As the COVID-19 crisis continues, the value of health insurance is becoming even more apparent. While many states have lowered barriers to coverage for their residents, some are pursuing policies likely to undermine access.
Over the winter, Georgia submitted a contentious proposal to the Trump administration to waive key provisions of the Affordable Care Act (ACA). If approved, the waiver would eliminate the ACA’s marketplace and essential health benefits requirements and replace federal coverage subsidies with a more limited state-administered program. In February, federal officials temporarily halted their review of the plan to give Georgia the chance to provide additional data and analyses that might justify its approach.
While a dozen states have used ACA Section 1332 waivers to improve the affordability of comprehensive individual market coverage, Georgia’s plan is different in substance and likely effects. It is the first to take advantage of legally tenuous Trump administration guidance that purported to loosen statutory safeguards governing the ACA’s waiver program. The core of the proposal would upend the state’s individual health insurance market and almost certainly make it harder for Georgians to enroll in affordable, comprehensive coverage. For this reason and others, the state’s waiver doesn’t satisfy federal requirements and surely would be challenged in court should the administration eventually approve it.
What Are Section 1332 Waivers?
- Section 1332 of the ACA allows states to apply to waive certain provisions of the health law to implement their own programs to improve health insurance coverage.
- States can waive rules governing the ACA’s marketplaces, premium and cost-sharing subsidies, and essential health benefits, among others.
- States may not waive ACA protections for people with preexisting conditions, prohibitions on health status and gender rating, and nondiscrimination rules.
- States can access federal funding under the program. If a state’s waiver plan is forecast to reduce federal spending on coverage subsidies, the federal government will pass through those savings to the state for the purpose of implementing its waiver.
- The program does not give states carte blanche to waive federal law. A waiver cannot be approved unless it complies with statutory “guardrails” that disallow any proposal likely to undermine comprehensive, affordable coverage, cover fewer people, or impose additional costs on the federal government.
- States must have statutory authority to submit the waiver application to the federal government and implement the waiver program.
Georgia’s Plan
The core of the state’s proposed waiver, called “Georgia Access,” has two parts.1
First, Georgia would replace the ACA’s coverage subsidies for middle- and low-income Americans with a state-administered subsidy system. Unlike federal premium tax credits and cost-sharing subsidies — to which all eligible consumers are entitled — the assistance Georgia offers would be limited, and allocated on a first-come, first-served basis. By capping funding, the state would limit its financial exposure to the new program. Georgians who still need help affording coverage once the cap is reached would be placed on a waiting list.
Residents who do receive a subsidy could use it to finance one of two new coverage products that aren’t allowed under current law because they have less-generous benefits or cost-sharing. “Copper” plans would resemble existing coverage options, with a $13,500 deductible — nearly 70 percent higher than what is allowed in bronze plans. “Disease management” plans could use unspecified flexibility to deviate from the ACA’s benefit requirements, for the asserted purpose of allowing insurers to sell a more tailored product to people with chronic illnesses.
Second, “Georgia Access” would prohibit Georgians from accessing HealthCare.gov, the federal marketplace through which Georgia residents now enroll. But it wouldn’t set up a state-run marketplace, either. Instead the waiver would require residents to sign-up for coverage via brokers or insurers directly. While Georgians can choose to do that already, the state asserts that relying fully on these private entities will spur competition and innovation. In the state’s view, a feature of this approach is that residents would have increased exposure to short-term and other limited-benefit insurance products. Under recently enacted federal COVID legislation, people enrolled in such products are classified as uninsured.
Misguided Policy
While Georgia claims its waiver will improve affordability and expand access and competition, it’s likely to do the opposite. Shuttering HealthCare.gov would reduce enrollment opportunities by depriving Georgians of the most commonly used access point for comprehensive individual market coverage. It also would undermine insurer competition. Eliminating a neutral public resource that displays the same information for all comprehensive plans will make it harder to compare coverage based on cost, provider networks, and quality, thereby reducing the incentive for insurers to compete on these bases. What is likely to increase, however, is consumer confusion, and the danger that Georgians will be steered to products that don’t fit their needs or expectations. The application asserts that the private “direct enrollment” entities to which the state gives preference will be required to meet largely unspecified access and transparency standards designed to preserve “private market flexibility.” For consumers, such assurances are of limited comfort. Federal direct-enrollment standards have suffered from spotty compliance and haven’t mitigated financial conflicts of interest or prevented private entities from steering consumers to substandard plans or providing misinformation.
While current law guarantees all eligible low- and middle-income Georgians will receive financial help to buy coverage, the state would revoke that promise and provide only limited funding for a limited number of Georgians. The state claims its budget cap will be sufficient to cover everyone who now receives subsidies, plus roughly an additional 25,000 people. Yet, if Georgia’s premium estimates are off by just 6 percent, the state will exhaust its funding and thousands of Georgians otherwise eligible for financial assistance will receive none. This shortfall would occur even if the state is spot on with its assumptions about the amount of federal funding available for the waiver.
Though required to budget for all of the effects its waiver would have on federal spending, the state’s application neglects to do so. The upshot of this omission is that Georgia will have far less money — at least $150 million less — than anticipated. This means virtually any discrepancy between the state’s forecasts and reality — forecasts developed prior to the onset of COVID-19 in the U.S. — will cause Georgians to lose out.
Looking Forward
Georgia’s would-be innovations — promoting enrollment in products with $13,500 deductibles, barring access to HealthCare.gov, eliminating the guarantee of financial assistance for coverage — won’t advance the goals it says it wants to achieve. To improve affordability and access, the state might consider instead proven policy alternatives, some of which need neither a waiver nor a change in existing law to implement. By its own calculations, the state could expand Medicaid for the same cost as its waiver plans, and in so doing provide affordable, comprehensive coverage to more than five times as many Georgians. Georgia’s proposal — counterproductive under the best of circumstances — is likely to be particularly harmful to residents living through or attempting to recover from the economic and health crisis wrought by COVID-19.
