Perhaps the most immediate problem facing federal and state health policymakers—and consumers—is what can be done for marketplace consumers in “bare counties” for 2018. As of early June, 2017, there are 47 counties in Ohio, Missouri, Kansas, and Washington where there are currently no insurers offering to provide marketplace coverage for 2018. Approximately 38,000 Affordable Care Act marketplace enrollees live in these counties (only 0.3 percent of the total), but under current law they have no access to the ACA’s premium tax credits and cost-sharing reduction payments that make health care affordable for lower-income Americans.
At least two bills have been introduced into Congress to provide access to coverage for these consumers. One bill, introduced by Senators Alexander and Corker (both Tennessee Republicans) would offer tax credits to purchase coverage outside of the marketplaces—not with advanceable tax credits but rather with tax credits that would be payable at tax filing time, probably too late for many ACA enrollees. A second bill, introduced by Missouri Democrat Sen. Claire McCaskill, would allow consumers in bare counties to receive premium tax credits and enroll in coverage through the District of Columbia small business exchange. Neither bill has been taken up by Congress.
It is also possible that a state could take action to address the bare county problem through an innovation waiver under section 1332 of the ACA. Section 1332 allows the Departments of Health and Human Services and Treasury to waive certain requirements of the ACA—pertaining to the marketplaces, the premium tax credits and cost-sharing reduction payments, the individual and employer mandates, and qualified health plan requirement—to allow states to pursue alternative approaches to providing coverage in the individual and small group markets. Section 1332 also allows the federal government to pass through to a state granted a waiver the money the federal government would have spent on premium tax credits, cost sharing reductions, and small employer tax credits to help fund the state program.
Section 1332, however, requires states to meet specific procedural and substantive standards to establish eligibility for waivers. Procedurally, states must enact legislation authorizing a waiver and provide notice and an opportunity for comment, including public hearings, before submitting a waiver request, while the federal government must provide further opportunity for public comment before authorizing the waiver. States must also submit a great deal of data, as well as actuarial and economic analyses, to support their proposals. Substantively, a state must establish that the waiver program will:
- provide coverage at least as comprehensive as that provided under the ACA,
- provide coverage and protection against excessive out-of-pocket expenditures at least as affordable as that provided under the ACA,
- cover a number of residents at least a comparable to the number who would be covered under the ACA, and
- not increase the federal deficit.
To date, only one 1332 waiver application has been approved, dealing with the small employer market in Hawaii.
Iowa’s Waiver Request: Stretching, And Breaking, The Limits Of 1332 Waivers
On June 12, 2017, the Iowa insurance commissioner submitted a request for a 1332 waiver that would dramatically change the nature of the marketplace in Iowa, claiming that the measure was necessary to save a collapsing Iowa individual insurance market. But Iowa recognizes that section 1332 was not designed for “crisis management.” To grant Iowa’s waiver request, CMS would have to grant, as Iowa recognizes, waivers and modifications of many of the 1332 statutory and regulatory requirements. Iowa proposes, therefore, that CMS broadly waive 1332’s requirements under President Trump’s Affordable Care Act Executive Order, or alternatively simply grant its request under the Executive Order without statutory or regulatory authority.
This creates a problem, however. The Executive Order only permits the federal agencies administering the ACA to take action “consistent with applicable law and subject to the availability of appropriations,” and under the authority of existing or properly revised federal rules. It does not, and could not, authorize the federal agencies to themselves rewrite ACA requirements and establish a premium subsidy program independent of Congressional appropriations authority. Iowa’s only hope, therefore, is that the administration believes that the Executive Order grants it authority to waive or modify 1332 requirements to validate its 1332 waiver request. To do so would require ignoring section 1332’s procedural and substantive guardrails to such an extent as to render the provision meaningless, except as a carte blanche for any administration to rewrite the ACA in response to any state’s request.
