Emergency, Emergency: Using State Section 1332 Waivers to Stabilize Insurance Markets

Despite considerable uncertainty — some created on the federal level and some created on the state level — on the way forward, health insurance markets are stabilizing in many places. Where they are not stabilizing, there is much interest in using Section 1332 waivers as market stabilization devices. Section 1332 waiver proposals, also known as innovation waivers, are also being particularly encouraged by the Trump Administration.

It was always contemplated that Section 1332 waivers would play a significant role in some states, particularly in states like Hawaii that have long organized some version of state specific health care reform.

Now we see Section 1332 proposals arriving from all over the map. Iowa's recent Section 1332 waiver proposal is an interesting example of how state insurance regulation decisions can help to create a crisis that, apparently, only an emergency innovation waiver can resolve. It merits a closer look.

The "Iowa Stopgap Measure" proposes  that premium subsidy determinations be made by the Iowa Department of Revenue and not by the federal government. It also proposes that ACA requirements capping health care premiums pegged to a percentage of household income be replaced by a status and income based allocation of premium subsidies, linked to age and other factors.  This would extend premium subsidies far beyond the 400 percent of the federal poverty level cap found in the ACA.  Cost sharing subsidies for those between 128 percent and 250 percent of the federal poverty level would be eliminated as well.

There is more to this  Section 1332 waiver proposal but Iowa's officials are reported in the press to candidly disclose that one of the purposes of the waiver proposal is to move government subsidization of health insurance access to higher income households. The justification is that without those higher income and on average healthier lives in the insurance pool, a crisis will ensue.Of course, in the meantime a crisis might ensue for those who can afford to enroll but not actually afford to use their health insurance because of the elimination of cost sharing subsidies for their demographic. 

Iowa's identified "emergency" rationalization is that only one insurer will sell ACA compliant plans in the state for 2018. What  created that emergency is, at least in part, Iowa's own  state level decision to continue to allow non-ACA compliant plans to be sold in the state, where an estimated 85,000 Iowans rest easily or uneasily in their own risk pool in the land of thin insurance.

Even an emergency Section 1332 proposal has some review components, however. CMS has recently reduced these to a checklist format. It will be interesting to see whether the notice and comment period produces any discussion about Iowa's role in constructing its own unstable health insurance markets.

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