President Trump campaigned in 2016 on repealing the Affordable Care Act (ACA) and ushering in a new health care system that would provide more choices at lower costs for all Americans. While that goal was not achieved through the legislative process, the administration was successful in some attempts to increase options for Americans through other means.
However, the truth remains that many still struggle to afford health insurance. Given the gridlock and dysfunction in Washington, what are our most vulnerable citizens supposed to do? The answer lies with the states. States should be the nucleus of health care regulation. The population and demographics of each state are different than others. For this reason, states should have the power to regulate the health care market with significant autonomy but only when absolutely necessary. A top-down approach from D.C. has failed, and I believe it will inevitably fail.
Ironically, despite the ACA’s provisions, which caused harm for many Americans, there is one part of the law that offers relief to states. As congressional gridlock appears to be the norm in the future and residents are struggling, states can look to Section 1332 of the ACA to waive some of the burdensome and expensive requirements that the ACA imposed on states.
This research update will focus on what the section 1332 waiver is, how other states (specifically Georgia) are using it, and how Democrats in Congress attempted to take this choice for states away.
Section 1332 Waivers
In previous research updates, I have discussed Section 1332 waivers. (See here and here.) States can apply to the federal government to waive certain provisions of the Affordable Care Act. Here is a description from one of an earlier research update:
For a section 1332 waiver to be approved, state officials would have to show HHS [U.S. Department of Health and Human Services] 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.”
This section was included in the ACA to give states a way to assist residents who have been ill-served by the law. Many states already have used these waivers to lower premiums in their states.
Georgia was the most recent state to come out with a plan to restructure its insurance markets under section 1332 of the ACA. Georgia Access, as the plan is called, followed the path of other states by proposing a reinsurance program. Governor Brian Kemp released the plan in late October to ask the federal government for approval to restructure the individual and small group markets in Georgia. According to the proposal, the plan estimates a reduction in premiums by an average of 10 percent in 2021 and an additional 30,000 individuals enrolled in the individual market. The plan emphasizes rural and non-competitive areas where premiums are estimated to decrease by more than 10 percent.
In addition to the reinsurance program, Georgia Access will allow individuals to use subsidies to buy non-ACA compliant plans. Now some may read this and think that these non-ACA compliant plans must be subpar. But that is far from the truth. The ACA imposed costly mandates on every health plan sold in this market, so much that the plans became unaffordable for many. By allowing non-ACA compliant plans to compete on the market, Georgians will have the ability to choose plans that fit their health needs and use subsidies for plans such as association health plans. Georgians would not buy these plans from Healthcare.gov, however. Instead, they would go straight to the source and buy plans directly from brokers or insurance companies.
Another aspect of Georgia’s plans deals with premium subsidies. Traditionally, premium subsidies are directed to individuals based on their income. The lower the income, the higher the subsidy. In some cases, these subsidies drop the plan cost down to $0 a month. But Georgia is doing something different. Under the proposed plan, the state would cap the number of subsidies that it pays, decreasing the flow of money from the government directly to insurance companies. If more individuals sign up than there are subsidies available, a waiting list would be created for those who don’t have financial assistance. In addition, contrary to federal rules, these subsidies can now be combined with employer health reimbursement accounts. This is a great piece of the reform that will boost the use of health reimbursement accounts, which have benefits for everyone in the individual market.
This is a bold plan, and it has not been tried before. States like Georgia continue to show that they are the true leaders in health care innovation despite federal mandates.
Congressional Vote on 1332
Even though both red and blue states have been successful in using 1332 waivers to provide relief to their residents, congressional Democrats recently tried to take this power away from states. The Trump administration reversed the Obama era guidance on section 1332 waivers to allow for more opportunities to innovate at the state level. Just last month, congressional Democrats, using the Congressional Review Act, attempted to roll back the new guidance issued by the Trump administration on Section 1332 waivers. Luckily their attempt failed.
It’s not clear why congressional Democrats would want to take away choices and lower costs from states who wish to pursue them. Their claims that these waivers allow for states to discriminate against those with pre-existing conditions are not true. The secretary of the U.S. Department of Health and Human Services cannot do this in their official capacity when granting waivers. These waivers are about allowing states, the entity closest to the individual being affected by the piece of policy, to make decisions that are best for their state and not the whole country. Who wouldn’t want that?
A few things that one should take away from this battle over 1332 waivers. First, regardless of how many people newly gained insurance coverage after the implementation of the ACA, many individuals still struggle to afford their health insurance. Costs are still too high, and this leads to families spending more than they should on health care. Second, the ACA should be repealed and replaced with a different approach to delivering health care for Americans. But, in the face of congressional gridlock, states are now in control and have options to act where the federal government will not. Section 1332 waivers are just one of those options. Third, we need to stop thinking of health care as a one size fits all issue. Everyone’s health needs are different, and those health needs vary by state. We should champion states like Georgia that have taken it upon themselves to try to make health insurance more affordable in their state.