State public options may suffer if CMS is too stingy with federal dollars
The Biden administration’s plan to retool Obamacare marketplaces could open the door to more states offering a public option, but the president’s goal to expand coverage could suffer if CMS doesn’t give states enough leeway to spend federal money.
The language around Section 1332 waivers in the market modernization proposed rule is similar to the Obama administration’s 2015 guidance but features more explicit language about improving health equity. Biden’s team wants states to apply for waivers that would increase the number of people covered, offer more comprehensive coverage, make comprehensive coverage more affordable or address health equity and the social determinants of health.
It’s a significant departure from the Trump administration’s exchange policies, which had primarily focused on making coverage more affordable by allowing consumers to buy skimpier plans.
“The Biden administration really wants to ensure that the plans people purchase have the coverage and cost-sharing protections that were originally intended under the ACA,” said Ruth Liu, an expert on the ACA and commercial insurance at consultancy Avalere Health.
That could be a problem for states like Georgia that want to offer plans with worse benefits or cover fewer people. CMS is reviewing the state’s Trump-era plan to privatize its exchange.
“The administration has sent a signal to states that it’s going to be less flexible regarding alternative benefit designs with a more limited scope of coverage and higher cost-sharing,” Liu said.
Ideology and consumer demand for more affordable coverage options, especially to meet short-term needs, initially drove the Trump administration to empower states and insurers to offer marketplace coverage that doesn’t meet the ACA’s requirements.
But it appears that the Biden administration sees a smaller role for those types of plans in the future.
Congress boosted financial assistance for ACA premiums in March’s $1.9 trillion American Rescue Plan, making comprehensive health coverage more affordable for more people. While those changes are temporary, the Biden administration and congressional Democrats are pushing to make them permanent.
“Affordability is less of a concern for many lower- to lower-middle-income individuals and, to some extent, higher-income individuals whose premium contribution is now capped at 8.5% of their income,” Liu said.
If those subsidies are made permanent, it could diminish the demand for lower-cost alternatives like association health plans or short-term, limited-duration insurance.
But states could run into trouble if they ask for waivers that increase federal spending because the rule’s language suggests the Biden administration might not approve them.
“I don’t know what it means for more ambitious proposals, especially those with a public option. The thing to watch is how they approach budget neutrality,” said Katie Keith, a health law professor at Georgetown University.
State insurance commissioners, marketplace executives and consumer advocates have asked the Biden administration to allow more budget flexibility for states that want to expand coverage through their marketplaces. They’re worried that states could pay the price if they lower marketplace premiums and too many people enroll in coverage.
“The state is at-risk if a reform at the state level increases the number of people that are covered,” said Joel Ario, managing director at Manatt Health. He’s a former state insurance commissioner and led HHS’ Office of Health Insurance Exchanges.
That seems counterintuitive to many policymakers and consumer advocates in light of the Biden administration’s other efforts to increase marketplace-based coverage through an expanded open enrollment period and greater consumer education and outreach.
“They’ve clearly expressed an interest in covering everybody that’s eligible. So, if states can figure out how to do that at a cheaper cost, I think they’ll be supportive of that,” Ario said.
But states need more clarity because they don’t want to be left holding the bag if they enroll more people that are already eligible for coverage, he said.