Editor’s note: In a new issue brief for the Blue Cross Blue Shield of Massachusetts Foundation, Manatt Health reviews opportunities for the Commonwealth to reevaluate and consider changes to its system of coverage through a Basic Health Program (BHP) or 1332 State Innovation waiver. The issue brief discusses the federal requirements related to each of these vehicles for innovation and specific coverage program modifications that the state may consider to tailor further healthcare reform in the Commonwealth. Below is an executive summary, capturing key highlights. Click here to download the full issue brief.
Massachusetts has led the country in expanding coverage and reforming its payment and delivery models, with considerable success. In 2006, the Commonwealth enacted Chapter 58, a comprehensive healthcare reform law that extended coverage to more than 96 percent of Massachusetts residents through expansion of its Medicaid program, MassHealth, and also engendered a series of private market reforms, an individual mandate, and subsidies for residents to purchase coverage in the nation’s first marketplace, the Health Connector.
With the passage of the Affordable Care Act (ACA) in 2010, Massachusetts began the task of tailoring its reforms to the ACA’s requirements. At the same time, the state tackled rising healthcare costs by passing Chapter 224 of the Acts of 2012, which set ambitious goals for private sector payers, providers and state agencies to rein in costs through payment and policy innovations, improve access and enhance quality.
Today, as its Medicaid (MassHealth) and marketplace systems continue to stabilize and the state enters its third year under Chapter 224, the time is ripe for the Commonwealth to evaluate ACA coverage programs in the context of its coverage and delivery system goals. The ACA offers two relevant vehicles: Section 1331, the Basic Health Program (BHP), and Section 1332, Waivers for State Innovation. These sections of the law allow Massachusetts to modify ACA coverage, subsidy, and insurance market requirements to address the state’s unmet coverage and delivery system goals. Section 1332 also allows the state to propose targeted fixes to features of the ACA that impede smooth operation.
Notably, Massachusetts already has acted to ensure more affordable coverage than would otherwise be available under the ACA by using MassHealth funding through its 1115 waiver to supplement marketplace subsidies for individuals with family incomes above MassHealth eligibility levels of up to 300 percent of the federal poverty level (FPL).
Section 1331: Establishing a BHP
To make coverage more affordable for individuals with incomes between 133 and 200 percent of the FPL, Section 1331 gives states the option to establish a BHP for these individuals who would otherwise be eligible for coverage through the marketplace. States electing to pursue the BHP, which to date are Minnesota and New York, receive federal funding up to 95 percent of the amount of the federal premium tax credits and cost-sharing reductions that would have been available had the individual purchased coverage through the marketplace. States were able to implement a BHP beginning in January 2015 through approval of a “BHP Blueprint” by the Department of Health and Human Services (HHS).
Section 1332: Proposing Alternatives to the Four Pillars of the ACA and Related Provisions
Section 1332 permits states to request from HHS and the Treasury Department waivers of certain ACA requirements, with the waivers first effective in 2017. Specifically, states may propose alternatives to four pillars of the ACA and various related provisions:
- Individual mandate. States can modify or eliminate the tax penalties that the ACA imposes on individuals who fail to maintain health coverage.
- Employer mandate. States can modify or eliminate the penalties that the ACA imposes on certain employers who fail to offer affordable coverage to their employees.
- Benefits and subsidies. States may modify the rules governing the establishment of qualified health plans (QHPs) and their covered benefits, as well as those related to premium tax credits and reduced cost sharing. States that reallocate premium tax credits and cost-sharing reductions may receive the aggregate value of those subsidies.
- Marketplaces. States can modify or eliminate the marketplaces as the vehicle for determining eligibility for tax credits and enrolling consumers in coverage.
While the scope of 1332 waivers offers broad opportunities for state innovation, HHS also imposes important guardrails to ensure that the ACA’s coverage goals are met. States must provide coverage that is at least as “comprehensive” and “affordable” as coverage offered through the marketplace. They must also ensure that at least as many people are covered as would have been in the absence of the waiver. In addition, 1332 waivers must not increase the federal deficit.
Regulations jointly promulgated by the HHS and the Treasury provide detailed information about the waiver application process—but notably not about the substantive requirements of Section 1332. Finally, Section 1332 requires HHS and the Treasury to develop a plan for coordinating and consolidating the 1332 waiver process with Medicaid, a critical point for Massachusetts given the importance of the MassHealth program and funding to the coverage continuum.
The Opportunity to Reconfigure the Massachusetts Coverage Continuum
Through some combination of Section 1331, BHP authority, a Section 1332 Innovation Waiver and the state’s Section 1115 MassHealth waiver, Massachusetts has the opportunity to reconfigure its coverage continuum to maximize access, affordability, and continuity for its residents and address targeted ACA rules that have proven problematic in the Commonwealth. Among the more comprehensive reforms, the state may consider new approaches to are:
- The subsidy continuum. The state could utilize a Section 1332 waiver—perhaps in combination with a 1115 waiver—to smooth the subsidy “cliffs,” or significant changes in costs as a result of modest changes in income for low- and moderate-income individuals.
- Plan purchasing and certification. The state could establish either a BHP product under Section 1331 or a BHP-like product through a 1332 waiver for certain subsidy-eligible populations. Such a new product could be operated through MassHealth managed care plans or through health plans offering coverage through the Connector. Massachusetts also could use Section 1332 authority to permit provider-led entities, such as Accountable Care Organizations (ACOs), to be certified to offer QHP or BHP products.
- The Connector’s role and responsibilities. Under Section 1332, Massachusetts could modify the functions of the Connector, augmenting or narrowing Connector functionality or eliminating the Connector altogether.
- Payment and delivery system reform. The state could design a new program, using a combined Section 1332 and 1115 waiver, through which a single set of plans or ACOs and providers serve most, if not all, of the state’s insurance affordability program enrollees. By implementing a strong purchasing strategy across as many as 1.7 million lives, the Commonwealth could gain substantial market power, which could be leveraged to accelerate payment and delivery system reform and ensure higher-value coverage.
The Commonwealth might also pursue targeted fixes, including:
- Fixing the “family glitch” that prevents dependents from accessing federal tax credits when an employed family member has access to “affordable” employer-sponsored insurance. The problem with the current system is that “affordability” of employer-sponsored insurance for spouses and dependents is based on the cost of individual coverage—not the cost of family coverage.
- Reaching the remaining uninsured by testing new insurance products targeted to hard-to-reach uninsured populations or using a “premium assistance” or voucher approach to help certain uninsured-but-employed individuals purchase employer-sponsored coverage. The state might also consider reconfiguring coverage options for certain immigrant populations that are currently unable to apply for and purchase health insurance coverage.
- Aligning and streamlining subsidy eligibility and enrollment rules through a combined 1332 and 1115 waiver that addresses conflicts in eligibility standards and verification rules across coverage programs.
- Aligning state and federal individual responsibility requirements through a 1332 waiver that modifies the rules of the federal individual mandate or eliminates it entirely (while maintaining the state individual mandate).
Massachusetts leads the nation in healthcare coverage and is among the states spearheading payment and delivery system reform. Now, almost 10 years after the passage of Chapter 58 and five years after the passage of the ACA, there are significant opportunities in the Commonwealth to align and streamline coverage, not only to increase consistency among coverage programs and improve access to consumers but also to accelerate payment and delivery system transformation.