As previously discussed by our colleagues at ML Strategies, the Department of Health and Human Services (“HHS”) and the Department of Treasury (“Treasury”) released new guidelines (the “Guidance”) on the application and approval process for states seeking waivers through Section 1332 of the Patient Protection and Affordable Care Act (“ACA”) from certain requirements for health plans issued under the ACA. The Guidance replaces guidelines issued under the Obama Administration and previously published on December 16, 2015.
The ACA set forth certain guardrails that Section 1332 Waivers must stay within to be approved. To stay within the guardrails, a waiver proposal must:
- Provide coverage that is at least as comprehensive as coverage is defined in the ACA and offered through exchanges;
- Provide coverage and cost-sharing protections against excessive out-of-pocket spending making the plans under the proposal at least as affordable as those under the ACA;
- Provide coverage to at least a comparable number of the state’s residents that would otherwise be covered under the ACA; and
- Not increase the federal deficit.
The Guidance sets forth the Trump Administration’s interpretation of those guardrails and the result is to significantly increase a state’s flexibility in applying for and obtaining a Section 1332 Waiver. Below is a summary of the significant impacts on the Section 1332 Waiver process.
1. The Guidance’s new comprehensive and affordability principles shift the focus from how many individuals would actually receive comprehensive and affordable coverage under a Section 1332 Waiver to whether or not the waiver would allow access to comprehensive and affordable coverage.
The Obama Administration interpreted affordability and comprehensive guardrails to require proposals to offer coverage that is as comprehensive and affordable as such coverage would be under the ACA. In doing so, the Obama Administration prohibited Association Health Plans (“AHP”) and Short-Term Limited Duration Insurance (“STLDI”) as those plans offer less comprehensive and affordable coverage by limiting coverage for pre-existing conditions and not covering certain benefits.
While waivers must still provide coverage that is comprehensive and affordable, the Guidance allows waivers to allow states to provide coverage that is less affordable and less comprehensive. Meaning, a waiver may still be approved if it provides less access to comprehensive or affordable coverage, relative to the ACA, so long as the waiver continues to provide some access to comprehensive and affordable coverage. In doing so, the Guidance expressly encourages states to seek waivers to expand access to AHP and STLDI. While less costly, AHPs and STLDIs can exclude individuals with pre-existing conditions and exclude coverage for certain health benefits such as mental health, prescription drugs and/or maternity care. A state proposing a waiver for AHPs and STLDIs could now be approved so long as state residents still have access to other comprehensive and affordable coverage.
In evaluating affordability, HHS and Treasury will now review waivers to see how many residents have access to affordable and comprehensive coverage, regardless of the type of coverage the state’s residents would have had access to absent the waiver. HHS and Treasury will also consider the significance of the proposed changes to affordability. For example, a waiver that makes coverage substantially more affordable for some and only slightly less affordable for others is now likely to be approved. Under the Obama Administration’s guidelines, such a waiver proposal would likely have been rejected because it decreased the affordability of coverage. However, to obtain this approval, a waiver application must, among other criteria, identify the types of individuals, including low-income individuals, who are likely to see a decrease in affordability and those who are likely to see an increase in affordability.
2. The Guidance anticipates that HHS and Treasury will approve waivers where the proposed waiver forecasts an initial reduction in the number of individuals covered if the longer-term impact forecasts an increase in coverage.
The guardrails require waiver proposals to provide coverage to a comparable number of individuals that would have been covered under the ACA. The Obama Administration interpreted this guardrail to require coverage of a comparable number of individuals in both the short-term and the long-term. The Administration also reviewed a waiver’s impact on coverage for sub-populations of individuals. The Guidance now ignores coverage impacts on sub-populations of individuals and reinterprets this guardrail to place a greater emphasis on the long-term coverage impact of the waiver proposal. Meaning, a waiver proposal could decrease coverage in the short-term if it is forecasted to increase coverage in the long-term.
3. Aspects of a waiver may increase the federal deficit so long as the overall impact of the waiver does not increase the federal deficit.
The Guidance largely maintains the Obama Administration’s approach to deficit neutrality and waivers must still project federal spending net of revenues to be equal to or lower than if the waiver did not exist. However, the Guidance does allow waiver proposals that would increase the federal deficit in any year so long as the total impact of the proposed waiver would be budget neutral.
4. Federal-pass through funding may now be updated at any time.
Section 1332 Waivers allow states to receive pass-through funding from the federal government. The amount of funds was previously calculated annually and equals an estimate of federal financial assistance, including premium tax credits, small business tax credits, or cost-sharing reductions. Under the Guidance, such pass-through funding can now be updated at any time to reflect changes to state or federal law, including changes to regulations and agency guidance.
5. The Guidance increases the ways in which a state can authorize a Section 1332 Waiver.
Previously, states where typically required to adopt new law to apply for a Section 1332 Waiver. Under the Guidance, states can now also rely on (1) existing law; (2) duly-enacted state regulations; and (3) state executive orders, to authorize and implement a Section 1332 Waiver. Thus, increasing the flexibility and basis for which a state can authorize a waiver application.
6. More guidance to come.
CMS’s Fact Sheet on the Guidance, and a blog post by Seema Verma, stated that CMS will be publishing a series of waiver concepts. These publications will provide examples on how states can take advantage of waivers to catalyze additional state innovations.
In summary, with this Guidance, HHS and Treasury show a readiness to approve proposals that were previously denied under the protections contained in the Obama Administration’s guidance. In the coming months, we expect to see states that had previously had Section 1332 Waivers rejected, seek to submit new waiver applications to have those previously rejected coverage and affordability proposals approved under this new Guidance.