At first glance, it appeared the Senate Obamacare repeal legislation took a less aggressive approach than House Republicans to the waivers offered to states to opt-out of Affordable Care Act insurer mandates. In fact, some conservatives were griping about it.
But, while substantively the Senate GOP proposed waivers look narrower than the House bill’s version, procedurally they are incredibly more lax. That means states will have all kinds of space to wreak havoc on Obamacare’s consumer protections, even as Senate Republicans claim they’re protecting people with pre-existing conditions.
Instead of creating new waivers, like the GOP bill, Senate Republicans in their bill are seeking to work within the framework of the Affordable Care Act’s existing “1332” system, named for that section of Affordable Care Act.
The ACA’s 1332 waivers let states make changes to all sorts of requirements of Obamacare, including its exchanges, tax credits, essential health benefits and cost sharing limits. What’s not on the table is community ratings, an ACA provision that bans insurers from charging more based on one’s health status. That was waiveable under the House bill, inviting a firestorm of criticism.
By working within the 1332 structure Senate Republicans can claim they keep these protections and take more of moderate approach to state flexibility. But the devil is in the details in how their bill refines the current waiver system.
“The concern is that the guard rails basically almost disappear,” Timothy Jost, a health law specialist at Washington and Lee, told TPM. “The idea clearly seems to be anything that states propose will be approved.”
Firstly, this approach runs into many of the same problems that House Republicans invited in their waiver proposal. Allowing states to opt-out of Essential Health Benefits not only means a trend towards skimpier insurance plans (which is a de facto version of pre-existing conditions discrimination, if a plan is not available for you that covers the services needed for your pre-existing conditions). It introduces the return of annual and lifetime caps, since those bans under the ACA are based on what’s required to be covered under a fully functional Essential Health Benefits package. If a state, for instance, chooses to exclude prescription drug coverage under its EHB requirements, insurers can impose limits on those services.
And this potential effect goes beyond the individual market. Due to some quirks in the regulatory language surrounding the Affordable Care Act, if just one state anywhere scales back their EHBs, employer plans everywhere will be at risk for the return of lifetime and annual caps, and higher cost-sharing.
On top of that, the Senate waiver proposal guts the standards Obamacare required states to meet in order to obtain a waiver.
“The provisions that can be waived are the same things that can be waived currently, but the things you have to accomplish with the waiver are all gone, by and large,” Gary Claxton, a vice president at Kaiser Family Foundation, told TPM.
Currently, state waiver programs must achieve at least comparable results to Obamacare in terms of coverage goals, affordability and comprehensive care, while maintaining budget neutrality. The waiver applications undergo an analysis by the independent actuary at the Centers for Medicare and Medicaid Services to prove they achieve these ends.
Under the Senate GOP proposal, waiver proposals are only required to reduce the federal deficit. While the legislation asks for a “description” of how the waiver will lower costs, improve access or stabilize the marketplaces, there’s no legally binding language requiring they achieve those goals as a condition of approval. Furthermore, the GOP bill changes the ACA text from saying the Health and Human Services secretary “may” grant waivers—giving the HHS some discretion—to “shall” grant waivers, obligating the granting of waivers to the state as long as the federal deficit reduction requirement is met.
“The long and short of it is if a state wants a waiver, a state can get a waiver,” said Nicholas Bagley, who specializes in health and administrative law at University of Michigan Law. “All a state has to do is demonstrate that a waiver won’t increase the federal deficit.”
Then there are changes to the current law regarding who can request a waiver. Currently, a state must get the approval of its legislature to go forward with a 1332 application, but under the GOP plan, state legislatures would stripped of that oversight authority. Instead a governor, in conjunction with his or her insurance commissioner, could single-handedly make the request.
The change from budget neutrality to federal deficit reduction is also suspect, Jost said.
“Budget neutrality at least implies some kind of maintenance and effort on the part of the state, that the state is saying, ‘We’re not going to spend more, we’re not going to spend less, it’s more or less the same,'” Jost said. “This is simply, ‘it doesn’t increase the deficit,’ so a state can come up with a plan that requires less state spending, brings less federal spending and, ‘let’s go build a hockey stadium.'”
It’s even an open question whether the lax requirements would let the state divert federal Obamacare funding to non-health care spending.
“What if the waiver request asks to devote the Obamacare money to education? Or housing? Does the secretary really have to approve a proposal like that?” Bagley said.
Finally, the Senate bill lengthens the expiration date for waivers from the ACA’s five-year renewal period to eight years. In that eight-year period, an HHS secretary wouldn’t be able to revoke any state waivers, even if a new administration came to power.
“That’s true even if the state abuses the waiver, either devoting the money towards something that doesn’t have anything to do with health care, or if it uses the money for some kind of fraudulent purposes. There’s nothing a secretary can do about that,” Bagley said.