By failing to follow through on repeated assurances to Oklahoma that its 1332 reinsurance waiver would be approved on an expedited timeline, the federal government dealt a devastating blow to Oklahoma consumers and magnified suspicions that the Department of Health and Human Services (HHS) is more interested in undermining the Affordable Care Act than partnering with the states to stabilize the individual market for the nearly 20 million Americans who depend on that market for their health security.
Oklahoma’s Lambasts The Federal Government For Breaking A Promise
In a blistering letter to now former HHS Secretary Tom Price and Treasury Secretary Steven Mnuchin, Oklahoma’s Secretary of Health and Human Services, Terry Cline, withdrew Oklahoma’s requested waiver and said the federal government had reneged on a promise at the last minute: “As late as last Friday, September 22, an agreed upon approval package had been circulated with the state expectation, and federal department promise, that waiver approval would be forthcoming on Monday, September 25.” (emphasis added) The letter noted that “waiver approval would have helped more than 130,000 Oklahomans’ who today are struggling with dramatic price increases, provided more than a 30 percent premium reduction and allowed nearly 30,000 individuals to buy insurance.”
Ironically, the federal government will pick up the cost of unnecessary premium increases for low-income Oklahomans who qualify for federal tax credits, but middle income Oklahomans not eligible for tax credits will bear the full brunt of soaring premiums and, by Secretary Cline’s account, 30,000 of them will find those premiums unaffordable.
Federal officials have yet to explain their abrupt change of course and likely will claim that they simply ran out of time. But those of us who have worked closely with the four states who have submitted reinsurance waivers know a different story. We know that two of those states—Alaska and Minnesota—have been approved for waivers closely resembling Oklahoma’s proposal: documenting the federal savings that accrue when state-based reinsurance programs cut premiums and reduce federal tax credit outlays, and then receiving those savings as a federal pass-through to partially offset the costs of the state reinsurance program.
We also know that Secretary Price sent a letter to Governors on March 13 encouraging states to consider 1332 reinsurance waivers and that HHS followed up with a checklist on May 11 that provided a roadmap for states to pursue such waivers on an expedited basis. Finally, we know that Oklahoma and Oregon have been repeatedly assured that their diligence in following the checklist would be rewarded with expedited approval.
A Troubling Message That Will Resonate Well Beyond Oklahoma
Oklahoma has now been rebuffed and it remains to be seen whether Oregon, which continues to move forward in reliance on those federal assurances, will be similarly rebuffed. Unfortunately, though, the ramifications of this story reach well beyond the four pioneering states. I personally know of another dozen states who are considering similar waivers for 2019, worried that they cannot depend on Congress to provide federal reinsurance or any other meaningful relief for their struggling individual markets. How much will those states be willing to invest in the actuarial studies and other hard work necessary to develop their own reinsurance programs?
Which brings me to the most troubling aspect of the Oklahoma debacle. As a former insurance commissioner in Oregon and Pennsylvania and as the first director of the HHS Office of Insurance Exchanges, I know firsthand how difficult it is to nurture trust between states and the federal government. Yet those bonds of trust are absolutely essential to fixing the Affordable Care Act, especially for Republican proposals that aim to shift major financial and operational risk back to the states.
Perhaps the repeated failures to repeal the Affordable Care Act and the resignation of Secretary Price will bring a change of course. But those who fear the worst have ample grounds for their fears—from the President’s monthly threats to terminate cost sharing reductions to the abrupt cutbacks in consumer assistance for open enrollment to the use of HHS resources to attack the law rather than implement it. Even the Minnesota waiver approval was bittersweet, with the state offered the federal savings on tax credits but not the second layer of federal savings that related to their Basic Health Plan. Denying the BHP funding is not fair and ends up punishing states that want to innovate with both a BHP and a reinsurance program. As with Oklahoma, this was a last minute change that betrayed repeated assurances that both types of savings would be passed through to benefit Minnesota consumers.
A clear majority of voters are cheering for Senators Alexander and Murray to reach a bipartisan compromise to stabilize the individual market and bring health security to millions of Americans, but no bipartisan deal can work if the agencies charged with implementing the law fail to do their part. Let’s hope no other state has to endure what Oklahoma did this week.