(Updated at 3:05 p.m. ET)
The CMS on Monday handed state governors significant power to overhaul their insurance exchanges and changed the way it will evaluate so-called innovation waivers.
In a dramatic overhaul of the current 1332 waiver process, the CMS' new guidance said state legislatures will no longer have to approve waiver plans. Instead, governors will be able to take action on their own.
The changes don't diminish protections for people with pre-exisiting conditions, CMS Adminstrator Seema Verma said on a call with reporters Monday. However, states would be able to divert their Affordable Care Act subsidies to help consumers buy short-term duration plans, which may not have protections for people with current health ailments.
"If someone freely opts for coverage with a lower premium, the guardrails remain satisfied even though the chosen coverage might be less comprehensive," Verma said.
Waivers that lead some residents to drop insurance coverage will no longer be a deal-breaker, according to the notice. States must ensure that a comparable number of people remain covered.
But the flexibility and potential shifting of exchange members to association health plans could make it seem like more people have adequate healthcare coverage even though access is worse.
"The Trump administration's new guidance on state ACA waivers opens the door to states creating parallel insurance markets attractive to healthier people, with lower premiums but fewer protections," Larry Levitt, senior vice president at the Kaiser Family Foundation tweeted.
The CMS now will calculate waivers' costs over the entire life of the proposal rather than by each year, according to Rea Hederman Jr., executive director of the Economic Research Center and vice president of policy at The Buckeye Institute.
That change helps ensure that start-up costs in a demonstration's early years don't adversely impact the evaluation of a 1332 waiver. Over time, the programs can build up enough savings to be budget neutral for the entire demonstration period, he said.
The CMS hopes the new guidance will open up opportunities for new kind of waivers. So far, seven of the eight approved 1332 waivers focus on reinsurance programs.
"That barely scratches the surface of what might be possible," Verma said.
The agency plans to publish an array of potential waiver applications in the coming weeks, she said.
The Trump administration said it hopes the new guidelines will allow it to approve waivers quicker. Lawmakers have pushed the agency to hasten its review of the waivers, holding several hearings on the process last fall.
States can request 1332 waivers for virtually every coverage component of the Affordable Care Act as long as the state's healthcare coverage is consistent with ACA terms and doesn't increase the federal deficit. The Obama administration had strict guidelines in place to ensure waivers wouldn't result in a loss of coverage.
HHS approved a 1332 waiver from Hawaii that required employers to provide more generous coverage than is required under the ACA, and another from Alaska, which created a state reinsurance program to reduce premiums, effective in 2018. Maine, Maryland, Minnesota, New Jersey, Oregon and Wisconsin received similar approvals.
States like Massachusetts and Oklahoma either withdrew their waiver or saw it denied because they couldn't be approved before last year's open-enrollment period.
Correction: An earlier version of this story misstated which waiver process would be affected. This error has been corrected.