the administration has renamed State Relief and Empowerment Waivers.

"With this guidance, states will be able to develop innovative approaches that break away from the otherwise inflexible federal approach and increase consumer control and expand choice and competition in their markets," Verma said.

Some have questioned the legality of the administration's revised guidance, based on the fact that it avoided formal notice-and-comment rulemaking.

"There are serious questions about whether the policy articulated in the guidance is a permissible interpretation of the underlying statute, but, at the very least, it is likely invalid for the agency to attempt to make this policy without a full rulemaking process," Christen Linke Young, a fellow with the USC-Brooking Schaeffer Initiative for Health Policy, wrote in analysis.

The changes to the guidance reinterpreted key terms in the ACA's statutory guardrails, which are designed to keep Section 1332 waivers from undermining the law's intent, as HealthLeaders reported last month.

Related: New ACA Waivers Could Subsidize Short-Term Coverage

Related: Reinsurance Waivers Provide Relief from Premium Hikes

Related: Is Trump Pushing Health Insurance Innovation or an ACA Rollback?

Verma acknowledged during a call with reporters Thursday that states could propose to use federal subsidies to cover short-term limited-duration plans (which qualify as "coverage" under the guidance's revised definitions, even though they are not required to offer the full benefits and preexisting condition protections as ACA-compliant plans), but she offered reassurance that CMS would weigh each state's proposal against the ACA's guardrails.

"At the end of the day, we're going to look at the proposal that the state gives us against the four guardrails. So we'd look at it in terms of comprehensiveness, affordability, coverage, and deficit neutrality," she said.

"We're particularly interested in looking at the proposals on the impact [on patients] with complex healthcare needs because it has to be affordable for them, has to be comprehensive," she added. "We're going to look at the proposals that are delivered to us head-to-toe along those four guardrails."

4 Waiver Concepts
 

There have been eight waivers approved already under Section 1332, representing two types of waivers. Seven states have secured waivers for permission to establish state-run reinsurance program. The eighth, Hawaii, has had a waiver since 2016 that authorizes its Small Business Health Options Program.

Having experienced the waiver application process firsthand, Verma complained that the rules are too stringent, impeding innovation. So the Trump administration loosened the rules and outlined four waiver types as inspiration for state-led proposals:

  1. Account-Based Subsidies: States could redirect federal subsidies to accounts consumers manage to cover insurance premiums or other healthcare expenses. "An account-based approach could give beneficiaries more choices and require them to take responsibility for managing their health care spending," the administration said in a fact sheet. "This approach could also allow a consumer greater ability to select a plan based on the individual’s or their family’s needs, including a higher deductible plan with lower premiums."
     
  2. State-Specific Premium Assistance:  States could devise novel subsidy programs of their own that uses federal pass-through dollars. "A state may design a subsidy structure that meets the unique needs of its population in order to provide more affordable health care options to a wider range of individuals, attract more young and healthy consumers into their market, or to address structural issues that create perverse incentives, such as the subsidy cliff," the administration said.
     
  3. Adjusted Plan Options: States could offer financial assistance for consumers to buy plans that don't meet the definition of a Qualified Health Plan, opening the door to more affordable options that may provide less coverage. "Used in conjunction with the Account-based Subsidy waiver concept, states could provide subsidies in the form of contributions to accounts, allowing individuals to use the funds to purchase coverage that is right for them and use any remaining funds in the account to offset out-of-pocket health care expenses," the administration said.
     
  4. Risk Stabilization Strategies: States could establish reinsurance programs or high-risk pools. State-run reinsurance programs vary from state to state and have already lowered premiums and improved market stability. "These models include a claims cost-based model, a conditions-based model, and a hybrid conditions and claims cost-based model," the administration said.
     

More information is available on the Section 1332 waivers page of the CMS website.

Editor's note: This story was updated Friday with an additional comment from Seema Verma explaining how CMS will review state waiver applications against the four guardrails of the ACA's Section 1332.

Editor's note: An earlier version of this story said short-term limited-duration plans "qualify as 'health insurance coverage' under the guidance's revised definitions." The story has been updated to state more precisely that short-term plans "qualify as 'coverage' under the guidance's revised definitions." (The revised guidance document expanded an earlier version's interpretation of "coverage" by incorporating the definitions of both "minimum essential coverage," from 26 USC 5000A(f) and 26 CFR 1.5000A-2, and "health insurance coverage," from 45 CFR 144.103.)

Steven Porter is editor at HealthLeaders.

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