A provision of Obamacare that opponents once saw as a potential loophole allowing a Republican president to unravel the law by executive order is now being used by some states to steady their shaky Obamacare markets.
Since the inception of Obamacare, “state innovation waivers,” which ostensibly provide states with some flexibility to experiment with different ways to provide healthcare for their residents, were eyed by those seeking to repeal the law. During the 2012 Republican presidential primaries, Mitt Romney repeatedly vowed that if elected, “On Day One I would issue an executive order paving the way for Obamacare waivers to all 50 states.” Early in the Trump administration, officials saw the waivers as a backup plan to ease Obamacare regulations if congressional repeal efforts were unsuccessful.
In reality, the mechanism, also known as a “1332 waiver” due to the relevant section of the law, comes with significant limitations that prevent presidents from issuing broad orders allowing states to get around Obamacare’s regulations wholesale. Instead, applications have to meet specific criteria to be approved. The changes states ask for cannot increase the federal deficit, and they cannot cause more people to become uninsured, increase the cost of coverage, or reduce benefits. They can be approved for up to five years, but must be renewed later.
“The idea is to give states more flexibility, but it’s flexibility in service of the goals of the Affordable Care Act,” said Justin Giovannelli, project director at the Center on Health Insurance Reforms at Georgetown University.
Last year, as states faced rising premiums and uncertainty over Obamacare’s future, former Health and Human Services Secretary Tom Price cast the waivers as a way to help “alleviate the burdens of the Affordable Care Act” that could“lower premiums for consumers, improve market stability, and increase consumer choice.”
He singled out waivers on reinsurance or high-risk pools, which allow government dollars to pay for high medical costs so premiums can go down.
At least 35 states have considered bills to start applications, according to the National Conference of State Legislatures. State officials haven’t always been sure about what type of applications the Trump administration would greenlight, but so far, four waivers have been accepted, three of which were for reinsurance. Three more states have applied for similar programs, which are bipartisan and aimed at lowering premiums.
But efforts to overhaul Obamacare through these waivers, whether sliding the law to the right or left, have proved elusive. This is partially because some states tried to apply for waivers without following the rules, whether trying to move too quickly or not meeting the law’s requirements.
“Finding a balance that falls into those guardrails and allows states to meet their policy goals is not as easy as states would have thought,” said Daniel Meuse, deputy director for State Health and Value Strategies.
While the GOP has for years framed waivers as a way for states to get out of Obamacare, Democrats say waivers can protect against actions Republicans have taken to unravel the law.
But officials on both sides of the political spectrum are running into the realities of how limited the waivers are. That’s attributable in part to the intent of the tool: It was never supposed to be an exit route from Obamacare, indicates its author, Sen. Ron Wyden, D-Ore., the top Democrat on the Senate Finance Committee.
“I created state innovation waivers to give pioneering states the opportunity to go above and beyond the strong consumer protections in the ACA — some have already taken advantage to blunt the impact of the Trump administration’s relentless campaign of sabotage against Americans’ healthcare,” Wyden said. “This law gives states a chance to do better, not worse.”
The waivers must follow a specific process that starts with lawmakers passing a bill that then receives feedback and hearings with the public. States assemble reports on spending, the anticipated outcome, and how the plan will be put into place. They then put the information together in an application that goes to the federal government, which holds another public comment period, before rejecting or signing off on the idea.
The process has been a roadblock to approval. The Trump administration told Ohio that it had not met requirements earlier this year and determined the application was incomplete. In rejecting the Massachusetts plan last year, federal officials noted the application wasn’t submitted enough in advance as stipulated in the rules.
Jason Lefferts, spokesman for the Massachusetts Health Connector, said the commonwealth was “always considering ways to use state flexibility to best implement an exchange that provides the broadest access to affordable coverage” but wasn’t looking at seeking another waiver now.
