Speakers Predict States Will Embrace ‘Innovation Waivers' Under ACA

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By Sara Hansard

Feb. 6 — Supporters and opponents of the Affordable Care Act said Feb. 6 that both Republican- and Democratic-led states will consider broad “innovation waivers” that could start as early as 2017 under the law.

“There's virtually no state that you talk to that doesn't say, ‘I'm definitely going to do a 1332 waiver,'” Deborah Bachrach, a partner in the New York office of Manatt, Phelps & Phillips LLP, said at a briefing. She referred to the section of the ACA that authorizes the state waivers from major provisions of the law. However, she said, states haven't made plans about how they will implement the waivers, which require them to provide affordable, comprehensive coverage to the same number of people as the health-care law without costing more money. The law sets a 10-year deadline for meeting a budget plan, which could be a formidable obstacle, some speakers said.

Cindy Gillespie, leader of the health-care policy team at McKenna Long & Aldridge LLP, said that the ACA stopped some states that were working on innovative policy goals, forcing them to “implement a structure that's been put on them.” For those states, through the innovation waivers, “there's an opportunity to at least in some areas take back and begin to innovate again in areas where the federal government has, in my opinion, intruded for the first time.”

Bachrach, who is supportive of the ACA, and Gillespie, who is critical of the law, spoke at a briefing titled Opportunities for State Innovation in Health Insurance Programs, sponsored by Maximus Inc., a Reston, Va., company that operates ACA state-based exchanges for New York, Connecticut, Vermont, Maryland, Hawaii and the District of Columbia.

Waivers of Major ACA Provisions

Krista Drobac, a partner with health-care consulting firm Sirona Strategies, said Section 1332, which can be combined with Medicaid and Medicare waivers, gives states the opportunity to apply for waivers from ACA provisions including the individual mandate and employer responsibility requirements, having an ACA exchange operate in a state, certification requirements for qualified health plans and requirements that individual and small group health plans cover “essential health benefits.”

Federal premium tax credits that are available to low- and moderate-income people who buy policies through the ACA exchanges can be used to cover people in a state, Drobac said. ACA insurance reforms must stay in place, including prohibitions against discriminating against people based on health status, bans on annual and lifetime benefit limits and requiring insurers to allow parents to keep children on health plans until age 26.

Some states, such as Vermont, have considered applying for a waiver under Section 1332 to set up “single-payer” health-care systems under which the government pays all medical bills. Vermont Gov. Peter Shumlin (D) decided in December against proposing the plan.

Boost to Private Exchanges

Joel Ario, a managing director at Manatt Health Solutions who was the first director of the Department of Health and Human Services Office of Health Insurance Exchanges, said some states that favor more free-market health insurance markets may use Section 1332 to bolster the use of private exchanges for employers, a growing trend.

“What I now see out in the marketplace is a continuum of different kinds of exchange approaches,” Ario said. “On one end of the continuum you'd have a state like Vermont,” which could use state power to drive change in the marketplace.

But “on the other end of the continuum,” Ario said that states such as Utah may decide to privatize many ACA functions and outsource them to the private sector. Those states may choose to use exchanges simply to determine consumers' eligibility for tax premiums, which then could be used to purchase plans from other venues, he said.

“I have not met a governor yet who doesn't think he or she can do a better job than the federal government can,” said Dennis Smith, a managing director at law firm McKenna Long. “This is the opportunity to prove it, and a waiver in essence says I don't want to do the law,” said Smith, who was recently an appointed secretary of the Wisconsin Department of Health Services by Gov. Scott Walker (R).

Small Group Plans, ‘Dual Eligibles.'

States could focus on the small group health insurance market or devise plans to provide more efficient care for dual eligibles—beneficiaries of both Medicare and Medicaid, Smith said. “In many respects we got bogged down because the federal government tried to prescribe too much at the beginning,” he said. “Waivers are about innovation.”

Smith said the waiver program could be used by states that haven't been able to get waivers they've been seeking. He cited Oklahoma, which he said has been trying to implement a version of a “three-share” program under which employers and employees pay a share of premiums and government subsidies are used to help reduce the cost. He said such a system would be more efficient than the ACA's use of both premium tax credits and Medicaid for some families.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bna.com

To contact the editor responsible for this story: Janey Cohen at jcohen@bna.com