The Centers for Medicare & Medicaid Services (CMS) and the U. S. Department of the Treasury issued new guidance last week that provides more flexibility for states to get waivers to design health plans that don’t meet the coverage requirements of the Affordable Care Act (ACA). RISE Executive Director Kevin Mowll examines what this new flexibility may mean for the future of the health insurance market.
A new federal policy that replaces 2015 guidance from the Obama administration gives states more power to pursue waivers to skirt provisions of the ACA and offer alternative health coverage options.
Under the previous guidance, states that applied for the state innovation waivers under Section 1332 of the ACA had to offer comprehensive and affordable policies that included the basic protections of the ACA. But in a press release announcing the new policy, Trump officials said that the old guidance substantially and unnecessarily restricted state waivers to one type, a reinsurance waiver. The new guidance will allow states more flexibility to develop “innovative approaches” such as short-term health plans and association health plans, in order to increase choice and competition within their insurance markets.
"States know much better than the federal government how their markets work,” said CMS Administrator Seema Verma. “With today’s announcement, we are making sure that they have the ability to adopt innovative strategies to reduce costs for Americans, while providing higher quality options.”
The new guidance states that the waivers will ensure that people with pre-existing conditions will retain access to the same level of coverage available today without the waiver.
But Larry Levitt of the Kaiser Family Foundation said in a tweet that Trump administration guidance is part of an ongoing trend to “make end-runs around the ACA’s rules.” The new policy, he said, “will likely widen the gap between red states and blue states for access, affordability, regulation, and protections for pre-existing conditions.”
Kevin Mowll, executive director of RISE, said the new guidance seems to be at odds with the ACA requirements that authorize states to waive certain provisions of the law as long as the waiver plan meets criteria that guarantee people will retain coverage that is at least as comprehensive and affordable as without the waiver, covers as many individuals and is deficit neutral to the federal government.
“The idea appears to be a ‘have cake and eat it, too’ proposition,” said Mowll. “That is, states will be encouraged to apply for waivers that would simultaneously retain ACA-compliant plans and offer new, non-compliant plans to create more choices for consumers at lower price points.”
But given a choice, it’s likely that younger, healthy consumers will select the plans that are less comprehensive and less expensive. And that will leave the ACA-compliant plans with sicker enrollees.
“As those of us know who have been around a while, experience with state-based ‘uninsurable’ pools in the past was disastrous and played out in the risk/pricing death spirals that rational markets follow,” he said.
The implications of moving in this new direction for the ACA marketplace are not completely clear and will depend on whether these new plans are treated in the same way as the risk adjustment program is applied, according to Mowll. However, since risk adjustment and payment transfers are conducted on a “like plan” basis, he expects that the ACA-compliant plans would “migrate toward adverse selection, and risk adjustment would only shuffle deck chairs on the Titanic as the death spiral sets in.”
Therefore, he said it is likely that ACA-compliant plans will “die off,” driving carriers from the market.
“The question will be whether carriers will be able to cherry-pick which plans they offer and whether they will be allowed to bail out of the ACA-compliant plans while remaining in the market to offer non-ACA-compliant plans,” Mowll said. “If they are obligated to provide compliant plans, they will undoubtedly over-price to avoid enrollment in those plans, in favor of doing business on the non-compliant side. In either case, we already know the end of this movie since we have seen it before.”