Recent guidance from the Centers for Medicare and Medicaid Services encourages states to take new steps to circumvent the ACA. Specifically, it invites them to apply for Medicaid Section 1332 waivers in order to use ACA subsidies for short-term insurance and association health plans. These plans, originally intended only to tide people over between periods of more-permanent coverage, are little more than flimsy stop-gaps that scarcely merit the name of real health insurance.
Having failed to repeal the ACA, the Trump Administration turned to short-term and association health plans as a prime tool in its attempts to cripple it. These kinds of plans are not new, having existed in some form for over 20 years. They were specifically designed to provide health coverage with a limited scope: either for groups under the banner of an “association” or for a short time frame, usually 90 days.
Because of this limited scope, these plans can circumvent some of the protections outlined in the Affordable Care Act, including the requirement to cover the 10 essential health benefits: outpatient care, hospitalization, preventive services like mammograms or prostate exams, lab services, prescription drugs, emergency care, rehabilitation after injury or illness or for disabilities, maternity care, mental health, and pediatric care. The plans can also deny coverage for pre-existing conditions.
Extending their duration would cause Marketplace costs to soar by removing healthier people who opt for cheap and lackluster coverage rather than quality plans. Not only that, but allowing subsidies to be used for skimpy and inadequate plans ignores the subsidies’ intended purpose: to support people in getting access to quality health insurance coverage and care.
The recent guidance is just one example of a series of actions to allow further access to poor coverage. An October executive order broadened people’s ability to purchase these plans, making their use more prevalent. In its June regulations, the Administration expanded the short-term insurance terms from three months to a year and made them renewable.
The federal administration wrongly says the changes would make insurance more affordable and present the public with more insurance choices. They would actually be a return to the pre-ACA era of essentially worthless insurance and insurance abuses – only this time, the Trump Administration would subsidize it.
The section 1332 “State Innovation Waivers,” which had been included in the ACA to allow innovation, were narrowly construed (in a 2015 guidance) to only be granted if a particular proposal did not weaken comprehensive coverage. The new guidance supersedes that Obama-era guidance. Short-term and association plans are now allowed as long as at least one comprehensive health plan is available and the overall rate of insurance coverage, including those covered by the junk plans, does not decline. The new guidance also renames the 1332s as “State Relief and Empowerment Waivers.”
Lawmakers in Illinois are taking the threat of association and short-term plans seriously. Two bills introduced this year in the Illinois legislature in response to the advance of short-term and associations plans sought to mitigate their worst abuses and protect state residents. HB 2624, the Short Term Limited Duration Health Insurance Coverage Act, would have limited these plans to six months, banned issuers from discriminating against people with pre-existing conditions, and required warnings that the plan may not provide all needed coverage. HB 4165, the Do No Harm Healthcare Act, would have prohibited the State from applying for any federal waiver that would reduce or eliminate any protection or coverage that was required under the ACA and in effect on January 1, 2017. Both bills passed both houses but were vetoed by Governor Rauner (a veto override in the November session would require a three-fifths vote in both chambers).
The new guidance went into effect immediately, although all the changes would not be fully in place until 2020.
More background from Smart Policy Works:
“Association and short-term plans – the latest hell” – in our February newsletter
“Experimenting with Medicaid” – fact sheet on the 1115 and 1332 waivers