1332 waiver flexibility: What do states need to know?
This week, the Trump Administration created additional flexibility for states considering how to use section 1332 waivers to support more affordable insurance options in the individual market. The Centers for Medicare and Medicaid Services (CMS) sent a letter to states addressing the new flexibilities that would be offered and noting that the previous policy guidance, written in 2015 under the Obama Administration, would be superseded by the new letter.
1332 waivers were authorized under the Affordable Care Act (ACA) and allowed states to conceive of new ways to deliver more comprehensive or less expensive coverage. The program permits states to request waivers for certain onerous requirements if they can demonstrate that their plans would increase and improve coverage and enrollment. In other words, the ACA envisioned opportunities for states to get creative with methods for offering and delivering coverage, so long as the same number of people were covered, as comprehensively, and as affordably.
This new guidance for 1332 waivers creates more flexibility for states by modifying the requirements around coverage, comprehensiveness, and affordability. These requirements were seen by some states as a barrier to offering alternative forms of coverage.
This 1332 waiver effort is closely linked to the Trump Administration’s recent expansion of Short-Term Limited-Duration Insurance (STLDI), which was previously not considered sufficiently comprehensive to replace typical ACA requirements. However, under the new 1332 guidance, CMS indicates that STLDI enrollment will be considered sufficient. For example, access to comprehensive insurance may satisfy some of the safeguards, even if people choose to enroll in less comprehensive coverage, such as STLDI. We wrote about the STLDI Executive Order and CMS published final regulations on these plans in August 2018.
CMS indicated that they will be publishing a series of papers to promote ideas they have for these waivers. One example offered by CMS is that a state could propose to modify the existing federal subsidy structure (known as Advanced Premium Tax Credit, or APTC) to increase the subsidy amount beyond the current assistance cliff of 400% of the Federal Poverty Level. This may allow a state to introduce subsidies for people beyond 400% FPL. However, to maintain the requirement that any proposal not cost the federal government more money, a state may have to reduce subsidies for people under 400% FPL.
CMS was careful to note that nothing in this guidance should be construed as reducing protections for people with pre-existing conditions. However, the option to establish STLDI plans notably attracts healthier people from the existing comprehensive individual market, making premiums more expensive for those who remain. Some experts, including CMS’ actuary, have remarked that this market segmentation will continue to cause premiums to rise for people with pre-existing conditions in the individual market. It will be up to states to balance those costs between populations with and without pre-existing conditions.
Here is the CMS Administrator’s blog post on the topic.