CMS expands flexibility for state ACA innovation waivers

The Centers for Medicare & Medicaid Services (CMS) released guidance on Monday relaxing a range of requirements for state waivers submitted under §1332 of the Affordable Care Act (ACA). 

CMS will "expand state flexibility" while "encouraging states to adopt innovative strategies to reduce future overall health care spending," according to the new guidance (PDF) that represents a significant overhaul to the Obama-era regulations. Additionally, the program has been renamed from “State Innovation Waivers” to “State Relief and Empowerment Waivers.” 

The update unravels 2015 guidance that included strict guardrails that required state-based proposals to maintain or increase the number of people with coverage that met the ACA’s parameters for comprehensiveness and affordability, including the 10 essential health benefits (EHBs).  

Now, a state need only make comprehensive coverage available to consumers, regardless of whether they buy it. The agency will also consider short-term, limited-duration (STLD) plans and association health plans (AHPs), which often do not cover EHBs, as coverage. 

RELATED: Azar says short-term plans 'absolutely not' an attempt to destabilize the individual market

On a press call, CMS Administrator Seema Verma claimed that the 2015 guidelines have been “really thwarting innovation.” The agency has approved only eight §1332 waivers since their release, seven of which established reinsurance programs, she said. 

The new guidance, effective immediately, allows states to “fundamentally restructure” the ACA’s requirements, but it “does nothing to reduce protections for people with preexisting conditions,” she claimed. But if healthy consumers forgo the ACA marketplace for AHPs and STLD plans, premiums could rise for those who need comprehensive coverage, analysts say. 

The guidance also allows states to submit §1332 waivers without approval from the state legislature. A state regulation or executive order will suffice, given the state statutorily authorizes enforcement of the ACA. 

Additionally, states would be able to use federal subsidy funding to help consumers purchase short-term health plans.

Senator Lamar Alexander, R-Tenn., who chairs the Senate Committee on Health, Education, Labor, and Pensions, applauded the new guidance, calling the §1332 waiver application "too cumbersome, inflexible, and expensive for states to use" until now. 

RELATED: Average ACA premiums dip as Verma takes aim at critics

However, health policy analysts expressed deep concern about the news on Twitter. 

“It doesn’t matter if thousands of people [are] projected to become uninsured,” wrote Sabrina Corlette of Georgetown University. 

Matt Fiedler, a fellow at the Center for Health Policy at the Brookings Institution, pointed out that it could change where states spend their federal dollars.

And Larry Levitt of Kaiser Family Foundation predicted it will deepen the divide between conservative and liberal states. 

It’s too close to the 2019 enrollment period for the guidance to make an impact right away, but CMS expects it to kick in by open enrollment for 2020.