CMS lets states get creative with federal exchange funds under 1332 waivers
CMS ADMINISTRATOR Seema Verma last week outlined ways that states can use 1332 waivers to launch new financing options that resemble health savings accounts.
Under the new approach, states would provide a cash contribution to an account that people can use to pay both premiums and any out-of-pocket health expenses.
This approach maximizes consumer choice and engagement, giving people flexibility to make smarter decisions with their healthcare dollars because they keep any unspent funds in the account, according to Verma. This flexibility also helps to control premium hikes and limit the number of public subsidies paid out by establishing a clear individual healthcare budget upfront, she said.
Verma laid out four 1332 waiver concepts last week during remarks at the States and Nation Policy Summit of the American Legislative Exchange Council. The speech followed up guidance issued by the CMS last month. That document represented a dramatic overhaul of the current 1332 waiver process.
States can also develop a new premium subsidy structure and decide how the subsidies should be targeted, set the rules for what type of health plan qualifies for state subsidies to give people access to more options, and implement risk stabilization strategies to address the costs of high-risk individuals to reduce premiums for everyone.
But these ideas are not going unchallenged. First, the new permissions must go through the rulemaking process, Christen Linke Young, a fellow at the Brookings Institution and former CMS official, wrote in an analysis.
“By releasing the document as guidance, the agencies are implicitly taking the position that it is an ‘interpretative rule’ exempt from the standard rulemaking process,” she said. “However, the new guidance contains policy that would likely be classified under the (federal law) as a legislative rule. As a result, the agency likely cannot adopt these changes without notice and comment rulemaking.”
The distinction is important. Any state looking to implement the ideas could be sued even if the
CMS approved their 1332 waiver request.
Under the guidance issued last month, state officials were given more autonomy to approve waiver plans by letting governors bypass legislatures and submit waivers on their own. Secondly, states could divert their Affordable Care Act subsidies to help consumers buy short-term duration plans, which do not have to contain the same patient protections as ACA-compliant plans.
The notice stated that a waiver could still be approved even if it resulted in some residents losing or dropping coverage. States would have to ensure that a comparable number of people remain covered. The Obama administration had strict guidelines in place to ensure waivers wouldn’t result in a loss of coverage.
The CMS hopes the new guidance will encourage creativity in waiver creation. So far, seven of the eight approved 1332 waivers focus on reinsurance programs. The new guidelines should also expedite the waiver approval process. Congress has pushed the agency to hasten its review of the waivers, holding several hearings on the process last fall.
States can request 1332 waivers for virtually every coverage component of the ACA as long as the state’s healthcare coverage is consistent with the law’s provisions and doesn’t increase the federal deficit.
HHS under the Trump administration approved a 1332 waiver from Alaska, creating a state reinsurance program to reduce premiums, effective in 2018. Maine, Maryland, Minnesota, New Jersey, Oregon and Wisconsin received similar approvals. HHS under the Obama administration approved a waiver for Hawaii that required employers to provide more generous coverage than is
● required under the ACA.
Verma says the new options will give consumers more flexibility.