States still looking to tailor health care through federal waivers, UMass Medical School expert says

May 16, 2017

Despite the American Health Care Act (AHCA) passing the House, there seems no clear pathway to repealing and replacing the Affordable Care Act (ACA). An alternative to federal legislation is the state waiver process, already in place. In an effort to assist states seeking to waive provisions of the ACA, the U.S. Department of Health & Human Services on May 16 announced a checklist.

States must follow a number of procedural requirements to submit a waiver. The checklist provides states with a list of those requirements. It comes two months after HHS Secretary Thomas E. Price sent a letter to states encouraging the use of ACA waivers, indicating a desire on the part of HHS for states to pursue these waivers. In the checklist intro, HHS welcomes waiver applications that would establish state-operated reinsurance programs, which funnel state money to health insurers to offset the high costs.

In the weeks before the checklist was issued, governors in several states were turning to the 1332 waiver process to restructure their local health care markets, according to UMass Medical School health care law and policy expert Rachel Gershon, JD, MPH.

While they offer opportunities for sweeping change, 1332 waivers can be extremely challenging, and complicated to pull off as well, Gershon says.

Such “State Innovation Waivers” offer the potential to make fundamental changes to how Medicaid and the Affordable Care Act work at the local level. States can restructure how ACA exchanges work and waive parts of the ACA, including the individual mandate, the employer mandate and federal subsidies for cost sharing and premium support, Gershon notes.  Congressional attempts to reform health care may affect these provisions as well; however, there is a much clearer path to changes through state innovation waivers because they do not require congressional approval.

“A state has a lot of opportunities to waive [provisions of the ACA],” explains Gershon, an associate at UMass Medical School’s Center for Health Law and Economics.

However, winning approval for a 1332 waiver from CMS can be extremely challenging, she notes.

In order to win federal approval, a state has to verify that it has a “viable replacement plan” that is just as comprehensive and affordable. The new administration, Gershon wrote for STAT, may have different ideas than the previous administration around what constitutes a viable replacement plan.

On top of that, a state must also show that its proposed changes won’t add to the federal budget deficit, says Gershon, adding “those structures are pretty hard to get right.”

The difficulty, in turn, stems from the challenging nature of the modern health care market and the competing demands states face when attempting to make changes, she said.

“One of the reasons that health care is so hard to do is that it is really hard to solve the puzzle of how do you cover as many people as you can with as comprehensive coverage as you can while keeping costs low,” Gershon notes.

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