On October 22, the Trump Administration issued new guidance related to section 1332 state waivers of certain provisions of the Affordable Care Act. The guidance eviscerates the existing statutory requirements for affordability, comprehensiveness and coverage that section 1332 waivers must satisfy to receive federal approval. As a result, as other analysts have pointed out (here and here), individuals and families living in states pursuing waivers — particularly those who have chronic illnesses and other pre-existing conditions — could be at serious risk of facing substantially higher out-of-pocket costs and large gaps in coverage or losing their health coverage entirely.
Under section 1332 of the Affordable Act, states can waive or modify some provisions of the Affordable Care Act including the rules for health insurance plans offered through the marketplaces and the marketplace subsidies. Such waivers, however, must comply with four requirements, which are commonly known as the “statutory guardrails.” The Secretary of Health and Human Services must determine a waiver: (1) “will provide” coverage that is at least as comprehensive as the coverage provided in the absence of the waiver; (2) “will provide” coverage and cost-sharing protections against excessive out-of-pocket costs that is at least as affordable as the coverage that would otherwise be provided; (3) “will provide” coverage to at least a comparable number of residents; and (4) will not increase the federal deficit.
In 2015, the Obama Administration issued guidance clarifying in greater detail how the federal government would determine whether waivers fit within these guardrails. For example:
- Comprehensiveness: States would have to demonstrate that the waiver would not decrease the number of individuals with coverage that satisfies minimum Essential Health Benefit (EHB) requirements, would not decrease the number of individuals with coverage of any particular EHB category or the number of individuals with coverage that includes Medicaid and CHIP-covered services. States would also have to show that vulnerable groups like low-income individuals, seniors and those with serious health issues would not be provided less comprehensive coverage, even if the number of people provided comprehensive coverage was maintained.
- Affordability: States would have to demonstrate that waivers would not increase the number of state residents with large out-of-pocket health care spending burdens even if the waiver would increase affordability for many other state residents and not make coverage affordable in the aggregate. Moreover, reducing affordability for vulnerable groups would also cause a waiver to fail to meet the affordability requirement.
- Coverage: States would have to demonstrate that a comparable number of individuals would have minimum essential coverage. In addition, states would have to show that a waiver did not reducing the number of vulnerable individuals — those with low-incomes, seniors, and people with serious health issues — with minimum essential coverage, even if the waiver covered a comparable number of residents overall.
The new guidance would not only supersede this earlier, robust guidance but also fatally weaken the statutory requirements themselves. For example, the Trump Administration will provide federal approval even if the waiver:
- Provides only comparable “access” to comprehensive or affordable coverage, even if fewer people actually enroll in those plans. This ignores the specific “will provide” statutory language in section 1332 which makes no mention of mere access or availability. So a waiver could be approved even if it results in a dramatic reduction in the number of people enrolled in plans that provide comprehensive benefits and affordable premiums and out-of-pocket costs so long as a comparable number of people, on paper, have the ability to enroll in such plans.
- Results in vulnerable populations being made worse off. While the Administration will continue to assess waivers for the impact on low-income residents and those with high expected health care costs, it will take into account the magnitude of such changes. So a waiver could be approved if it makes coverage much more affordable for some people without making others, like vulnerable groups, “substantially” worse off. It will also approve waivers that make coverage much more affordable for some people even if it makes coverage somewhat more costly for a larger number of people, including vulnerable populations. And presumably, if vulnerable groups see less “access” to affordable and comprehensive coverage, that would still be acceptable if the Administration determined there was not substantially less access or it was offset by increased access among non-vulnerable populations (as the Administration would likely count greater availability to non-ACA-compliant plans like short-term limited duration plans as increasing access to healthy individuals with low health costs).
- Reduces enrollment in coverage complying with Affordable Care Act requirements for comprehensiveness and affordability. To satisfy the coverage requirement, states could now count enrollment in short-term limited duration plans even though such plans can charge higher premiums based on health status, deny coverage outright, exclude coverage of pre-existing conditions, have large gaps in coverage, charge unlimited deductibles and cost-sharing and impose annual and lifetime limits. The Administration also expressed openness to waivers that result in immediate reductions in coverage even when counting enrollment in non-ACA-compliant plans, so long as the state can show comparable coverage over the life of the waiver.
Moreover, while the guidance itself does not explicitly address the issue, Seema Verma, the Centers for Medicare and Medicaid Services (CMS) Administration, indicated in a press briefing that the Administration would be open to waivers that extended marketplace subsidies to non-ACA-compliant short-term plans. That could dramatically increase enrollment in such plans, particularly among healthy people with low health costs, and seriously destabilize the risk pool for both marketplace plans and ACA-compliant plans offered outside the marketplaces. That would drive up premiums and cause insurers to withdraw from the marketplaces and the overall individual market. This would eventually reduce even “access” to affordable and comprehensive plans in the state, let alone actual enrollment in ACA-compliant plans, although it appears unlikely that the Administration would enforce even its dramatically weaker standard in this case.
As a result, the new Trump Administration section 1332 waiver guidance raises serious concerns that some states could in the future receive federal approval for waivers that dismantle key elements of the Affordable Care Act and result in many fewer people enrolled in affordable and comprehensive health coverage.