And while waivers were denied under the previous guidance if a state's plans would reduce coverage for the low-income, elderly or sick, the CMS will consider a proposal that “makes coverage much more affordable for some people and only slightly more costly for a larger number of people,” the guidance stated.
Matt Fiedler, an economist with the Brookings Institution, warned that the guidance would allow for waivers that shift costs from higher income people to those with lower incomes. He predicted some states could reduce or take away subsidies for ACA-compliant coverage and instead use it to subsidize people who enroll in short-term plans. As healthier people left the ACA exchanges, the ACA market would become sicker, prompting insurers to raise premiums that few could afford without federal financial assistance.
CMS Administrator Seema Verma confirmed last week that states could change who gets subsidies and potentially apply subsidies to short-term plans, which are not available to people with pre-existing conditions.
That worries healthcare providers.
“We see patients when they are most in need, and if they were shortchanged in their insurance purchase then they are going to have unaffordable cost-sharing, or they may actually lack coverage for needed services when they are sick,” Kahn said. “That means we have to worry about the financial relationships between the hospitals, physicians and patients when all of us should be focusing on care for the patient only.”
Molly Smith, vice president for coverage and state issues at the American Hospital Association, said in an emailed comment that while the AHA supports the use of waivers, short-term plans “will lead to increased bad debt, with underinsured patients unable to afford the care they need but that is not covered.”
Still, others doubted the guidance would harm the individual market. Doug Badger, a healthcare policy expert at the conservative Heritage Foundation, said similar fears were present when the individual mandate penalty was zeroed out, yet premiums next year are going down. A more pressing problem is that people are opting to forgo coverage rather than pay an unaffordable premium; the 1332 guidance “will let states be a little more creative to attack the problem,” he said.
The requirement that waivers continue to be budget-neutral could limit state actions that would increase individual market premiums, said Tricia Beckmann, a director at Faegre Baker Daniels Consulting, adding that as benchmark premiums increase, so do the amount of federal subsidies, and the state may have to figure out how to offset that cost.
Some doubt that many states will run with the increased waiver flexibility. Because of the guidance's emphasis on promoting private coverage over public programs and decreasing regulation, Democratic-leaning states might have a harder time pushing public options or Medicaid buy-in programs through the waiver process. While some states may be very interested in pursuing a waiver, barriers may prevent them from making dramatic changes, said Joe Antos, a health policy expert at the right-leaning American Enterprise Institute.
For instance, the guidance allows governors to push a waiver without legislative action. But governors would still want to maintain the support of lawmakers and the industry or they'll have trouble in the next election, Antos suggested.
Only eight states have obtained waivers so far and most of them were for reinsurance programs to lower premiums. Idaho and Iowa both abandoned efforts to establish alternative insurance models under 1332 waivers.
Idaho Insurance Department Director Dean Cameron said he is unlikely to pursue a 1332 waiver under the new guidance. The state's push for a dual 1332 and 1115 Medicaid waiver failed to get through the Legislature this year. And Cameron won't pursue a waiver for Idaho's “state-based plans” that would allow insurers to get out of some ACA rules if they also offered ACA-compliant plans. He said the guidance changes don't go far enough. Allowing states to bypass ACA rules including the requirement that insurers use a community rating to set premiums would save consumers the most money, he said.
Questions remain over how the guidance jibes with the law. Katie Keith, a health policy expert at Georgetown University, said 1332 waivers do not allow states to waive consumer protections including the ban on pre-existing condition exclusions and underwriting based on health status. Yet the guidance allows the expansion of short-term plans, which do both of those things.
Nick Bagley, a University of Michigan law professor, expects to see lawsuits once HHS grants a waiver.