Now that Congress and the courts have failed to overhaul Obamacare, states are eyeing the only current remaining opportunity to modify the healthcare law — this time from the inside out.
Policy and lawmakers are shifting their attention to a section of the Affordable Care Act allowing for state innovation waivers, known as “1332 waivers.” Starting in 2017, the waivers can give states wider latitude in how they run their insurance marketplaces and regulate health plans, as long as they meet the law’s major goals of providing affordable coverage to lots of people.
If their waiver requests are approved by the Department of Health and Human Services, states could modify the rules governing the benefits that plans have to cover or how subsidies are provided to low-income individuals. They also could reduce or eliminate the law’s fines on individuals and employers for lacking coverage or failing to provide it.
Arkansas, Minnesota, New Mexico and Hawaii have created working groups to look into the possibility of applying for waivers; Rhode Island’s legislature has authorized the state to pursue one; and California lawmakers are poised to do the same. Colorado legislators recently held a hearing on them, although it is not clear whether they will move ahead.
Some lawmakers from both parties are wary of how effective the waivers could be, but others are excited about the possibility they present. Liberal Democrats in Vermont have wanted to use the waivers to move toward a single-payer system. Republicans in Arkansas are considering how they could be used to modify benefits and fully integrate Medicaid enrollees into the marketplace plans.
“This is our best hope to turn around the healthcare situation and fix it, and it’s ironic that it’s a provision that’s housed inside the law that gives you the ability to undo the more troublesome results of the law,” said David Sanders, a Republican Arkansas state senator.
Sanders, who discussed the waivers Thursday at a workshop sponsored by HHS, is heavily involved in the discussions. He said the Arkansas legislature may approve a waiver application early next year
When Congress was writing the healthcare law, some top Democrats, including Rep. Henry Waxman, objected to including innovation waivers at all. Conversely, Democratic Sen. Ron Wyden, who pushed for them, wanted them to start in 2014, the same time the online marketplaces went live.
But lawmakers kept the start date at 2017 over concerns that providing them before the law was up and running would bump up the total cost.
The possibilities for waivers appear far-ranging, from allowing states to permit illegal immigrants to buy private plans on the marketplaces, as California is pursuing, to letting them overhaul their entire health insurance safety net, as Arkansas is contemplating.
“The waivers can include broad change as well as very specific or focused change,” said Dick Cauchi, health program director for the National Conference of State Legislatures. “How do benefits look, how are premiums set, how are essential benefits — all of those aspects which tie to exchanges, all those are open to consideration.”
HHS released a new rule last month laying out more guidelines for how a state should apply for a waiver. The waivers last for five years and must be authorized by a state’s legislature. They are most likely to be pursued by the 14 states (plus the District of Columbia) that are running their own exchanges, although it appears states with federal-run exchanges could apply, too.
Yet much is unknown about how the waiver will work or how much freedom the administration will allow states.
Arkansas has contracted with Lanhee Chen, former policy director for Mitt Romney’s 2012 presidential campaign, to provide recommendations to its Medicaid program that might work alongside a 1332 waiver. Chen said he is skeptical the Obama administration will permit much latitude in the waivers, but said they hold much potential under future administrations.
“I think the most important thing is for states to plan ahead,” he told the Washington Examiner. “While this administration may not be amenable to innovative and thoughtful market-based reforms, a future administration or leaders might be.”
The law itself lays out some parameters for how a state may not use a waiver. A state can’t enact changes that would result in fewer people obtaining coverage, whittle down the benefits plans offer, make plans more expensive for consumers or increase the federal deficit.
So while the waivers present states with an unprecedented opportunity, it doesn’t give them a blank slate, either.
“I think [states are] kind of thinking, this is sort of interesting, there’s all this flexibility here if we can meet these standards,” said Sarah Lueck, a senior health policy analyst for the Center on Budget and Policy Priorities. “I think the question is, can we meet these standards.”
The California Senate has approved a bill authorizing the state to seek a waiver allowing illegal immigrants to buy exchange plans, albeit without the use of federal subsidies. Beth Capell, a lobbyist for Health Access California, said she’s “optimistic” the state’s assembly will pass the bill this year and Gov. Jerry Brown will sign it.
It’s less likely Colorado will apply for a waiver, although Republican state Sen. Ellen Brown presided over a hearing in July to explore the possibility. While she was initially interested in the waiver, she now feels that applying for one would require too much time and investment.
“Personally, I think we have so many problems with our existing exchange, that right now to spend any concerted effort on the 1332 waiver is not where we should head,” she said.
