In a recent article for Inside Health Policy, TRP’s Senior Vice President Shea McCarthy was quoted discussing the ideological split between lawmakers on fixes to the Affordable Care Act (ACA). As the article highlights the tensions over state reinsurance waivers, McCarthy noted that these these statewide debates are reflective of the “philosophical dissonance” between the Trump administration and Congressional Democrats on health care policy. “While Democrats have spent their energy talking about increasing coverage and consumer protections, CMS is hammering home a message about cost,” said McCarthy. “The debate over 1332 waivers may be reflective of this tension, but it’s also indicative of where they stand in the broader health policy discussion on everything from Medicare for All to reforming the Medicaid program.”
The article in its entirety can be read below.
Reinsurance Waiver Reactions Highlight Ideological Split On ACA Fixes
By Amy Lotven
August 28, 2019 at 12:08 PM
Republicans are pointing to the premium decreases in states with reinsurance programs established through the Affordable Care Act’s 1332 waivers as proof that working around the law’s mandates will lower prices, particularly for those ineligible for tax credits, while Democrats, who created the waivers, say efforts to boost the ACA must also help the lower income population.
Meanwhile, the Heritage Foundation is holding up the reinsurance programs’ success to say states should get even more relief from the ACA, and to advocate passage of GOP legislation setting up state block grants.
Traditional reinsurance programs generally work by reimbursing health plans a portion of high-cost claims, which in turn lowers premiums, and in the case of the ACA, reduces federal spending on tax credits. States can establish a reinsurance program without a waiver, but the waiver mechanism included in the ACA allows states to collect federal pass-through dollars equal to the governments’ savings on subsidies.
Since 2017, when the waiver provision went into effect, the Trump administration has approved 10 state requests to set up a reinsurance program and is reviewing an application from Rhode Island. States have credited the programs for significantly bringing down rates compared to previous years. For example, Montanans expect average 2020 rates to come in about 8% lower than last year, and Coloradans may see average 18% decreases, according to officials in both states.
Republicans also welcomed the results: The Trump administration says they show how administrative actions have helped shore up the marketplace and GOP lawmakers say they prove states need more flexibility.
The Heritage Foundation says the waivers show that states should have more control over the markets and should take the opportunity to seek exemptions from the ACA’s mandates.
In a brief entitled “How Health Care Premiums Are Declining in States That Seek Relief from Obamacare’s Mandates,” Heritage fellow Doug Badger notes that while premiums nationwide fell on average by about 0.8% for the 2019 plan year, the decreases were largely centered in the states that implemented state-level reinsurance programs. For 2020, the five states that requested waivers expected decreases ranging from 5.9% to 19.8 %.
Badger argues that more states should take advantage of the waivers, and that a federal reinsurance program is not needed. He also says the Congress should build on the waivers by supporting Heritage’s “Health Care Choices Proposal” which, like other GOP-sponsored ACA-replacement options, would turn ACA subsidies and Medicaid expansion dollars into a block grant, he says.
“The experience with risk-mitigation waivers shows that affording the states relief from the ACA’s strictures, as well as the flexibility to pursue innovative reforms, has made health insurance more affordable. Congress should build on these findings by restructuring federal programs to maximize this flexibility,” he wrote.
But Democrats have been relatively quiet about the premium decreases attributable to the state-level programs. And beneficiary advocates point to studies, like a January issue brief from Families USA, that show, while reinsurance can lower premiums, the program essentially directs limited resources to help a wealthier population.
House Democrats back legislation (HR 1425) that would provide $10 billion a year to support a state or federal reinsurance program, or to set up a state-level program that provides additional subsidies to residents.
The legislation has already moved through the House Energy & Commerce Committee along with other bills to boost the ACA, and the Congressional Budget Office recently estimated the bill would cost $34.4 billion over 10 year. CBO also expects the bill would increase the number of insured Americans, particularly those who are not eligible for subsidies, by up to 200,000 each year.
Though some of those ACA fixes passed the full chamber, Democrats held off on moving the reinsurance bill because they wanted to couple it with Rep. Lauren Underwood’s (D-IL) bill that would provide more generous ACA subsidies, and bring it to the floor at a late date, a House aide said earlier this year.
Inside Health Policy asked a few health policy consultants and strategists whether Democrats may be missing an opportunity to highlight the success of their own 1332 waiver policy when it comes to the state reinsurance programs.
“It is an interesting scenario, not too afield of the situation on drug pricing, where Trump has adopted what would historically be seen as Democrat-driven championing of the issue,” says Billy Wynne of Wynne Health Strategies. “While I think it makes some sense for federally-focused Democrats to remain more reticent, given all of the nefarious things the Trump Administration is simultaneously doing with 1332 (and 1115) waivers to actually reduce coverage and increase consumer costs, I don’t think there should be room for doubt that Democrats support states taking steps to strengthen their Exchange markets."
