Health Care Reform by Waiver

By Robert A. Holden, Esq., Senior Vice President

As partisan positions have crystallized at the federal level, changes to the Patient Protection and Affordable Care Act (PPACA) through legislation look increasingly unlikely. While Congress and President Obama agreed to change the 1099 reporting mandate through legislation, future bi-partisan health care policy agreements will be rare. If American voters have developed a new respect for divided government, this could be the case well after full implementation of the PPACA in 2014. Accordingly, employers and states have been seeking, and getting, waivers from PPACA requirements based on executive authority already present under the law. While contested in some instances, PPACA health policy changes through waiver are in most ways a continuation of a long-standing state/federal relationship. They may also indicate how states will meet the design and time demands for implementation of state health benefit exchanges.

All Waivers Are Not Created Equal

The administration has granted a number of waivers to both employers and states. Hundreds of waivers from annual benefit limit requirements, particularly as they affect the “mini-med” plans that many employers utilize to offer basic health coverage to their employees, have received considerable media attention. Earlier this year, the House of Representatives Committee on Oversight and Government Reform began hearing testimony regarding application of these waivers to employer plans, and the authority of HHS to grant them is still a matter of debate.

Nevertheless, while the authority to grant waivers on annual benefit limits may be contested, over twenty other provisions explicitly provide waiver authority to the Secretary of Health and Human Services. States have focused on waivers for which there is clear executive authority, specifically Medical Loss Ratio (MLR). As I have written about previously, twelve states including Delaware, Florida, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Nevada, New Hampshire and North Dakota have formally applied for waivers from the pending requirements affecting insurance carriers in their jurisdictions. As I write this, Maine, New Hampshire, and Nevada have had theirs approved, with the remaining nine still pending approval.

As with the annual benefit limit waivers for employers, the MLR waivers are meant to be temporary measures to bridge implementation difficulties until the Health Benefit Exchanges are effective in 2014. But what about policy once the PPACA is fully implemented?

Long Term State Policy Innovation

States have had freedom to innovate within federally directed Medicaid policy by requesting waivers for some time. The Federal Social Security Act provided for section 1115 research and demonstration waivers, section 1915(b) managed care policy waivers, and section 1915(c) home and community-based services waivers long before enactment of the PPACA. These waivers allow the Centers for Medicare and Medicaid Services to permit states to make policy choices beyond those normally allowed under federal standards.

The PPACA may contain a comparable model of federal/state interaction in section 1332 of the act, which was referenced by the President in a speech to the Governors earlier this year. The “Waiver for State Innovation” allows the Secretary of Health and Human Services to waive federal requirements on state health benefit exchanges and related health insurance market requirements, beginning in 2017, which the President supports moving up to 2014. This provision would allow the states to suggest policies quite different than the exchanges currently contemplated under the PPACA. Vermont has already enacted state legislation to move in this direction, setting the stage for what it hopes will be a federally subsidized single payer system in the state by 2016.

While other states are unlikely to go down a single payer route, there is certainly interest in being allowed to explore options outside the established exchange parameters. Furthermore, states are running low on time as they contend with other aspects of health care reform. In order to maintain a high level of participation by the states, I expect that the administration will find a way to grant more waivers to the states in order to make health care reform function in the long term. While the administration may be willing to extend subsidies to Vermont’s single payer plan, will it also provide those funds to a deregulated market model? Will it have an option if individual mandates are found to be unconstitutional?

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