If Arkansas wishes to opt out of Patient Protection and Affordable Care Act requirements governing individual and small group health insurance market reforms and propose an alternative plan under Section 1332 of the law, it must act quickly in order to have such a plan in place by January 1, 2017 as allowed under Section 1332, a consultant’s report recommends. On that date, Arkansas’s existing federal waiver allowing it to use expanded Medicaid eligibility funding to subsidize the purchase of qualified health plans on its health benefit exchange expires at the same time it plans to launch a state-based exchange. The 1332 waiver could also be combined with a new Medicaid Section 1115 waiver as part of an omnibus reform plan as permitted by federal rules, depending on how the state chooses to provide medical coverage to its low income and medically frail residents.
Section 1332 provides for state innovation giving states the flexibility to opt out of most Affordable Care Act individual and small group health insurance market reforms including the requirements to have a health benefit exchange, that plans provide specified essential health benefits as well as advance tax credit premium subsidies and reduced cost sharing for those households meeting income criteria. Also waivable are the individual and employed shared responsibility provisions.
To qualify for a waiver from the federal government, states must demonstrate their programs would ensure individual and small group plans would offer coverage at least on a par with plans providing the 10 essential health benefits prescribed by the ACA. State programs would also have to ensure individuals and small employers would have access to coverage with affordable premiums and protections against “excessive” out-of-pocket costs (such as annual maximums) like those for ACA plans and cover a comparable number of residents as existing ACA plans.
States granted Section 1332 waivers are eligible for “pass through” federal funding operating like an annual block grant. The funding would cumulatively represent what state residents would otherwise receive under ACA rules for premium tax credits, cost-sharing reductions and small business credits.
Given the complexity of assessing various policy and waiver options and preparing and vetting the application, the report prepared by Public Consulting Group recommends Arkansas enact the required authorizing legislation to seek the waiver by June 2015 and to submit the waiver application to the federal government by October 2015. (H/T to Elizabeth Osius of Manatt, Phelps & Phillips, LLP for writing about the report).
“Section 1332 Waivers are new territory in state and federal healthcare policy. No such waiver has been applied for, denied, or approved as of the date of this writing,” the April 6, 2015 Public Consulting Group report notes. “Interpreting and negotiating what is permissible under Section 1332 will gain its first precedents in the months ahead. This paper serves to help assess options and plan activities should Arkansas wish to be the first, or among the first, to submit an application.”
According to the report, some of the policy options Arkansas could implement under a Section 1332 waiver include:
- Continuous enrollment for individual plans instead of annual open enrollment periods;
- Offering Medicaid plans on the state health benefit exchange;
- Allowing employers to issue tax exempt vouchers to employees to purchase individual coverage;
- Reduced penalties for large employers offering “skinny” plans that do not meet ACA employer shared responsibility requirements for minimum affordable coverage;
- Liberalized eligibility requirements for those wishing to purchase catastrophic plans with less than 60 percent actuarial value.
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