The Trump administration just made it easier for states to rewrite some of the Affordable Care Act’s insurance rules, carrying on with a crusade against “Obamacare” that voters seemed to reject soundly in this month’s midterm elections.
States have always had the ability to modify some of the Affordable Care Act’s regulations, just as long as they obtain explicit, prior permission from the federal government. To get that permission, states must file formal waiver requests that show they are abiding by certain guidelines ― chief among them, making sure coverage doesn’t end up worse as a result.
But those guidelines allow for some varying interpretations, and in October the Trump administration signaled that it was prepared to give states a lot more leeway than the Obama administration ever did. In particular, the Trump administration said it would let states alter rules for the distribution and use of federal health insurance tax credits, which have been available to people buying coverage on their own ever since the Affordable Care Act took effect.
The October guidance was not that specific, leaving all sorts of open questions about just how extensively the Trump administration was prepared to let states reshuffle their markets. On Thursday, the agency in charge of the Affordable Care Act ― the Center for Medicare and Medicaid Services, or CMS ― unveiled a set of four waiver concepts that might get approved.
We are returning freedom, authority and innovation to you, state lawmakers. Seema Verma, CMS administrator
They are known as “1332 waivers” because Section 1332 of the law lays out the process and the standards waivers are supposed to meet. And among the 1332 waiver models that CMS published on Thursday was a prototype in which people could use federal tax credits to pay for alternative insurance options that exclude key benefits, like full prescription coverage or inpatient psychiatric care, and aren’t generally available to people with pre-existing conditions.
This isn’t wholly surprising, because administration officials have frequently touted such plans as a cheaper alternative to the policies some consumers find when they go looking for coverage on HealthCare.gov or in state-run marketplaces like Covered California. If states want to make those alternative plans easier to buy, CMS chief administrator Seema Verma said in a speech Thursday, they should be able to do so.
“We are returning freedom, authority and innovation to you, state lawmakers,” Verma said. “And I believe the results will be better, and more Americans will be insured because of it.”
Verma went out of her way to say that she believed the new concepts were consistent with the Affordable Care Act’s guidelines and would protect people with pre-existing conditions. But the alternative plans are cheaper because they cover fewer services, and people who have serious, expensive-to-treat medical problems can’t even get them.
Consumers who buy the plans can still face crushing medical bills if they get injured or sick and require treatment the policies don’t cover. Meanwhile, people who need or want more comprehensive coverage can end up paying more for their policies because the insurers who sell them have to raise premiums when healthier customers flock to the skimpier plans.
A major goal of the Affordable Care Act was to avoid these problems ― or, at the very least, to mitigate them. By encouraging enrollment into these less-comprehensive plans, experts warned Thursday, the administration was all but certainly making it more difficult for the law to function as intended.
“If implemented, these waivers … would upend the ACA’s basic structure, which is to provide people with affordable, adequate insurance regardless of their health status,” said Sabrina Corlette, a research professor at the Center on Health Insurance Reforms at Georgetown University’s Health Policy Institute.
Larry Levitt, senior vice president at the nonprofit Henry J. Kaiser Family Foundation, offered a similar assessment. “The Trump administration is sending a signal that it’s prepared to allow states to upend the ACA in a significant way, particularly if they steer the health insurance system in a direction that involves less government regulation and consumer protection.”
To be clear, insurance premiums for individual coverage really did rise after the Affordable Care Act took effect, for the very same reason those skimpy plans cost less: The law forced insurers to cover bills they were previously able to avoid. And, although those federal tax credits meant many people ended up paying a lot less for insurance, some ended up paying a lot more.
The hardest hit have been those who qualify for small tax credits or none at all ― a point Verma made in her speech, calling it a “crushing financial blow for too many families.”
Some middle-class people have dropped coverage altogether because they feel like they simply can’t pay what insurance companies are now demanding. Others are seeking out those alternative plans, or other non-traditional ways of paying medical bills, where they already exist.
If implemented, these waivers … would upend the ACA’s basic structure. Sabrina Corlette, Georgetown University research professor
There are other ways of addressing this situation, however, including some that states have tried. The most popular so far has been to create “re-insurance” programs that help insurers pay for their most expensive beneficiaries. Premiums in states like Minnesota actually dropped after they created re-insurance plans, and one of the new CMS prototypes actually sets out a model that could make it easier for more states to develop similar programs.
But the Trump administration has also made it clear it would frown on a different kind of innovation ― namely, anything that relies on either expanding or creating a government-run insurance plan. That means proposals to let more people buy into Medicaid, as states like New Mexico and Nevada have considered, would get a lot more scrutiny and quite possibly face rejection.
Whether the Trump administration’s guidance and the prototypes are legal is an entirely separate question. The Obama administration had stricter standards for approving waivers in part because it believed the statutory wording of the Affordable Care Act demanded it. And, although the Trump administration has said it believes otherwise, approval of a waiver like the one CMS sketched on Thursday would almost surely invite court challenges.
“Would a future waiver be vulnerable? You bet,” said University of Michigan law professor Nicholas Bagley. “The ACA says that a state waiver must provide coverage at least as comprehensive as what the ACA provides. A state waiver that means loads of sick people won’t be able to get coverage, or won’t be able to get affordable coverage, shouldn’t pass muster.”
The debate over these rules and how they will affect different groups of people ― and whether changes would hold up in court ― should sound familiar. That‘s because it’s the same basic argument that’s been playing out for the last two years, ever since Donald Trump became president and began working with Republicans in Congress to repeal the Affordable Care Act outright.
“It reminds me a lot of the concepts that were considered and then rejected during the repeal debate,” said Sarah Lueck, a senior policy analyst at the Center on Budget and Policy Priorities, after first hearing about the waiver prototypes on Thursday.
The public’s negative reaction to repeal, which ultimately failed, is a big reason why Republicans just lost 40 House seats in the midterm elections.
Thursday’s announcement is a reminder that even without his party controlling Congress, Trump can keep trying to tear down the 2010 health care law ― or, at the very least, refashion it into a program that operates a lot more like conservatives would prefer.
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