Benefits Buzz

State Innovation Waivers: Going Back to the Old Days of Health Insurance?

Posted on September 26th, 2016

The cornerstone of the Affordable Care Act (ACA) is arguably the Health Insurance Marketplaces, also referred to as the Exchanges. Effective 2014, previously uninsurable individuals could start enrolling in a health insurance plan without regard to their medical history, and people who had trouble affording coverage could receive subsidies to reduce their out-of-pocket costs and/or premiums if certain requirements could be met.  
In theory, this sounds like a great thing, but it’s been a challenge for many insurance companies who participate in the Exchanges to turn a profit. The purchasers of Exchange plans are said to utilize coverage at a higher rate than expected and comments have been made that not enough young, healthy people have enrolled. As a result, some of the nation’s largest insurance companies have decided to exit several of the Exchange Marketplaces in 2017, and other insurance companies are seeking significant rate increases, some greater than 50%.
An argument that at least some state officials appear to be making is that the Exchanges are working opposite to how the law intended. Premiums have increased significantly and the number of plan options is declining.  That’s where Section 1332 of the ACA comes into play. This part of the ACA takes effect in 2017 and allows states to request a waiver to implement certain parts of the ACA differently. Generally speaking, a waiver would only be granted if coverage in the state would be as comprehensive and affordable as it would absent the waiver, and it would continue to provide coverage to approximately the same number of people in the state. It also cannot cost the federal government more than it would absent the waiver.  
Under Section 1332, a state could essentially request a waiver to opt-out of participating in the Exchanges. Instead, they could request a return to the way coverage was made available in the past to the uninsurable population. This was offered through a state-run, high risk pool plan. With this type of waiver, the federal government would help fund the high risk pool plan instead of subsidizing coverage through an Exchange. 
The argument in support of this type of waiver is that the Exchanges only insure a small percentage of the state’s population, but they are driving up premiums and reducing coverage options for the state’s population as a whole. If there were a special plan for these individuals (i.e. a high risk pool plan), that could drive down premiums and increase choices for the rest of the state’s population. 
High risk pool plans aren’t without criticism though. In the past, these plans were considered by many as being expensive and, in some cases, not offering coverage as good as what the insurable population could obtain. It’s unclear exactly how many states may consider a waiver to return to the insurance days of the past or if the federal government would even approve the request. In the upcoming years, Section 1332 of the ACA could create vastly different insurance distribution models from one state to the next. 
Subscribe to this blog at the top left navigation by entering your email address to learn more with Flexible Benefit Service LLC (Flex). The materials contained within this communication are provided for informational purposes only and do not constitute legal or tax advice. 

Tag Cloud



Stay Connected