The following comments were submitted by Richard Besser, MD, Robert Wood Johnson Foundation (RWJF) president and CEO, in response to the Centers for Medicare and Medicaid Services (CMS) request for comments relating to Section 1332 of the Affordable Care Act (ACA).
We have a long-standing commitment to working with states to expand health care coverage. For instance, the State Health and Value Strategies program1 assists state agencies and officials in their efforts to transform health and health care systems to provide care that meets people’s goals and needs, including by providing technical assistance to states seeking to expand access to coverage. Part of this assistance involves working with states on 1332 applications. We also support a variety of other activities intended to increase transparency in insurance markets and consumer education, including providing technical assistance to navigators; supporting consumer representatives at the National Association of Insurance Commissioners (NAIC); and sponsoring competitions for those creating consumer decision support tools.
The recently-issued guidance for 1332 waivers provides opportunities for states to dramatically change their individual insurance markets. A crucial element of the new guidance is the separation of the current guardrails pertaining to the number of people covered, affordability, comprehensiveness, and budget neutrality. Under previous policy, the guardrails were interpreted jointly; states seeking a 1332 waiver would have to ensure not only that the same number of people would be covered, but that their coverage would be as comprehensive and affordable as that which would be offered in the absence of the proposed waiver. The new guidance may permit proposals that cover at least the same number of people, albeit using a different definition of coverage, yet this may result in reductions in comprehensiveness and affordability for some consumers. The Administration maintains that affordable and comprehensive coverage must remain available but proposes to substitute a more limited test of availability for a standard aimed at promoting access to such coverage; indeed, the types of reforms outlined in the recently circulated waiver concepts seem likely to drive up premiums for comprehensive products. There will likely be legal challenges to the view of the 1332 guardrails as being independent of one another.2
In general, we support the idea of increased flexibility for states. The offer to customize healthcare.gov to better accommodate particular state proposals provides a potentially important opportunity, depending on costs to states and implementation issues. We appreciate the flexibility on what qualifies as state legislation for that requirement and the agency's receptiveness to state innovation. However, we are also concerned about the potential for the new guidance to increase the cost and reduce the availability of comprehensive coverage for those who need it most. The guidance will facilitate waiver applications that allow states to trade off greater affordability of plans at the expense of their comprehensiveness, which has implications for the affordability of health care. Given the problems with affordability, we understand the motivation of states that contemplate this tradeoff. However, the reinsertion and/or expansion of non-comprehensive coverage in the individual market raises concerns. We are worried about the affordability impact on ACA-compliant coverage, and we also believe that short-term or non-comprehensive health insurance is an inferior product that should be part of our past. It fails to provide the consumer with the financial protection that is an important aspect of health insurance, due to the coverage limits in most plans. We are concerned that reductions in the comprehensiveness of coverage will have adverse effects on population health. Preferable approaches to reform would improve the affordability of comprehensive coverage by fostering competition, reducing costs, improving the risk pool, and/or altering the subsidy structure. We hope that the new guidance would also facilitate waiver applications that further these goals.
Holding these overarching concerns aside, what follows are a few suggestions aimed at increasing transparency for consumers and other stakeholders.
