On Thursday, the Centers for Medicare & Medicaid Services unveiled four examples of waivers states can request to alter Obamacare under guidance
unveiled last month. These new suggestions would open the door for people to use subsidies to buy coverage outside the Obamacare exchanges — and expand eligibility for assistance to include those with higher incomes or policies from their employers, for example.
It’s the latest move by the Trump administration to weaken the Affordable Care Act from the inside after the collapse of Republican efforts to repeal it altogether, this time by targeting the subsidies, which are considered crucial to keeping insurance markets working well.
The new waiver powers could widen the divide in health care coverage among the states, which the Affordable Care Act sought to unify with nationwide standards for benefits and assistance. Red states may seek to provide greater access to alternative plans, while blue states could try to bolster their Obamacare markets.
The subsidies are key to the long-term health of Obamacare because they help guarantee that millions of people can afford coverage no matter how high premiums go, which entices insurers to stay in the market. Altering that structure could severely weaken the health care law and leave those who rely on it paying more for Obamacare policies, which offer strong protections for those with pre-existing conditions.
Changing the eligibility for subsidies could prove tricky because the level of federal funding won’t change, so letting more people receive money could lower or eliminate the assistance currently given to nearly 9 million Obamacare enrollees.
“There is a real limit to how much states can open the door to giving subsidies to more people,” said Larry Levitt, senior vice president at the nonprofit Kaiser Family Foundation, which focuses on health and health policy issues. “There wouldn’t be enough money to go around.”
Administration officials stressed that they will review the state requests for how they affect those with major health issues, noting that states cannot ask to opt out of the law’s provisions that ban insurers from denying coverage and basing premiums on people’s medical histories.
President Donald Trump and Health and Human Services Secretary Alex Azar “have both made clear we will protect people with pre-existing conditions,” Seema Verma, the centers’ administrator, said in a speech at the American Legislative Exchange Council policy summit on Thursday.
Currently, subsidies can only be used for plans bought on the Obamacare exchanges. Enrollees who make less than 400% of the poverty threshold — just over $48,500 for a single person or $100,000 for a family of four — are eligible for this help. Some 87% of participants receive this assistance, which lowers their premiums to less than 10% of their income.
However, those who aren’t eligible for subsidies are increasingly finding themselves priced out of the Obamacare market after insurers hiked rates for several years. The Trump administration has broadened the availability of alternatives that have lower premiums, but offer fewer benefits and protections. Thursday’s guide suggests ways to help pay for these policies, which will direct people away from Obamacare plans.
Here are four changes the administration suggests states could request:
Funnel subsidies into private accounts: Enrollees’ subsidies could be directed into private accounts that could be used to pay premiums or out-of-pocket health care expenses. Republicans favor these types of accounts, which they argue give beneficiaries more control, but also more responsibility. GOP lawmakers and officials have long pushed for Health Savings Accounts in employer-based plans and have been adding similar tools to Medicaid. Enrollees could also funnel their own money or employer contributions into the accounts and carry over any unspent funds to following years.
Create new subsidy programs: States could design their own subsidy systems, which they would administer. Their programs could seek to provide assistance to a wider range of residents or to attract specific populations, such as young and healthy consumers, into their market, the agency said. Currently, all states must adhere to the structure laid out in the federal law, which is geared to helping those with lower and moderate incomes.
Use the subsidies to pay for non-Obamacare plans:
States could set the rules for the types of health plans eligible for premium subsidies. These could include policies that don’t adhere to Obamacare’s regulations, such as short-term plans
. The Trump administration recently broadened the availability of this coverage, which lasts just shy of one year, through an executive order. Alternatives to Obamacare typically offer less comprehensive coverage, but officials point out that states could allow enrollees to use their federal subsidies to offset higher out-of-pocket expenses.
Help insurers cover high-cost enrollees: States will have more flexibility to implement programs that help defray insurers’ costs to cover those with pricey medical conditions, such as reinsurance programs or high-risk pools. Seven states have already used waivers to set up reinsurance programs, which prompted insurers to lower their rates for Obamacare policies. Officials highlight that this flexibility can be “particularly important” in states allowing the sale of short-term plans, which could siphon off younger, healthier enrollees from the Obamacare market.
Even with these new powers, Verma stressed that states must still adhere to certain rules when applying for waivers, including those that would change subsidy programs. For instance, the new designs can’t cost the federal government more. But the administration made some key adjustments to how applications would be evaluated. Requests will now be judged on how they affect coverage and affordability for residents in the state as a whole, rather than for specific groups of people, such as the poor or the sick.
However, Verma said that the agency will pay particular attention to how state waiver requests affect low-income residents and those with complex medical conditions. She reiterated that the guidance does not affect Obamacare’s protections for those with pre-existing conditions, which became a central focus of the recent midterm elections and helped Democrats take back the House.
Health policy experts, however, counter that the waivers could leave low-income, older or sicker residents with fewer choices and higher costs while favoring the young and healthy. The protections may still be in place, but the sick may not be able to afford the policies or may not be able to find any comprehensive plans offered in their area.
The four templates offered by the administration on Thursday contain suggestions — such as providing a flat subsidy based on age and family size — that are similar to some of the replacement measures lawmakers proposed during the Obamacare repeal battle last year. The private account example, which Verma highlighted, is similar to one she helped craft for Indiana’s Medicaid program when she served as a consultant there before joining the Trump administration.
Verma painted the enhanced flexibilities as a way for states to address problems created by the Affordable Care Act. She said she knows firsthand how hard it was to gain approval for a waiver request under the Obama administration.
“These waiver concepts are offered as a springboard to spur innovative thinking among states on how to develop better health care programs across the country,” she said.
Democrats, however, attacked the proposals, saying they will hurt older and sicker Americans.
“The Trump administration’s approach warms over old and bad ideas that increase costs for consumers and lowers the quality of care,” said Sen. Ron Wyden, a Democrat from Oregon who wrote the Affordable Care Act’s waiver provision. “Today’s news accelerates America’s slide back to the days when health care was reserved for the healthy and wealthy.”
Several Democratic lawmakers and left-leaning policy experts are also questioning whether the agency exceeded its authority by issuing the waiver changes last month as guidance, rather than a rule, which must go through a more extensive process. This could open the door to legal challenges.
Reps. Richard Neal of Massachusetts and Frank Pallone of New Jersey called the move “illegal” and are demanding answers from the administration.
“It is contrary to the plain language of the statute, and it appears to be part of the administration’s ideologically motivated efforts to sabotage the ACA,” they wrote in a letter Thursday.