The Lay Of The Land In Iowa
Iowa faces a real and serious situation, as outlined in its proposal. The proposal notes that before the ACA, Iowa had one of the highest insurance coverage rates and lowest premium rates in the country. Although Iowa’s uninsured rate has decreased further because of its Medicaid expansion, its individual market has been troubled. Iowa allowed individuals to keep non-ACA compliant “transitional” plans in 2014, leaving 85,000 individuals outside the marketplace market, undermining its individual market. Iowa’s insurers apparently initially underpriced coverage and received an older and sicker group of enrollees than they had anticipated. Iowa’s CO-OP, CoOpportunity, went into liquidation in 2014, and United withdrew from its insurance market for 2017. The refusal of Congress to fully fund the risk corridor program led to the end of CoOpportunity, and the uncertainty of continued federal funding contributes to ongoing market instability.
Approximately 72,000 Iowans are covered under ACA-compliant plans for 2017. About 51,500 are covered through the marketplaces and 44,000 receive advance premium tax credits (APTC). On March 30, 2017, Wellmark and Wellmark Health Plan, the Iowa Blues, announced that they were not returning to the market for 2018, followed by Aetna a few days later. Currently two plans have not announced yet that they are leaving for 2018, but the Iowa proposal suggests that they are unlikely to remain. Their withdrawal would leave zero carriers. Iowa is requesting emergency authority—initially only for 2018—to address this situation.
Iowa has continued discussions with Wellmark and with Medica, one of the remaining insurers, and has put together with them a plan for a stop-gap program for 2018. The state has apparently already discussed this program with the Centers for Medicare and Medicaid Services (CMS) (although the proposal suggests that these conversations have been with “senior level management” and that career staffers who review the proposal may take a “strict interpretation” of 1332 requirements.) Wellmark has agreed to offer coverage in all 99 Iowa counties if the proposal is approved.
Iowa currently has a high-risk pool and estimates that 4,400 consumers might be eligible for coverage through it. However, the state also observes that many who currently have APTC would not be able to afford high-risk pool coverage and that covering even this number of consumers through a high-risk pool could cost the state $100 million.
Iowa claims that it has broad existing state legislative authority to implement its proposed program. Iowa law gives the insurance commissioner authority to implement the ACA through regulation. Iowa also has a preexisting reinsurance entity, the individual health benefit reinsurance association (IIHBRA), which was established in the 1990s and administers the high-risk pool. Iowa believes it could be used to implement the law.
What Iowa Is Proposing
The IIHBRA is developing a standard plan (the Iowa PSM Plan) for 2018. As no insurers have yet submitted their own plans for the individual market, the PSM Plan is to be modeled after 2017 coverage. Each carrier would offer a single standard plan. Upon approval of the plan, the commissioner would promulgate rules setting for the eligibility and plan requirements. Only one plan would be available in the market for each insurer—a silver level (68 to 72 percent actuarial value plan) that would cover all essential health benefits and Iowa state-mandated benefits. The PSM Plan would be the only plan available in the individual market in 2018 except for grandfathered and transitional plans. (Iowa apparently intends to extend transitional plans another year rather than to get those covered by transitional plans into its individual ACA-compliant risk pool). Although the proposal does not focus on this, apparently coverage would be only available through direct purchase from plans and through agents and brokers, and not through HealthCare.gov as it is now.
The plan would be issued on a guaranteed issue basis and not have annual or lifetime limits. It will only be available during the open enrollment period from November 1 to December 15, 2017, and for special enrollment periods. Anyone applying during a special enrollment period except for birth or adoption would have to show continuous coverage for the preceding 12 months, a requirement that would be questionable under ACA guaranteed issue requirements, which cannot be waived under 1332.
The program would be largely funded by pass-throughs of federal funding that would otherwise have gone to fund APTC or CSRs within Iowa. Premium tax credits would be based on age and income, although apparently using much broader age and income categories than apply under the ACA. In the table attached to the proposal, for example, age levels increase based on 10-year increments and income is organized into six categories, based on percentage of federal poverty level. The proposal does not clarify whether insurers would be required to age rate based on ten year increments as well. Indeed, the plan includes no direction to insurers as to how to set their premiums or guarantee that coverage will be affordable for the premium tax credit levels established. The tables indicate, however, that it is Iowa’s intention that younger people pay less, and older people pay more.
