Improving and Expanding Health Insurance Coverage through State Flexibility

Thursday, December 10, 2015

The Affordable Care Act (ACA) has been the subject of controversy since its enactment in March 2010. Over the past six years, the ACA has faced legal challenges, problems with its first open-enrollment period, votes to repeal or defund the law in whole or in part, and opposition by many state legislatures and governors. Further, polls continue to show deep divisions in public opinion on the law.

Despite the controversy, an additional 13.2 million individuals have enrolled in Medicaid and the Children’s Health Insurance Program. Some of the new enrollment is the result of states expanding coverage to “newly eligible” individuals; however, many were previously eligible but not enrolled. Further, an estimated 8.3 million individuals purchasing health insurance coverage through state and federal health insurance exchanges received federal financial assistance in the form of tax credits or cost-sharing assistance.

Although dozens of bipartisan changes to the ACA have been enacted since the ACA was signed into law, most have been clarifying amendments, or changes designed to provide offsets for other legislation, such as extensions of expiring Medicare provisions. Some changes have been more substantive. For example, in 2011, Congress passed legislation and the president signed into law, a repeal of business reporting requirements to the Internal Revenue Service. In October 2015, a law was enacted to block implementation of a provision combining small- and mid-sized employers into a single insurance market. Business and insurance industry experts estimated the combining of these two employers would have resulted in insurance premium increases for both groups of employers.

The prospects for repeal or major modifications to the law are slim before a new president and Congress take office in January 2017. There remain in addition, however, important opportunities to influence policymaking at the agencies and to focus on the states as a frontier for innovation and reforms in health care.

Opportunities for State Flexibility using State Innovation Waivers

The Bipartisan Policy Center’s health leaders agree on several principles, including the importance of: (1) expanding coverage to the uninsured; (2) reducing health care costs; and (3) improving the quality of health care delivery. Achieving these goals will require changes in the law. Given the ongoing discord, BPC’s leaders encourage dialogue among federal and state policymakers to identify opportunities to maintain and expand coverage, simplify administration, and provide increased choice to families and individuals through increased state flexibility.

Significant opportunities (and limitations) to advance this dialogue lie with the ACA itself. Section 1332 of the ACA, based on a provision in bipartisan legislation offered by Senators Ron Wyden (D-OR) and Bob Bennett (R-UT), permits states to test alternative means of providing coverage while upholding the principles of Opportunities for State Flexibility using State Innovation Waivers expanding coverage, reducing costs, and improving quality of care.

This paper outlines Section 1332 of the ACA, including its opportunities and limitations. This paper also discusses the potential of 1332 and its interactions with Section 1115 of the Social Security Act, a wavier authority that allows states to expand Medicaid coverage with certain restrictions, and Section 1115A, which offers opportunities for delivery system reform. This paper describes BPC leaders’ recommendations on the implementation of Section 1332 and other provisions of the ACA that are designed to make health insurance more affordable and to improve consumer choice in health plans, such as the implementation of laws permitting interstate compacts to improve choice in health insurance plans and fixing the “family glitch.”

Recommendations

  • Advance new and innovative approaches to health insurance coverage by convening governors and the secretaries of Health and Human Services and Treasury to seek agreement on a reasonable interpretation of “guardrails” for Section 1332 State Innovation Waivers. The secretaries should issue guidance based on those convenings.
  • Define the guardrail requiring federal deficit neutrality to permit the requirement to be applied across programs waived (i.e., tax-credits and Medicaid), to demonstrate neutrality over the entire term of the waiver, and require strong standards to assure federal deficit neutrality.
  • Improve consumer choice and competition in insurance markets by implementing federal law permitting states to form interstate compacts to sell insurance across state lines (Section 1333 of the Affordable Care Act).
  • Assure access to affordable coverage for spouses and children by fixing the so-called “family glitch” and fully offsetting the cost at the federal level.

KEYWORDS: AFFORDABLE CARE ACT, BOB BENNETT, CHILDREN'S HEALTH INSURANCE PROGRAM, MEDICAID, RON WYDEN

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