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The Department of Health and Human Services (HHS), the Department of the Treasury, and the Centers for Medicare and Medicaid Services (CMS) have issued new guidance that will make it easier for states to get waivers from certain mandates under Section 1332 of the so-called “Affordable Care Act,” also known as the “ACA” or “ObamaCare.” The goal of the new guidance is to provide consumers with more private insurance options in the nongroup health insurance market.
Section 1332 created “State Innovation Waivers,” which allows a state to seek waivers from specific parts of the law provided the state meets other criteria. The waivers were meant to foster innovation in states and sustainable spending. Through September 2018, however, only eight states have successfully applied for a waiver. Waivable provisions of ObamaCare are:
Part I of subtitle D (Sections 1301-1304): This subtitle is part of Title I of the law related to the definition of a qualified health plan (QHP), including the metal tiers of health plans and actuarial values, and the ten essential health benefits (EHBs). It also included the annual limitations on out-of-pocket costs.
Part II of subtitle D (Sections 1311-1313): This is another part of Title I related the establishment of state health insurance exchanges, accessible both online and by phone, and grants to states to create the exchanges. It also established a single risk pool for the nongroup market.
Section 1402: This section established the cost-sharing subsidies for individuals or families who earn up to 400 percent of the federal poverty level, which were supposed to be used to lower out-of-pocket costs. These subsidies have never been authorized by law, although the Obama and Trump administrations unconstitutionally made the payments to health insurance companies until October 2017. A pending case in federal court could force the Trump administration to begin paying cost-sharing subsidies despite the subsidies not being appropriated by Congress.
Section 36B: This part of the Internal Revenue Code was created by ObamaCare and deals with the advanceable premium tax credit (APTC) under the law. Individuals or families who earn up to 400 percent of the federal poverty level may receive the tax credit, which is paid directly to health insurance companies, for qualified health plans purchased on the ObamaCare exchange.
4980H: This is another part of the Internal Revenue Code established by ObamaCare. The section created the employer mandate, which requires employers with 50 employees or more to offer health insurance coverage to full-time employees. Full-time employees are defined by those who work 30 hours or more each week.
5000A: This part of the Internal Revenue Code established by ObamaCare created the individual mandate, the penalties for which were set to $0 by the Tax Cuts and Jobs Act beginning in tax year 2019, although the individual mandate remains in statute.
States still have obligations to qualify for waivers. Specifically, a state must be able to explain how it will provide coverage that is at least as comprehensive, affordable, and comparable. Also, a waiver may not increase the budget deficit. A waiver may be granted for five years, although a state may be able to request an extension.
The new guidence issued on Monday by HHS, Treasury, and CMS builds on the Trump administration’s rule regarding the expansion of association health plans (AHPs) short-term, limited-duration (STLD) health insurance plans. The guidance updates the previous guidance released in December 2015. The previous guidance didn’t provide much flexibility, which is why so few states were granted waivers.
The new guidance document focuses on the coverage that is made available on the exchanges by health insurance companies rather than what consumers had purchased. States must still meet statutory requirements to be eligible for a waiver, but the guidance explains that the comprehensiveness and affordability requirement may be considered met “if access to coverage that is as affordable and comprehensive as coverage forecasted to have been available in the absence of the waiver is projected to be available to a comparable number of people under the waiver.”
Basically, if an individual decides to purchase a more affordable, less comprehensive plan, the requirement under Section 1332 will be met because there will be more comprehensive offerings on the exchanged that they could have opted to purchase.
CMS Administrator Seema Verma explained that the administration the flexibility provided under the new guidance should allow states to focus on “increased access to affordable private market coverage.” She also noted that STLD plans are part of the equations, essentially urging states to take advantage of the rule.
STLD plans would be eligible for the ATPC under the new guidance. Allowing the use of APTC to be used to purchase these plans. STLD plans aren’t subject to ObamaCare’s costly Title I regulations, although these plans are subject to state regulation and a state could impose regulations and mandates. In fact, some states already do have mandates on these plans. Of course, the result of this will be that premiums for plans that are compliant with ObamaCare will increase if a significant number of people opt for STLD. As a result, subsidies for these plans will also rise.
The new guidance is positive on the whole. Virtually every effort to rollback or sidestep ObamaCare through the regulatory process should be applauded. Still, like every rule or guidance issued by the administration, it’s not a substitute for repeal, and Congress failed epically on that effort in 2017 because Republicans focused too much on a replacement that looked an awful lot like ObamaCare rather than thoughtfully crafting a real alternative.