Unlike under the ACA, premium tax credits would be available to individuals with incomes above 400 percent of the poverty level. On the other hand, nowhere does the proposal suggest that cost-sharing reductions would continue to be available or funded. The effect of the proposal would, therefore, be to make coverage more affordable for people with incomes over 400 percent of the poverty level, but leave health care unaffordable for those with the lowest incomes.
Income would be determined based on 2017 household income. (Apparently, individuals who experienced a significant loss of income, perhaps because of job loss, would not be able to apply based on their 2018 income). Premium tax credits would be determined though the Iowa Department of Revenue and be paid directly to insurers.
The proposal also includes a reinsurance program, funded through the federal pass-through payments. It would provide 85 percent reinsurance for claims between $100,000 and $3,000,000 and 100 percent for claims above $3,000,000 by supplementing the 2018 federal risk adjustment program, which reinsures 60 percent of claims above $1 million.
Iowa expects that for 2018 APTC funding under the current ACA would be $304 million (up from $194 million in 2017 because of anticipated premium increases) and that CSRs would amount to $48 million. This makes for a total of $352 million in federal funds available for individual insurance premium tax credits and for a reinsurance program. Iowa expects that $220 million of this will be available for premium tax credits, and about $80 million for reinsurance. Of course, if no insurers show up for 2018, the anticipated federal expenditures for Iowa would be $0, so HHS and Treasury will have to stretch 1332 requirements to find that this results in the budget neutrality required by 1332.
An appendix to the proposal, based on the 1332 checklist HHS and Treasury released in March, indicates how Iowa intends to comply with 1332 waiver requirements. Recognizing that HHS has 45 days to determine whether a 1332 request is complete, Iowa asks for a 14-day turnaround, and further requests that senior HHS staff ask career staff not to interpret requirements strictly. Contrary to regulatory requirements, Iowa is not exposing the proposal for public comment for 30 days before submitting it to HHS, but says it intends to hold public hearings and meet tribal consultation requirements after it gets feedback from HHS.
As noted above, Iowa claims to have broad legislative authority to implement its proposal, but requests HHS to waive the requirement for more specific authority if it is needed. It notes that Iowa’s legislature had recessed for the year. Iowa says it will promulgate rules to implement the proposal, but the proposed rules included do not begin to address the questions raised.
Section 1332 waivers require the submission of extensive data as well as actuarial and economic analysis to demonstrate compliance with the 1332 coverage, affordability, comprehensiveness, and budget neutrality requirements. Section 1332 requires that the independent cms actuary must certify that 1332 waiver applications meet statutory reqirements based on these data. Iowa contends that since the proposal is only for 2018 (unless it is extended), information additional to the minimum included in the proposal is not needed. It also asks that specific 1332 requirements that must be met for reinsurance programs and information on external effects of waiver programs be excused for the same reason. (The proposal includes a footnote saying that a waiver from the individual mandate is also being requested, but this issue is not developed or explained.)
A Problematic Solution
In sum, Iowa essentially says that it has a crisis, and the only way to meet it is to establish a different program than that established by the ACA, which it wants the federal government to fund. Iowa has a real problem but so do a number of other states (although notably California and other states that have embraced the ACA and tried to make it work have often fared better). However, rewriting the ACA without congressional authority and giving federal money to a state without a congressional appropriation raises serious concerns, as does a program that would help middle-income enrollees at the cost of those with lower incomes.
It is also hard to believe that Iowa could possibly stand up what is essentially a state exchange, determining eligibility, calculating premium tax credits, and paying insurers, in less than five months. States that had far more preparation time failed to do so in 2013 and 2014.
To stabilize the marketplaces in Iowa and elsewhere, Congress and the administration could immediately take steps to ensure that the cost-sharing reduction payments are funded, the individual mandate enforced, and risk corridor obligations met. Congress could also require Medicaid managed care plans to participate in the marketplaces, as New York intends to do. But amending the ACA is up to Congress, not Iowa.