1. Ensure that stakeholders understand the trade-offs: Under the proposed guidance, states will be able to satisfy the waiver requirements by counting non-comprehensive coverage as coverage, thereby potentially asserting that the same number of residents are classified as "covered," even though the comprehensiveness of coverage for some residents may be reduced. Such a plan should only be contemplated with full awareness of the tradeoffs that are being made. The amount of coverage provided by short-term versus comprehensive plans is not likely to be equivalent, and the differences should be understood. An index could be created based on differences in the estimated out-of-pocket costs for selected episodes of care that would allow the comparison of the coverage provided by different types of plans. Stakeholders could then better understand the impact of such a proposal for coverage at both an individual and an aggregate level. Similarly, since states will be able to satisfy the coverage guardrail as long as they provide access to affordable and comprehensive coverage, the definition of affordability should be transparent and well publicized. The estimated impact of the proposed waiver on the affordability of comprehensive coverage needs to be part of any waiver application and should be well publicized to all stakeholders. These data are important for stakeholder understanding of impacts at the individual and aggregate level. Relatedly, there should be carefully estimated and widely reported estimates of the impact of proposed waivers on specific groups, such as (but not limited to) low income residents with high health care needs. These could follow the approach of published estimates of the potential impact of limited duration and Association Health Plans.3 While we appreciate the attempt to facilitate waiver applications by no longer requiring passage of a separate state law, robust public input, informed by knowledge about the nature of the trade-offs being contemplated, should be a required component of any waiver application. The potential winners and losers within the state must be fully apprised of the waiver’s impact and have an opportunity to provide input. Similarly, while the CMS will conduct a risk pool analysis of all proposals, it should also be specific and explicit about their review criteria and the tradeoffs they are willing to accept.
2. Ensure robust consumer decision support: We share the agency’s interest in greater consumer engagement, so long as consumers have the information they need to make good decisions. Due to its quasi-public nature and the great potential for fraud, insurance has always been a highly regulated industry, and ensuring adequate consumer information is an important aspect of state insurance supervision. Health insurance is a complicated product in the best of circumstances, and increasing the potential market to include a more heterogeneous group of products also increases the responsibility for those who supervise their state's insurance markets. Already, there are aggressive sales pitches advertising different kinds of non-comprehensive health insurance products, many of which have relatively little coverage value. A waiver that increases economic opportunities for non-comprehensive coverage will most likely serve to accelerate these trends. As an example, we can look to the case of Simple Health LLC, a company that that made a presentation to the NAIC at the August 2018 meeting in which they promoted their innovativeness and affordability and attempted to convince commissioners to look favorably on non-comprehensive coverage. Just a few months later, Simple Health was the subject of a Federal Trade Commission (FTC) enforcement action for selling products that they claimed were health insurance plans, but were actually extremely limited medical discount programs that provided no insurance coverage.4
At a minimum, state insurance regulators need to protect their residents from bad actors if they seek to use taxpayer dollars to subsidize non-comprehensive coverage. Secondly, the establishment and enforcement of a minimum loss ratio as described below will also help to prevent extremely low value choices. Finally, the measurement of comparative coverage as described earlier should be conveyed to consumers in a clear and appropriate manner, so that they can make informed choices and avoid products that will not truly meet their needs, and may put them at greater financial risk in the event of injury or illness. States seeking to enable the purchase of non-comprehensive coverage should require issuers to clearly convey information about the nature of the coverage provided by these products—what services are covered, how pre-existing conditions are treated, and what coverage limits may exist. Establishing a required Summary of Benefits and Coverage5 document for non-compliant coverage would greatly benefit consumers. The state insurance department should ensure this information is provided to consumers wherever they may shop for coverage, which includes requiring these disclosures from brokers licensed to do business in their state. While we appreciate efforts to increase direct enrollment, consumer decision making should be adequately supported in all settings.
3. Establish a minimum loss ratio for non-compliant plans: Making non-comprehensive plans subsidy-eligible requires some attention to the loss ratios of these plans. At the most recent meeting of the NAIC, a presentation highlighted the low and declining trend in loss ratios for many insurance products, including short-term medical. In the “Other Medical” and “Specified Disease” categories, for example, the loss ratios were as low as 50 percent in 2017.6 While these products may be profitable for the sellers, it would appear that in many cases, consumers are getting relatively little value. Were such plans to be subsidy-eligible, this lack of value would extend to the taxpayer, and has public stewardship implications. Many states do not have loss ratio requirements for these products, or if they do, they are not being actively monitored. Yet if these products are to be counted as coverage and eligible for subsidies, there should be a loss ratio requirement comparable to that for other subsidized health insurance markets, which either the state or the federal government must monitor and report to consumers. For example, in the ACA-compliant market, the minimum loss ratio is currently 80 percent in the individual, and 85 percent in the small group market, meaning that 80 and 85 percent of premiums, respectively, must be spent on claims and expenses that improve health care quality. A benchmark value for consumers and taxpayers should be established and enforced through a minimum loss ratio requirement. A related consumer protection measure, which should also be extended to non-compliant coverage, would be to prohibit issuers from rescinding coverage except in cases of fraud or material misrepresentation of fact.
