State Action on Market Stabilization

Manatt on Health

During the open enrollment period for the 2018 plan year, approximately 11.8 million people enrolled in Marketplace coverage and 74 million people enrolled in Medicaid, leading to an uninsured rate in the U.S. of 12.2 percent.i State policymakers and other stakeholders share continued interest in further reducing the uninsured rate, making coverage more affordable for consumers and improving access to care, particularly as federal and state lawmakers continue to debate the appropriate government role in ensuring access to healthcare. The role of the Marketplace is front and center in this debate; federal lawmakers, after much debate since Repeal and Replace efforts failed, did not pass legislation to stabilize the Marketplaces. Further, the administration has advanced actions that are expected to erode coverage gains in favor of provisions that would, for example, allow healthier individuals to remain in plans that do not have to meet all of the Affordable Care Act (ACA) rating requirements. In today’s newsletter, we look at state activity intended to address coverage and/or affordability in this evolving federal environment: first, we provide an update on state 1332 waiver requests; and second, we highlight state approaches to offering a “Medicaid buy-in” product.

The Current State of Play on 1332 Waivers

Section 1332 of the ACA permits states to apply for a State Innovation Waiver to pursue strategies for providing residents with access to high-quality, affordable health insurance as an alternative (in whole or in part) to standard Marketplace coverage.

The Trump administration approved three state-based reinsurance program waivers in 2017—Alaska, Minnesota and Oregon—and more states are pursuing similar waivers in 2018. These are all “targeted waivers,” through which states seek federal “pass-through” funding related to federal savings that accrue when state-based reinsurance programs reduce premiums and, in turn, reduce federal premium tax credit expenditures. Some states are taking a traditional reinsurance approach, paying claims in a specified corridor (e.g., $50,000–$200,000), minus a coinsurance rate, while other states’ programs are condition-specific, whereby the states pay for all or some of the claims for individuals with a specific set of high-cost health conditions.

In addition to targeted waivers, states may pursue comprehensive waivers that address multiple waivable provisions, involving restructuring of a state’s individual and/or small group market. Idaho is among the states that has proposed a comprehensive waiver (in coordination with a 1115 waiver) to increase enrollment across the individual market and Medicaid and reduce/stabilize premiums. State proposals to create “Medicaid buy-in” products may generate comprehensive waiver proposals in the coming months (for additional information, see “Medicaid Buy-Ins: Design Considerations for States” below). To date, the Trump administration has not given clear signals on 1332 waivers beyond reinsurance, and we anticipate that most 1332 waivers submitted in 2018 will be for state-based reinsurance programs. Another important dynamic relates to potential administrative action to modify 1332 rules of the road: since Congress has yet to make any changes to the 1332 process, the Department of Health and Human Services (HHS) is now considering changes to prior guidance on how it would assess guardrail compliance, which could influence states’ 1332 waiver design decisions.

The chart linked here provides an overview of 1332 waivers for state innovation, including approved, withdrawn and pending waivers that have been submitted to HHS and the Department of Treasury, as well as waivers that have been posted to states’ websites and reached at least the public comment stage in 2018.

Medicaid Buy-Ins: Design Considerations for States

As states consider options to stabilize the individual insurance market, some are exploring offering a Medicaid buy-in, through which the state would provide healthcare coverage that may be more affordable and/or accessible than current Marketplace options by leveraging Medicaid in some way—such as using the state’s Medicaid provider network, reimbursement, infrastructure and/or Medicaid-like benefits. States are exploring Medicaid buy-in programs that can be offered on or off the Marketplace, and design of the program, regardless of model, requires careful planning for administrative considerations and federal authorities required for implementation. Medicaid buy-in design decisions will also vary depending on state goals, which may include improving access and affordability, increasing competition, and/or paving the way for a state-led single payer healthcare system.

In a new report for the State Health & Value Strategies project supported by the Robert Wood Johnson Foundation, Manatt Health explores two models for implementing Medicaid buy-in proposals: Model 1, the introduction of a state-sponsored product on the Marketplace, and Model 2, the introduction of a Medicaid buy-in outside of the Marketplace. Included in the report are state considerations for each model, including those related to implementation requirements, the need for federal waivers, and deficit neutrality issues. Among the key takeaways from the report:

  • States have substantial flexibility for designing Medicaid buy-in programs that achieve their goals with respect to access, competition, affordability and program alignment;
  • Prioritization of state goals is essential to inform Medicaid buy-in design decisions;
  • State-specific Marketplace dynamics will also be key considerations in evaluating different buy-in design features;
  • 1332 waiver authority is not required to implement a buy-in, but may be necessary depending on program design;
  • To the extent states pursue 1332 waiver authority, deficit neutrality will be a key guardrail that states must meet;
  • States may be able to access “pass-through” savings for 1332 waivers that result in savings to the federal government; and
  • Cross-agency collaboration among Medicaid, insurance departments and other key agencies is essential in designing a Medicaid buy-in.

iCMS (April 3, 2018) Health Insurance Exchanges 2018 Open Enrollment Period Final Report, retrieved from https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2018-Fact-sheets-items/2018-04-03.html; Kaiser Family Fund (December 2017). Total Monthly Medicaid and CHIP Enrollment, retrieved from https://www.kff.org/health-reform/state-indicator/total-monthly-medicaid-and-chip-enrollment/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D; Gallup (January 16, 2018). U.S. Uninsured Rate Steady at 12.2% in Fourth Quarter of 2017, retrieved from http://news.gallup.com/poll/225383/uninsured-rate-steady-fourth-quarter-2017.aspx.