The application process is part of the problem, believes Sen. Lamar Alexander, R-Tenn., chairman of the Health, Education, Labor and Pensions Committee. He asked the Trump administration in a recent letter to toss certain application rules, set by the Obama administration, noting state officials have labeled the process “too cumbersome, inflexible, and expensive.”
The administration should create a “fast-track” approval for states facing an emergency, and should move quicker when states want to copy others, Alexander said. Along with Sen. Patty Murray, D-Wash., Alexander tried to pass a bill that would have provided more flexibility in creating waivers, but the efforts are at an impasse because lawmakers disagree over abortion funding.
Certain states view the waivers as an opportunity to take the law into their own hands in the face of Washington inaction that has contributed to higher premiums. Wisconsin, for instance, cites this reason behind its reinsurance application.
“Wisconsin is stepping up to add stability to a healthcare mess left after Obamacare that Washington has not fixed,” said Amy Hasenberg, press secretary for GOP Gov. Scott Walker.
Iowa’s waiver tested the limits of what could be allowed. The state tried to set up a reinsurance fund but also wanted to create cheaper health plans that fell outside of Obamacare to entice young people. Legal experts said the application couldn’t pass because it didn’t follow the correct process or meet the requirements that say coverage must be as extensive as Obamacare.
Doug Ommen, Iowa’s insurance commissioner, acknowledged certain older adults would have paid more but that the status quo was leaving too many young people uninsured.
The state ultimately determined the waiver rules were inflexible for what they planned and withdrew the idea. Ommen, a Republican, said Iowa may take another shot, but that reinsurance alone was inadequate.
“Reinsurance doesn’t solve the underlying problem,” he said. “The structure is bad … States shouldn’t pay for something to prop up the ACA when the structure itself isn’t working.”
Adding to the complications with Iowa was that President Trump intervened against the waiver, the Washington Post reported. Still, there had long been doubts about its legality.
“I would agree that out of Washington there has been a fair amount of starts and stops,” Ommen said. “But ultimately the law has to be changed. It’s not going to be fixed by waivers.”
Similar confusion happened elsewhere. Oklahoma pulled its reinsurance plan in September after the Trump administration passed its deadline. Wyden sent a letter to HHS accusing the agency of not following through on helping states as promised. In reply, the administration said the timing to meet all the requirements had been “challenging.”
Minnesota Gov. Mark Dayton, a Democrat, told the Trump administration that the experience of applying for reinsurance was “nightmarish.” He noted Minnesota followed all instructions, but waited longer than expected only to discover funding for another healthcare program would be cut.
“The program is certainly not designed to be a quick fix to what one might describe as an emergency situation,” Giovannelli said. “That’s just not the way it’s set up.”
Still, some signs show the applications are moving faster. Andrew Ratner, chief of staff for the Maryland Health Benefits Exchange, said the state faced no troubles with its reinsurance application.
“I don’t think it was laborious,” he said of the process, which was carried out over roughly six weeks from the time a bill was signed to filing the application. “We have good communication with the Centers for Medicare and Medicaid Services.”
Blue states that have tried to use waivers to expand on Obamacare are hitting barriers, too. Vermont, for instance, tried to set up a single-payer system, but officials abandoned the effort after they realized they couldn’t find a way to pay for it. Because of the waiver’s specifications, Vermont officials couldn’t ask the federal government to kick in more funding.
“It’s a combination of the deficit guardrail and the realities of the healthcare system,” Meuse said. “Making changes with a large but limited number of federal dollars often requires state investment.”
Other states, including New Mexico, are considering using waivers to create a “public option” that would allow people to buy into Medicaid.
Though politics are another factor at play. California had filed a plan under the Obama administration to allow immigrants who came to the U.S. illegally to join the exchange, but not receive subsidies. State officials withdrew the waiver when Trump was elected, out of concern the data would be used for deportations.
“It’s a resource-intensive application process,” Meuse said of the waivers. “For a state to be willing to go through with it, they will have to look at all factors, the policy factors and the political factors.”