4. Require a strong evaluation design: We share the agency’s enthusiasm for supporting state innovation, so long as it is coupled with a similar enthusiasm for evaluation, since a defining aspect of innovation is recognition of failure as well as success. In the private sector, feedback is rapid, and failure brings adjustments and potentially withdrawals from markets. In public sector efforts to promote innovation, there must also be a way to measure whether or not an approach has been successful, and to react quickly if it is not. A solid evaluation plan should be an essential component of an approved waiver. Prior 1332 waivers have mostly been for reinsurance, and their impact has been self-evident, lessening the role of evaluation. However, this proposed guidance might result in waivers that would require a far more complicated sets of trade-offs. The suggestions about measurement, value, and consumer decision support described above will enable stakeholders to understand the trade-offs being proposed and the improvements that are envisioned. The public input process should include an agreement about how success will be defined, how it will be measured, and what actions should be taken if goals are not achieved. An objective and transparent process should be followed to evaluate proposed waivers, share results, and outline a corrective plan if needed. In addition to the measures already described, this evaluation, which should be external and timely, should include assessment of how the waiver affects trends in uncompensated care, other insurance market segments, and other relevant health and health care outcomes, some of which are longer term.
5. Avoid the dichotomization of public versus private: Our final suggestion pertains to the expressed preference for approaches that provide access to affordable "private market" coverage. Any waiver application submitted by a state government to the federal government is proposed public policy, involving the potential use of federal funds and the interpretation of federal law. We would argue that all coverage opportunities made possible by 1332 waiver proposals inherently have both public and private aspects, since the private sector supplies insurance products to potential consumers in a market that has been defined through a public policy process and rewards certain plans with access to public subsidies. Without wishing to engage in semantics, we question the usefulness of deeming certain products to be more "private" and therefore preferred. For example, insurance carriers may offer Medicaid plans, Qualified Health Plans, and under a waiver, perhaps some other type of plan which becomes subsidy-eligible. All are examples of private sector participation in a publicly subsidized and regulated market. We suggest that federal attention would be more appropriately focused on the soundness of the state’s proposal, the fit with the insurance market needs, and the evaluation design.
1. State Health and Value Strategies program. www.shvs.org/about/state-health-and-value-strategies/
2. Christen Linke Young, Brookings, Blog The Trump administration side-stepped rulemaking processes on the ACA’s State Innovation Waivers—and it could make their new Section 1332 guidance invalid. www.brookings.edu/blog/usc-brookings-schaeffer-on-health-policy/2018/11/28/the-trump-administration-side-stepped-rulemaking-processes-on-the-acas-state-innovation-waivers-and-it-could-make-their-new-section-1332-guidance-invalid/
3. Blumberg, Linda J., Matthew Buettgens, and Robin Wang. 2018. “Updated: The Potential Impact of Short-Term, Limited-Duration Policies on Insurance Coverage, Premiums, and Federal Spending.” Washington, DC: Urban Institute. www.urban.org/research/publication/updated-estimates-potential-impact-short-term-limited-duration-policies
4. Federal Trade Commission news release. FTC Halts Purveyors of Sham Health Insurance Plans. www.ftc.gov/news-events/press-releases/2018/11/ftc-halts-purveyors-sham-health-insurance-plans
5. Healthcare.gov Summary of Benefits and Coverage www.healthcare.gov/health-care-law-protections/summary-of-benefits-and-coverage/
6. NAIC Consumer Liaison Committee presentation. Ensuring Access to Routine Care Costs During Cancer Clinical Trials. https://naic.org/meetings1811/cmte_conliaison_2018_fall_nm_consumer_slideshow.pdf?87, slides 8–15.