Payers, Policy

CMS offers states potential routes to undermine Obamacare

Current ACA subsidy programs are required to be based on income. Under the rules laid out by CMS states would be able to base subsidies on other factors potentially leaving lower-income, older and sicker patients with less comprehensive coverage options.

CMS has announced plans to let states dismantle some provisions of the Affordable Care Act, namely rules that force states to use subsidies on insurance plans on the law’s marketplaces, which are required to meet certain coverage standards.

The Trump Administration and CMS Administrator Seema Verma have touted the effort as a way to inject additional choice and competition into the insurance markets through increased flexibility for states to run their own healthcare policy.

The so-called “1332 waiver concepts” are frameworks released by CMS that allow states to skirt certain requirements laid out by the ACA starting in 2020.

They are as follows:

  • Allowing states to direct subsidies to private accounts which could be utilized by patients to pay for coverage premiums and out-of-pocket expenses.
  • Giving states the ability to design their own subsidy programs and decide how premium subsidies should be targeted.
  • Letting states set the rules for what type of health plan is eligible for state premium subsidies, which could mean plans that don’t adhere to ACA coverage regulations.
  • Granting the ability for states to implement strategies to address the costs of high risk individuals to reduce premiums.

Current ACA subsidy programs are required to be based on income. Under the rules laid out by CMS, states would be able to base subsidies on other factors including age and family status, potentially leaving lower-income, older and sicker patients with less comprehensive coverage options.

Healthcare experts also highlight the possibility of changing subsidy structures working to destabilize insurance exchanges.

The 1332 waiver program was created in the ACA for states looking to develop alternatives in the law’s approach in providing coverage if the idea would not lower the amount of people covered, increase federal deficits or decrease the affordability or comprehensiveness of coverage.

CMS overhauled this process last month by issuing a guidance that only required comparable “access” to affordable and comprehensive coverage, instead of an actual minimum specified level of coverage.

During a speech the American Legislative Exchange Council (ALEC) Policy Summit in Washington, D.C., Verma repeated familiar lines of attack against the ACA and its inability to control healthcare spending and promoted individual states’ ability to act as “laboratories of innovation and reform.”

ALEC is a nonprofit conservative political organization that serves to distribute draft legislation to state lawmakers and therefore can act as a springboard for states efforts to submit their own 1332 waivers.

“The reality is that the rate of growth in healthcare spending has been a crushing financial blow for too many families, especially the millions of Americans who are unsubsidized and have had to face rising premiums, fewer insurance choices and in some cases an inadequate network of medical providers,” Verma said at the conference.

CMS’ proposals have already received pushback including from Oregon Senator Ron Wyden who tweeted a statement saying the waivers have “created a fast lane to flood health care markets with junk plans and quarantine older Americans and those with pre-existing conditions apart from everyone else.”

Democratic House members Frank Pallone and Richard Neal have also sent a letter to Trump Administration officials seeking further answers on what they characterized as the “latest illegal efforts to undermine the Affordable Care Act.”

While CMS has undertaken some measures to stabilize the individual insurance marketplaces including the implementation of new consumer assistance tools, moves such as slashing the marketing budget and open enrollment period for ACA exchange coverage have had the opposite effect.

Additionally, efforts by the Trump Administration to offer up coverage including short-term health plans and association health plans for smaller businesses wanting to work together to create their own risk pools, have also served to undermine the ACA’s individual insurance exchanges.

Last month, the administration also proposed loosening restrictions on health reimbursement arrangements to allow them to be used to purchase insurance on the individual exchanges starting in 2020.

Verma underscored the claim that the Trump Administration will work to protect people with pre-existing conditions and said that these new concepts represent a way to better incorporate innovation and creativity into the healthcare system.

“Critics of state flexibility will always assume the worst.  Indeed, cynics will always be able to imagine negative ways states might screw up if given some flexibility. If a state does get something wrong, unlike the federal government, states have the flexibility and the incentive to fix it,” Verma said in her remarks.

Picture: Alex Wong, Getty Images

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