The party could be doing more to think broadly about waivers and how they could be used to expand coverage and bring down costs, Wynne adds.
“With relative stasis legislatively regarding ACA improvement, waivers really are the primary vehicle for the federal government to shape this state-driven phase of health reform,” he notes.
Wynne recently wrote a three-part series for Health Affairs that lays out ways that states could use the 1332 waivers and the Center for Medicare and Medicaid Innovation to establish a Medicare-based public option.
Democrats have avoided discussing the waivers since they are administrative, not legislative, alternations that are not controlled by Congress, health policy consultant Chris Jennings of Jennings Policy Strategy says. He also points out that Democrats have, and largely do, support reinsurance in the broader context of health care fixes.
“Indeed … you generally find bipartisan support at the state level for these waivers — waivers that are explicitly authorized under the Affordable Care Act,” he says. The issue is that reinsurance is not seen as the most efficient way to ensure affordability, he says.
Reinsurance as a stand-alone does not secure affordable premiums for Americans that make more than 400 % of the poverty level, and, as such, is an “empty promise fix” for this important group,” Jennings says. “Anyone who suggests to the contrary doesn’t understand Americans need additional support to ensure affordability. This is why we need further federal legislative relief on the cost containment and premium/cost-sharing tax credit fronts."
Shea McCarthy, senior vice president at Thorn Run Partners, says the “differences in rhetoric between the Trump administration and congressional Democrats are truly reflective of their philosophical dissonance: While Democrats have spent their energy talking about increasing coverage and consumer protections, CMS is hammering home a message about cost. “
“The debate over 1332 waivers may be reflective of this tension, but it’s also indicative of where they stand in the broader health policy discussion on everything from Medicare for All to reforming the Medicaid program,” he says.
Chiquita Brooks-LaSure, who worked on the ACA as a Congressional staffer and is now with Manatt Health, stresses that the ACA’s temporary reinsurance program was extremely effective in mitigating premiums. Brooks-LaSure sees state-level reinsurance programs as a positive step that more states should pursue, and also sees the need for federal legislation to help the states that struggle to find funding for their share of the costs.
Most of the states that established state-level reinsurance program fund their part through assessments on health insurance issuers that are generally opposed by industry, although a few use other mechanisms, including general funds and penalties from state-level coverage mandates. Several states, including Colorado, took more than one legislative session to get reinsurance passed due to battles over the funding mechanism.
The ACA’s waivers, championed by Sen. Ron Wyden (D-OR), were created to let states experiment with their own ideas without undermining the law’s consumer protections and coverage expansion goals. Under the statute, starting in 2017 states may request an exemption from some of the insurance mandates in order to pursue their reforms, but they also must show that any changes still follow certain guardrails.
In 2015, the Obama administration issued rules for the innovation waivers, which included guardrails that mirrored the statute. Despite strong interest in the waivers, no states applied at the time and several complained that the guardrails were too restrictive for the ideas they hoped to pursue. Further, CMS was unable to let states using the federally facilitated marketplace to make large changes due to technical issues.
In 2016, with the ACA’s three-year federal reinsurance program phasing out and premiums poised to skyrocket in the next plan year, states began to look for ways to protect their residents who were already struggling with high costs.
Alaska opted to fund a state-level reinsurance program which managed to bring the rates down from a proposed 42 % hike to a 7.3 % increase for the 2017 plan year. The state then worked with CMS under both administrations to create a way for benefit from the savings generated by the significant reduction in premiums, which translates to lower federal subsidy payments.
Alaska sent its application to then then-HHS Secretary Sylvia Burwell on Dec. 29, 2016. On July 11, 2017, the Trump administration approved the waiver. Another five waivers were approved from July 2017 through October 2018 for the following states: Maryland, Minnesota, New Jersey, Oregon and Wisconsin.
In October 2018, the Trump administration issued guidance that loosened the guardrails so that reforms could be approved so long as consumers retain “access” to comprehensive coverage, even if they don’t enroll. CMS has also pushed out a number of concepts that states could consider, including using the ACA’s tax credits to buy non-ACA compliant coverage or creating consumer-directed health savings accounts.
The Trump administration also included the reinsurance waivers as a concept, and that continued to be the only one that states were willing to consider. CMS has approved waivers in four states so far in 2019 — Colorado, Montana, Delaware and North Dakota — and is likely to approve Rhode Island’s request soon.
Despite the hard sell from CMS officials, many states believed the October guidance was not legally sound and didn’t want to act on other reforms that would inevitably be challenged.
Democratic lawmakers also argued the guidance was illegal and asked the Government Accountability Office to determine whether it should have been promulgated as a rule. GAO recently affirmed that the guidance should have been released as regulation, and Democrats now plan to hold a vote to reverse the language under the Congressional Review Act sometime this fall. — Amy Lotven (email@example.com)