States Waivers Could Allow States to Circumvent Health Reform

From AAPD (5.16.11):

Health Care Reform Implementation: Waiver Provision would Allow States to Set up their Own Health Care System

By David Heymsfeld, AAPD Policy Advisor

An important provision of the Affordable Care Act (ACA) allows the U.S. Department of Health and Human Services (HHS) to grant waivers to states to set up alternatives to the health care system required by ACA. This is Section 1332 of ACA. To receive a Sec. 1332 waiver, a state must demonstrate that its alternative system will provide at least the same benefits as the ACA system. The procedures and policies developed to administer Section 1332 will be very important to the disability community that supported the ACA reforms as a means of providing affordable, comprehensive health insurance to uninsured or underinsured persons.

Background about Section 1332: Section 1332 was included in the ACA as a response to arguments that the federal government should not develop a “one-size fits all” health care solution for the states. This is a way to address the varying health care needs, insurance markets, and regulatory systems already in place in the states. A possible use of Section 1332 would be to develop a so-called single payer system, in which a state Government would pay providers for all services provided. This would contrast with the ACA system in which most service would be paid through health insurance policies, subject to regulatory and market requirements designed to insure the widespread availability of affordable coverage.

Policy Concerns: Under ACA, Section 1332 waivers could not be granted until 2017. Legislation has been introduced, with the support of the Obama Administration, to move the date for these waivers to 2014 when the main ACA reforms would also be implemented. So far as we are aware, there has not yet been much activity at the state level to developing these alternatives, except in Oregon and Vermont.

In considering this issue it is important to bear in mind that the waiver program could be used to establish alternative systems that advocates would prefer to the ACA system.  On the other hand there is also the potential for states to try to establish alternatives that are inferior to ACA. Advocates will want to insure that the waiver process is transparent and provides full opportunities for the public to understand a proposal and raise concerns,

Provisions that could be waived under Section 1332: Under Section 1332 there can be a waiver of provisions, many of which are at the heart of ACA.  A state could ask for ACA provision waivers such as:

•  The ACA requirements on the benefits which must be provided in health insurance plans, and the conditions of availability (such as no denial of coverage for pre-existing conditions)
• The ACA requirement that each state set up exchanges in which affordable health insurance will be made available to individuals and small businesses, and consumers will be given guidance as to which plan best met their needs, and whether they qualify for Medicaid or other federal programs          
• Premium assistance for low income individuals purchasing insurance through exchanges
• Mandates requiring individuals to purchase insurance, and companies to provide insurance or assistance to employees to purchase insurance.

Note also, that under a section 1332 waiver, the state could receive the premiums and subsidies that ACA would give to qualified individuals purchasing insurance from an exchange.

Approval Needed for State Sec. 1332 Waiver: To grant a Section 1332 waiver to a state, both HHS and the Treasury departments must find that a state’s plan will provide coverage to at least as many people as ACA; that the coverage will be at least as affordable and comprehensive as required by ACA; and that there will be no greater cost to the federal government.

AAPD Participates in Sec. 1332 Rule-Making: On May 13, 2011 AAPD joined in comments on a proposed rule about Sec. 1332 waivers in response to a March notice of proposed rulemaking from the CMS. The comments were developed by the Consortium for Citizens with Disabilities, a coalition of many disability organizations, including AAPD. The CCD comments contained numerous suggestions for strengthening the proposed process to ensure transparency, and a robust public process which will furnish a basis for a sound determination of whether a state’s alternative will provide at least equivalent benefits. CCD’s specific suggestions for changes in the proposed rule include:

• Requiring the HHS Secretary to maintain a dedicated website for display of waiver applications and supporting materials.
• Requiring that actuarial and economic analysis submitted in support of a waiver application include the data and assumptions underlying the analysis.
• Requiring the states to hold public hearings to give the public an opportunity to learn about and comment upon a waiver proposal,
• Requiring a state to include in its application a discussion of key issues raised by the public and how the state dealt with these issues.
• Requiring HHS to conduct period evaluations of state programs established under section 1332 waivers, including the effects of the program on the availability of health plans for individuals and businesses, the stability of coverage, the extent to which the program provides access to needed health services for special populations such as adults with disabilities, and the effects of the waiver on coverage of vulnerable populations, including persons with disabilities. 

Advocacy Steps

1. Find out whether there are any efforts in your state to develop an alternative system by contacting your Governor’s office or state legislator.
2. Work to ensure that any alternative system will be at least as good as ACA in providing affordable, comprehensive insurance, and that the health care facilities and delivery system are accessible and do not discriminate against persons with disabilities.
3. For more information on the Section 1332 waivers, please go to CMS website at http://cciio.cms.gov/programs/stateinnovations/index.html
4. For a copy of the CCD letter that AAPD signed onto, please write policy@aapd.com, put “Section 1332 waiver letter” in subject line. Thank you.