New ACA innovation waiver policy brings major changes to state marketplace coverage

CMS Administrator Seema Verma listed the changes in a speech to the American Legislative Exchange Council on Thursday. (ALEC)

States will have far more latitude to bypass parts of the Affordable Care Act thanks to a new policy change from the Trump administration, marking a significant shift in the types of marketplace coverage available to Americans. 

The Centers for Medicare and Medicaid Services (CMS) unveiled a controversial policy last month that expanded what’s permissible under §1332 waivers, which states can submit to be exempt from certain requirements under the Affordable Care Act (ACA).

In a speech to conservative lawmakers Thursday, CMS Administrator Seema Verma followed up on this guidance by announcing four “waiver concepts,” specific examples of actions states can do to restructure marketplace plans.

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Namely, Verma said, states can: (1) create and contribute to accounts for consumers’ premium and out-of-pocket expenses, (2) restructure subsidy eligibility, (3) redefine what plans qualify for subsidies and (4) implement high-risk pools.

Although the new policy would not allow states to waive preexisting condition protections under the ACA, it would allow states to let consumers use subsidies to purchase short-term limited duration (STLD) plans or associated health plans (AHPs) that aren't required to cover preexisting conditions. 

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Strategies like these, Verma said, promote “consumer engagement, personal freedom and choice, spending smarter, price transparency, portability, and controls over premium growth."

"What’s not to like?" she added.

Verma contrasted the new ACA innovation waiver guidelines with those of the Obama administration, which she alleged made it “impossible to put forward creative ideas” amid rising premium prices.

“No one should have been surprised when the president charted a different course,” she said, fighting back against allegations that the Trump administration has deliberately weakened the ACA.

“The rate of growth in health care spending has been a crushing financial blow for too many families … and no one can say this is due to the Trump administration.”

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"The specific examples laid out today show how state governments can work with HHS to create more choices and greater flexibility in their health insurance markets, helping to bring down costs and expand access to care," echoed Health and Human Services Secretary Alex Azar in a statement

Preexisting condition protections are the public’s greatest healthcare concern, as reflected in this year’s midterm elections. And in this politically charged announcement, Verma was adamant that the guidance will not lead to fewer protections for people with preexisting conditions.

“You cannot waive any of the preexisting conditions protections. Those cannot be waived at the federal level or the state level,” she said on a subsequent press call.

However, when the guidance was released, policy experts said they expected the opposite, especially because the new guidance includes STLD plans and AHPs as coverage even though they provide fewer benefits.

Critics also suspected changing subsidy regulations could make plans less affordable—and consequently, reduce coverage—among lower-income groups.

There are also concerns the administration side-stepped traditional rule-making that could invalidate the new guidance. A report from the USC-Brookings Schaeffer Initiative for Health Policy says the guidance contains policy that should be classified as a "legislative rule" requiring it to follow the notice and comment rule-making process. 

"There are serious questions about whether the policy articulated in the guidance is a permissible interpretation of the underlying statute, but, at the very least, it is likely invalid for the agency to attempt to make this policy without a full rule-making process," Brookings fellow and former CMS official Christen Linke Young wrote Wednesday.