With a divided Congress that will struggle to reach agreement about major health policy legislation, states will continue to serve as the drivers and testing ground for new healthcare reforms in at least the next two years. With 36 states in complete control by one party—14 states controlled by a Democratic governor and both houses of their legislature, and 22 states completely under Republican control—many states will be able to advance health reforms far more easily than the federal government. Central to state health reform discussions will be options for stabilizing and administering Marketplaces in 2019, including ways states can leverage Section 1332 waivers.1
CMS recently issued guidance that illustrates the types of 1332 initiatives the administration is most interested in supporting; some states are likely to pursue these new flexibilities, while others will consider alternative strategies. Among the strategies states are considering are “buy-ins” or leveraging state purchasing power—whether through Medicaid, a Basic Health Program or another vehicle—to create a more affordable coverage option.
Recent CMS Guidance About Use of 1332 Waivers
In October, the Centers for Medicare & Medicaid Services (CMS) issued 1332 guidance, replacing guidance published by the Obama administration in 2015, and offering states considerably more flexibility in redesigning benefits and subsidies and meeting other Affordable Care Act (ACA) requirements. Last month, CMS provided states with additional detail via a November 29 discussion paper that includes examples of the 1332 waiver options that CMS encourages states to consider. The 39-page paper, titled “Section 1332 State Relief and Empowerment Waiver Concepts,” describes four new waiver concepts that would involve broad restructuring of the current ACA framework. CMS described the paper as “an effort to spur innovation” and “reduce burden for states with potentially limited policy resources.” The new guidance relaxes the earlier prohibition on waivers providing less comprehensive or less affordable coverage to particular subgroups within the state, including vulnerable populations, potentially permitting the approval of waivers in which some groups have less access to affordable coverage and others have more access.
The CMS discussion paper provides a clearer picture of the types of 1332 initiatives that the administration is most interested in supporting, namely proposals that:
- Redirect premium tax credit funding to non-Qualified Health Plans (QHPs) and/or limited-benefit plans;
- Redirect premium tax credits to defined contribution arrangements (similar to Health Savings Accounts);
- Restructure subsidies to be flat dollar amounts that are not tied to income; and/or
- Establish high-risk pools as another way to stabilize risk pools in addition to reinsurance waivers.
The discussion paper also identifies in detail the types of technical questions that states will need to consider and address to pursue these waivers. By outlining four types of initiatives that the administration is open to approving, this discussion paper will serve as a helpful template for states interested in pursuing new 1332 waivers consistent with these options. In that respect, the CMS-outlined options are similar to the checklist that CMS offered to states interested in reinsurance waivers, which remain the only type of waiver approved by this administration to date.
The four waiver concepts are not, however, the only types of waivers that the administration could approve under 1332 authority. Some states—through 1332 authority or other means—will continue to weigh options to improve marketplace competition and access, increase consumer affordability, and strengthen coverage. Several states are considering state-sponsored buy-in programs to address these concerns.
State-Sponsored Buy-In
In advance of states’ 2019 legislative session, state policymakers and advocates are considering policy options to stabilize their markets, make coverage more affordable for consumers and improve access to care. At the center of many of these reform agendas are state-sponsored buy-in (or “public option”) proposals—wherein the state procures a new healthcare coverage option through a plan that may be more affordable and/or accessible than current options in the individual and employer markets.
While the definition of buy-in is evolving, most states are considering a “Medicaid buy-in,” or a state-sponsored product that leverages Medicaid in some way—such as using the state’s Medicaid provider network, reimbursement, infrastructure and/or Medicaid-like benefits. Two basic Medicaid buy-in models are emerging: a state-sponsored QHP product offered on the Marketplace, likely in partnership with an existing insurer; and a more traditional Medicaid buy-in, where the state makes Medicaid-like benefits available to consumers above current Medicaid eligibility as a state-administered, off-Marketplace plan outside of the individual risk pool.
Some buy-in designs, particularly off-Marketplace products, would require a 1332 waiver to allow enrollees to use premium tax credits to purchase the plan or to obtain pass-through funding from the federal savings that result from a lower premium buy-in product. Given CMS’s October 1332 waiver guidance, which expresses a strong preference for waivers that promote private health insurance over potential public/state-offered options, it may be challenging for states to obtain 1332 waivers to advance these buy-in models in the near term.
Two states have recently engaged in studies to test the impact of a state-sponsored buy-in program leveraging Medicaid:
- New Mexico: With one of the highest uninsured rates in the country (more than 9%),2 New Mexico is exploring new ways to increase affordability, expand coverage and improve access to healthcare. On behalf of a coalition of New Mexico advocates and the state legislature, Manatt Health conducted a Medicaid buy-in study to identify and evaluate four potential buy-in models alongside stakeholders. The proposals vary in their complexity, the required federal authority and potential state risks, as well as in their “reach” in covering uninsured New Mexicans. In a second phase, Manatt Health and Wakely Consulting are modeling the affordability, coverage and state budget impacts of a state-funded Medicaid buy-in targeting individuals currently ineligible for other, subsidized coverage.
- Colorado: As the state faces rising costs and reduced competition, particularly in rural areas, policymakers are considering coverage alternatives. Earlier this year, Colorado health advocates, Manatt Health and Wakely Consulting conducted a qualitative and quantitative feasibility assessment of a Medicaid buy-in product, available to all Colorado residents outside the individual market risk pool. The study found that the buy-in could have a 28% lower premium than average individual market plans in Colorado before the buy-in, which could mean $2,228 in annual savings for an unsubsidized individual.
Conclusion
States will continue to take divergent paths to either stabilizing or segmenting the ACA Marketplaces. Some states will use 1332 waiver authority to promote off-Marketplace plans that have limited benefits and lower premiums. Other states will make the case to use pass-through funding to finance state buy-in products with Medicaid or ACA-like benefit packages at lower costs, and it is unclear how the administration will react to such proposals. Still other states will seek to build market stabilization options that do not require federal approval by forgoing additional federal funding or using existing ACA programs (such as the Basic Health Program).
1Section 1332 of the Affordable Care Act (ACA) permits the Department of Health and Human Services (HHS) and the Department of the Treasury (collectively, “the Departments”) to waive certain provisions of the ACA related to insurance Marketplaces, qualified health plans (QHPs), essential health benefits (EHBs) and federal premium subsidies. Section 1332 establishes four guardrails that must be satisfied for a state’s waiver request to be approvable. Coverage under the waiver must: (1) be at least as comprehensive as coverage under the ACA, defined as EHBs by the ACA; (2) be at least as affordable as coverage under the ACA; (3) be provided to at least a comparable number of people as the ACA would; and (4) not increase the federal deficit.
2Health Insurance Coverage in the United States: 2017. U.S. Census Bureau. Available at https://www.census.gov/content/dam/Census/library/publications/2018/demo/p60-264.pdf.