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The New Wave of ACA Waivers

Nov.12.2018

On October 22, 2018 the Centers for Medicare & Medicaid Services (CMS) and the Department of Treasury (collectively, “the departments”) provided new guidance on what were previously called “Innovation Waivers” and are now known as “State Relief and Empowerment Waivers.” Section 1332 of the Affordable Care Act (ACA) allows states to apply for a waiver of certain requirements under the ACA in order to encourage state innovation, so long as the state’s plan meets specific consumer protection criteria, known as “guardrails.” 

Guardrails from the initial 2015 guidance from CMS required that any waiver application must (1) establish coverage at least as comprehensive and affordable as without the waiver, (2) provide coverage to at least as many individuals, and (3) not increase the federal deficit. These guardrails are now being relaxed in four distinct ways.

(1) It’s all about “Access”

The new guidance provides that the departments will look to whether consumers have access to comprehensive and affordable coverage when considering a waiver application. This means that the departments will not require that each state resident’s coverage is actually comprehensive and affordable, only that such coverage is available. States may seek a waiver to provide access to less comprehensive or affordable coverage options compared to those plans currently on the health exchange which must meet certain coverage standards. The new guidelines also stress that the departments will consider the longer-term impacts of a state’s proposed waiver, allowing a temporary reduction in coverage if the state can demonstrate that the reduction is reasonable under the circumstances, and in the aggregate, the coverage guardrail will be met over time.

(2) Short-Term Insurance and AHPs

Another major change is the CMS definition of insurance coverage sold on the health exchanges has been expanded to include short-term and association health plans (AHPs). States no longer have to ensure their waiver application includes coverage which meets the “minimum essential coverage” requirements of the ACA, but rather the departments interpret coverage to include the ACA’s “minimum essential coverage” and “health insurance coverage” defined in 45 C.F.R. 144.103. The guidance explains this includes short-term limited duration insurance and AHPs, which will likely lead to greater variation across the states in what types of plans are offered.

(3) Analysis on Vulnerable Populations

The guidance also changes the analysis previously required with regard to waiver effect on vulnerable populations. The new guidance looks only to aggregate effects of the proposed waiver. This provides the departments with flexibility to determine that improvements in comprehensiveness and affordability for state residents as a whole offset any detrimental effects for particular residents.

(4) State Approval Process

The guidance also provides flexibility for states to meet the requirement regarding state legislative authority, allowing that in certain circumstances, existing state legislation granting statutory authority to enforce the ACA and the state waiver plan, combined with an executive order or a state regulation, will suffice. In addition, the guidance provides that HealthCare.gov will start accommodating state-specific variations allowing those without an exchange platform to also seek waivers that will be supported by the federal webpage.

Proponents of revisions to Section 1332 maintain that the changes will allow states to take greater innovative approaches and increase consumer control. For example, they suggest that options for short-term plans may increase enrollment for those who avoid buying coverage because of cost and also attract young healthy people who have avoided purchasing insurance on the health exchange. Critics of the revisions are concerned that short-term plans do not have to provide comprehensive coverage and can exclude or charge higher premiums to persons with pre-existing conditions. Further, critics are concerned that the lower-cost, less comprehensive plans will draw healthy patients away from the standard ACA plans, thereby driving up premiums.

The guidance went into effect immediately, but the effects of this guidance won’t be seen until the 2020 plan year because open enrollment for 2019 began November 1. The departments are accepting public comment until December 24, 2018.

For additional information on AHPs see: Running with Scissors – and Association Health Plans, Iowa Enacts Legislation to Broaden Access to Association Health Plansand States Seek Control over Association Health Plans in Comments on DOL Proposed Rule on the C&M Health Law Blog.

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For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.

David McFarlane
Partner – Los Angeles
Phone: +1 213.443.5573
Email: dmcfarlane@crowell.com
Grace Fleming
Associate – Los Angeles
Phone: +1 213.310.7991
Email: gfleming@crowell.com