Stabilizing the individual health insurance market is one of the most pressing issues facing Congress, in the wake of the contentious debate over repealing and replacing the Affordable Care Act. The Senate is working toward a hard deadline of September 30 to pass health insurance legislation under budget reconciliation rules that require a simple majority for passage, rather than 60 votes.
As part of that work, I testified before the US Senate Committee on Health, Education, Labor and Pensions as it considered how to stabilize premiums in the individual insurance market by increasing states' flexibility in several areas. I was honored to be part of a witness panel that included former HHS Secretary Michael Leavitt, Kaiser Permanente CEO Bernard Tyson, Allison O'Toole, CEO of the Minnesota insurance marketplace MNSure, and Tarren Bragdon, CEO of the Foundation for Government Accountability.
I've written before about Section 1332 of the Affordable Care Act. It's the section that allows states to apply for waivers from some of the provisions of the law in order to shape their insurance markets to meet their local needs, as long as their modifications don't increase premiums, increase the federal deficit, decrease the number of people covered, or decrease the comprehensiveness of coverage.
Though these criteria, sometimes called "guardrails," sound almost impossible to fulfill, our models show that Alaska, one of the first states to be granted a 1332 waiver, can expect to cover more people and lower its individual marketplace premiums by creating a state-funded high-risk pool starting next year. The only health plan covering the state's individual market has filed for a 20 percent decrease in premiums for 2018 because the payer, Premera Blue Cross Blue Shield of Alaska, projects that the pool will lower its costs.
Each state is unique in terms of its demographic and socioeconomic make-up, insurance markets, Medicaid programs, and existing federal waivers. Allowing states to study and implement state-based solutions that are most effective for their local market may help stabilize the individual markets. At least 10 states have passed the required legislation to allow them to apply for Section 1332 waivers and several more are considering such legislation, signaling that the overall provisions of the ACA are presenting significant challenges in many states.
Here are some of the possibilities that we presented, and the issues that they address.
Rescind the December 2015 guidance on Section 1332. With this guidance, the Obama administration provided a fairly restrictive interpretation of what states would be allowed to do under a waiver. Instead, I recommended that states be allowed to:
- Demonstrate that each of the guardrails are met in aggregate for the market, rather than for each individual or group within the market.
- Meet deficit neutrality and other guardrail requirements over the five-year lifetime of the waiver, rather than each year. This strategy would allow a ramp-up period for certain types of programs where payback is not immediate. For example, it might take several years to boost enrollments of younger, healthier people even if a measure reduced their potential premiums substantially.
- Permit states to submit coordinated waiver applications for both Section 1332 and Section 1115 (which covers the Medicaid program) that allow recognition of savings from current or proposed 1115 waivers when assessing the effect of a 1332 waiver application on the federal deficit. Currently states can't use federal savings on their Medicaid programs to offset expenses in the individual market, which may keep them from being able to use the two programs together to cover more people.
Allow states more flexibility in defining and designing plans. States could be permitted to explore value-based benefits with lower out of pocket maximums for high-value services in exchange for slightly higher out of pocket maximums for lower-value services, to ensure that people in lower-cost bronze plans do not forgo needed services for managing chronic conditions. States could also be permitted to explore changing the definition of "essential health benefits" that must be covered by all plans, though we should be careful not to provide so much flexibility that states lose the advantages of being able to spread the cost of benefits over a large number of enrollees.
Create a standard "menu" of waiver programs based on those already approved. Since stabilizing the individual market is an immediate need, Congress could fast-track the approval process of applications for waiver programs that have already been approved and implemented in other states. For example, states that wanted to fund a reinsurance program like Alaska's, to insulate payers from high-cost patients, could borrow that model and receive expedited approval.
While it's impossible at this point to say exactly how the Senate might use our input, it was clear at the hearing that the committee members have a sincere desire to protect the rights and benefits currently provided by the ACA while also protecting people's access to insurance and care at prices that are both affordable and predictable.