State Relief and Empowerment Waiver Guidance

October 25, 2018|12:18 p.m.| ASTHO Staff

On Oct. 22, the Centers for Medicare and Medicaid Services (CMS) released new guidance on Section 1332 of the ACA, allowing states new flexibilities in the marketplace through Section 1332 waivers—now referred to as State Relief and Empowerment waivers.

The new guidance makes updates to the Obama Administration’s 2015 guidance. It aligns with President Trump’s 2017 Executive Order 13813, “Promoting Healthcare Choice and Competition Across the United States,” which sought to increase competition in the healthcare market and facilitate health insurance purchases across state lines.

The guidance will likely have an impact beginning in the 2020 open enrollment period.

Specific changes in the new guidance include the following:

  1. CMS will allow a wider range of insurance coverage levels, including plans that do not comply with the ACA’s basic coverage requirements. For example, state 1332 waivers will now be able to include Association Health Plans (AHPs) and short-term, limited duration insurance (STLDI). States may also use federal subsidy funding to help residents purchase AHPs and STLDI plans.
  2. CMS analysis of affordability and coverage will now be based on the types of coverage made available to state residents, rather than on the coverage that residents buy. CMS expects this new method of analysis to broaden the guardrails around acceptable waiver applications.
  3. CMS analysis will focus on the aggregate effects of a waiver, rather than on the effects on a subgroup of state residents, as the 2015 guidance dictated. In other words, analysis will look at the overall improvements in affordability and coverage for state residents, even if there is a detrimental effect for a subset of individuals.
  4. The new guidance aims to reduce legislative burden. Existing state legislation that provides statutory authority to enforce ACA provisions, in combination with a state regulation or executive order, may now fulfill the previous requirement that a state enact a law approving a 1332 waiver.

There have been eight 1332 waivers approved under the 2015 guidance (Alaska, Hawaii, Maine, Maryland, Minnesota, New Jersey, Oregon, and Wisconsin), the majority of which focused on reinsurance programs to lower premiums in the federal marketplaces. It is likely that the new guidance will lead to a greater number of and greater diversity in the submitted 1332 waivers.

The most significant change to the CMS guidance is related to AHPs and STLDI. AHPs and STLDIs do not necessarily include coverage for essential health benefits, which can leave plan participants with high out-of-pocket costs or discourage individuals from seeking timely treatment. For example, STLDI is not required to cover pre-existing conditions, and these plans often do not cover behavioral health services, prescription drug costs, or maternity care—high priority health issues within state and territorial public health. Although these lower-cost plans may initially be attractive to consumers, they may also segment and destabilize the federal marketplace by drawing younger and healthier consumers away from more comprehensive insurance packages. This has the potential to raise premiums for populations with greater healthcare needs, who are likely to stay in benefit-rich, ACA-compliant packages.

CMS’s analysis will now assess overall improvements in coverage and affordability, merging the two measures together and comparing them against the number of residents who would have had coverage without the waiver. The revised guidance favors statewide figures and does not penalize changes in level of coverage and affordability that may only impact subpopulations and not the entire population.

As the health insurance landscape continues to shift—and increasingly varies between states—state and territorial public health leaders will play an important role in promoting strategies to leverage new state flexibilities while also preserving access to high-quality care.

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