The Senate’s failure to pass even a watered-down version of health care reform was compounded by its decision to leave Washington rather than finish the job.
At this juncture, the nation’s governors and state legislators should use every legal means available to them to reform their health insurance markets to the best of their ability and to reduce their citizens’ health insurance costs.
The Cost Crisis
Federal regulation of state health insurance markets, which contributes directly to higher premium costs, has been a disaster. Enrollees are hammered by double-digit premium increases and deductibles annually climbing into many thousands of dollars.
While lower income persons are largely insulated from these rate shocks because they are heavily subsidized, approximately 10 million middle-class persons in the individual markets must face these costs directly—without even the benefit of tax relief they’d get if they got insurance through an employer.
In some states, insurance costs are so high that enrolling in coverage is akin to financing a second mortgage.
Inevitably, these explosive cost increases will encourage more persons to drop their coverage. Indeed, a recent Heritage Foundation analysis shows a decline of 583,000 persons enrolled in the individual market in 2016, indicating that Obamacare may be shifting from “insuring the uninsured to un-insuring the previously insured.”
The Waiver Option
Arguably, Obamacare’s biggest single insurance policy change has been the massive transfer of regulatory authority over health insurance markets from the states to the federal government.
Beginning this year, however, state officials can take advantage of Obamacare’s Section 1332, and apply to the secretary of health and human services for a five-year waiver from 11 statutory requirements of the national health law.
Innovative state officials can pursue new policy options and begin the process of restructuring their health insurance markets. In submitting their applications to the Department of Health and Human Services, state officials should go as far as they can to undo Obamacare’s damage
Areas of Exemption
States can get Health and Human Services waivers from the highly unpopular individual and employer mandates and their tax penalties.
It is the federal health insurance rules, however, where states can seek the biggest structural changes. For example, they can get waivers that would allow them to redefine a “qualified health plan” in the individual and small group markets.
States could also get waivers from a mandate that’s one of the biggest drivers behind premium increases—the 10 categories of federally mandated health benefits (known as “essential health benefits”)—and the actuarial value mandate that specifies the levels of coverage health plans must offer.
The states can also get waivers from the rules governing health insurance exchanges, requirements governing the risk pooling, and the administration and functions of the exchanges.
State officials can also use waivers to make crucial changes in the financing of health insurance within their health insurance exchanges, such as the eligibility and rules for cost-sharing subsidies and the so-called “premium tax credits.”
For example, they can alter the payment amounts, the benchmarks for setting the payments, and change the rules concerning family size and income eligibility.
Coping With Limitations
When the Senate recently abandoned health reform legislation, it also jettisoned an amendment easing the process for state officials to secure a Section 1332 waiver.
Notwithstanding the greater difficulty under current law, state officials, seeking a waiver, can still make progress in reducing Obamacare’s regulatory costs on the individual and small group markets. They can also improve, to some extent, the functioning of the Obamacare exchanges within their state borders.
Under current law, state officials offering alternatives must meet certain statutory conditions.
First, under current law, the state health insurance alternatives must enroll as many persons in coverage as Obamacare. The good news for state officials is that this condition is getting easier and easier to meet, since Obamacare coverage projections have routinely fallen far below expectations.
The Congressional Budget Office projections, for example, have been laughably inaccurate. State officials, therefore, should have little trouble meeting Obamacare’s enrollment levels.
Second, state alternatives must meet Obamacare’s standards for “comprehensive” coverage and cost-sharing requirements. While these standards pose more of a challenge, the Department of Health and Human Services also has the administrative authority to interpret and apply these standards.
State officials should be mindful of the fact that administrative agencies, assuming that their rules are reasonable, legally enjoy a privileged position in their interpretation of the rules that they promulgate and apply.
In Chevron USA Inc. v. Natural Resources Defense Council (1984), the Supreme Court ruled that courts should defer to an agency’s interpretation of the law in issuing regulations unless that interpretation is unreasonable.
Third, the state alternatives must not contribute to an increase in the deficit. For conservative governors and legislators, this should be no obstacle.
In 2010, Congress enacted Obamacare on a narrow partisan basis and in the teeth of popular opposition. The national health law epitomizes Washington liberals’ agenda of central planning and bureaucratic control. Its negative consequences were predictable from the very beginning.
The millions of Americans who voted for change, and expected change in federal health policy, are justly angry and frustrated at the poor performance of the Senate.
The good news is that we have a federal system of government, where the people can act through their governors and state legislators. Time for state officials to step up.