The Trump administration will allow states to rewrite Obamacare’s rules so that people can apply federal subsidies toward health insurance that doesn’t meet the definition laid out in the healthcare law.
The approach is controversial, with Democrats warning that people will be siphoned into “junk plans” that don’t cover medical care for pre-existing conditions such as cancer and diabetes and that it will cause further depletion of the marketplaces created under Obamacare, formally known as the Affordable Care Act.
But the Trump administration has said that the protections will be unchanged and that it believes states should have more options for how they operate health insurance marketplaces, noting that plans currently sold under Obamacare are out of reach for many customers.
“Seeing the problems the ACA created and seeing the lack of federal action to address these problems should be proof enough for why it was such a mistake to federalize so much of health care policy under the ACA,” Seema Verma, the administrator of the Centers for Medicare and Medicaid Services, said at the American Legislative Exchange Council summit in Washington, D.C.
Verma declared that the changes would produce better results and predicted that more people would be insured if states used the plans. The agency proposed allowing more people to use subsidies to buy catastrophic plans, a proposal that had been included in a bipartisan deal the Senate reached earlier this year, before the entire bill crumbled amid a dispute over anti-abortion language.
But giving states more flexibility on their healthcare markets increases the prospects that people could get subsidies to buy short-term or association healthcare plans through the Obamacare exchanges. Both are less expensive than Obamacare plans, but also cover fewer benefits.
Sen. Patty Murray, the top Democrat on the Health, Education, Labor, and Pensions Committee, in a statement on Thursday referred to the latest rollout as a “How-to guide for healthcare sabotage.”
The option to use subsidies for other types of plans was one of four ideas states could consider to rewrite the rules of the healthcare law.
The idea with the most potential, the agency said in a release, would allow states to provide cash contributions to accounts that people can pull from to pay their premiums and out-of-pocket medical costs. The fund could be paid for through the tax credits in Obamacare, through a small business health tax credit, or by collecting individual or employer contributions.
The Trump administration billed the option as a way for people to have more control in how they manage their healthcare spending.
“This approach maximizes consumer choice and engagement, giving people flexibility to make smarter decisions with their health care dollars because they directly retain the benefit of any unspent funds from the account,” according to CMS.
Other options presented include letting states change the subsidy structure to decide which customers on Obamacare should be allowed to receive federal funds that reduce what they pay for health insurance. Under the current structure, people generally get subsidies when their income is below about $48,560 a year for an individual and $100,400 for a family of four. Other factors at play in the cost include location, smoking status, and age.
A final idea would allow states to set up high-risk pools, which would funnel federal funds to pay for the medical expenses of the neediest patients and keep premiums at pay. Some states used these arrangements before Obamacare, and it is a favored approach by conservatives.
Because Democrats won a majority of the House, Republicans will be limited in their ability to make legislative changes to overhaul Obamacare. Instead, the Trump administration is turning its attention to changes that are possible administratively, and the latest come through what are known as “1332 waivers,” which refers to the relevant section of the law.
The mechanisms, known as “innovation waivers” under the Obama administration, have been renamed “state relief and empowerment waivers” by the Trump administration.
Republicans have long talked about using the waivers as an escape hatch from Obamacare for states, but they will still face limitations under the law that the Trump administration cannot change.
The waivers come with a specific process that entails several steps by both state lawmakers and the federal government, with an opportunity for public comment before finalization. But the applications still have to meet specific criteria to be approved. The changes states ask for cannot increase the federal deficit, and they cannot cause more people to become uninsured, increase the cost of coverage, or reduce benefits. They can be approved for up to five years but must be renewed later.
