The current state of the individual markets

The authority of the states to regulate their own insurance markets was severely curtailed by the Affordable Care Act (ACA). In the individual markets, insurers’ ability to determine what kind of coverage should be included in an insurance plan was usurped by the ACA’s essential health benefits. The one-size-fits-all approach to health insurance ushered in by the ACA crushed the ability for insurance plans to compete for the population of individuals who do not get their health insurance from their employer or from a public program. This is the population of individuals that have been hurt the worst by the ACA. Congress failed to act during the most recent term and from a legislative standpoint, the ACA remains largely unchanged. However, the Trump administration has taken some steps to expand the options for individuals shopping in the individual market for health insurance.

It’s true that many individuals obtained coverage from the ACA that previously didn’t have coverage. Yet, the population of people negatively affected by the ACA’s centralized approach to health care is often overlooked. A few weeks ago, I discussed new rules from the Trump administration that created health coverage options that are not subject to all of the ACA regulations. Association health plans (AHP), short-term, limited-duration insurance (STLDI), and Farm Bureau plans offer options to individuals who can’t afford ACA plans or don’t need all services mandated in ACA plans. This was meaningful action that expanded choices for populations hurt by the ACA. However, there is still more that can be done.

Currently, over 50 percent of counties in the United States have only one insurer offering coverage in the individual market. The number of insurers that offer plans in a given county is a robust predictor of costs associated with the health plans of that county. Many insurers pulled out of ACA marketplaces because of the expense and onerous requirements to sell health insurance plans. Earlier this week, the Trump administration published new guidance on section 1332 of the ACA. This new guidance will provide more opportunity for states to design individual insurance markets to manage costs and provide coverage that fits the needs of the state’s residents.

What is section 1332 of the Affordable Care Act?

According to federal rules, section 1332 of the ACA “provides the Secretary of Health and Human Services (HHS) and the Secretary of the Treasury with the discretion to approve a state’s proposal to waive specific provisions of the PPACA (Patient Protection and Affordable Care Act) provided the section 1332 state plan meets certain requirements.” In other words, a 1332 waiver approved by HHS will give states permission to change the structure of eligible health plans and reallocate federal subsidies in the individual insurance market. For a section 1332 waiver to be approved, state officials would have to show HHS that their new alternative will function in accordance with the following guardrails: “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 comparable to the number who would be covered under the ACA; and not increase the federal deficit.”

In 2015, the Obama administration issued new guidance, which made it much more difficult for a state to have a waiver to be approved under section 1332. Through this new guidance, the Trump administration has granted states more opportunities to have waivers accepted and renamed the waivers the “State Relief and Empowerment Waivers” to reflect the intentions of the new guidance. The new guidance says that the federal government will look favorably on applications that “provide increased access to affordable private market coverage over public programs, and increase insurer participation and promote competition; encourage sustainable spending growth by promoting more cost-effective coverage, restraining growth in federal spending, and eliminating state regulations that limit choice and competition; foster state innovation; support and empower those in need; and promote consumer-driven health care.”

What now?

The lesson to take from the failures of the ACA is that centralized control of the health care industry leads to unintended consequences. The Trump administration promised to open up opportunities for more choices and lower costs and this reinterpreted waiver process under section 1332 of the ACA accomplishes that. Each state has a very unique population with unique health needs. Therefore, each state is best suited to create programs that ensure that the most vulnerable are protected, while allowing for competition that offers high-quality health care to patients in their state markets. A few states have already submitted a waiver, had a waiver approved, or have already implemented a new plan through a waiver under this section and the results are promising.

The main change to the state programs would be in how federal dollars are used at the state level. With this new guidance, states could now create markets where plans can be sold to better meet the needs of individuals shopping for insurance. States can offer premium assistance for plans that aren’t as expensive as those sold on the ACA exchanges. Different plans mean more options for individuals who have no choice but to sign up for expensive insurance that is filled with coverage that these individuals don’t need.

ACA proponents will argue that the expanded waivers will allow states to create opportunities for “junk insurance” to be sold and for plans that don’t cover pre-existing conditions to be sold. But the fact is many people still don’t have health insurance, and many simply can’t afford the insurance sold on the ACA exchanges. The recent moves from the Trump administration allow for AHPs and STLDI to be more widely available. In light of the new section 1332 guidelines, states now have the opportunity to create programs to fund these cheaper plans with money that would have been used on expensive Obamacare subsidies, which will create numerous opportunities for people to get more affordable care that fits their needs.

A state that potentially has a section 1332 waiver approved will still have ACA exchanges with essential health benefits and coverage for pre-existing conditions. The notion that allowing for these plans to be sold that don’t comply with Obamacare will hurt people is misleading. Individuals who need protections for pre-existing conditions and expensive coverage will not have their plans or benefits taken away. In the most ironic turn of events thus far, proponents of the new waiver guidance are exclaiming a familiar message: “If you like your plan, you can keep it!”

Approving waivers for states to offer new options for residents will benefit a large population of people who need coverage but cannot afford the coverage offered by the ACA. These alternatives will not take anything away from those who benefit from the extensive ACA coverage. This isn’t the end of the ACA. This isn’t the end of coverage for those who have pre-existing conditions. This is the on-going process of accomplishing the administration’s goal to relieve people from the restrictions imposed by the ACA and to give people more choices and freedom in choosing coverage that offers them value.