Yesterday, the House passed the American Health Care Act (AHCA), its attempt to repeal the Affordable Care Act (ACA, or Obamacare). Several Republican senators have already suggested that they will need to move forward with their own bill in that chamber. But for now, I want to consider the role of HHS—and specifically of Secretary Tom Price—in this process, assuming that something like the House bill does move forward. There are at least two provisions in the law that provide the Secretary with enormous discretion, which could make the bill significantly more problematic for large groups of people.
First, the MacArthur Amendment permits states to seek three different kinds of waivers: waivers that would permit them to charge older enrollees many times as much as younger enrollees (the ACA, in contrast, limits the disparity to 3:1); waivers that would permit them to establish their own set of essential health benefits (presumably ones that are less generous than the ACA requires); and waivers that would allow insurers to charge people with pre-existing conditions more than they charge healthy people. This last set of waivers also requires states to provide financial assistance to such people.
In other words, waivers granted by HHS are critical to the design of the legislation and may have a huge effect on how it works in practice.
You might therefore ask: what does a state have to do to get a waiver? Most importantly, the application must “specif[y] how the approval of such application will provide for one or more of the following: (i) reducing average premiums for health insurance coverage in the State, (ii) increasing enrollment in health insurance coverage in the State, (iii) stabilizing the market for health insurance coverage in the State, (iv) stabilizing premiums for individuals with pre-existing conditions, (v) increasing the choice of health care plans in the State.” These applications are approved by default after 60 days, unless the Secretary denies them.
That’s the extent of the MacArthur Amendment’s requirements. It doesn’t instruct the Secretary of HHS to issue substantive guidelines about what kinds of evidence must be submitted in support of waiver requests, or to explain how these different options will be traded off against each other. That is, it is entirely possible that a state may reduce average premiums (satisfying option i) by decreasing enrollment (defeating option ii) and specifically by hiking premiums for individuals with pre-existing conditions (defeating option iv). And in that event, it appears the state would be entitled to a waiver under the plain terms of the statute.
Ultimately, the bill tells the Secretary to do exactly one thing: specify the time and manner in which applications are to be submitted. How rigorous do we expect this process to be? Tim Jost argues that “Essentially, any state that wanted a waiver would get one.”
A key problem with the MacArthur Amendment is that the third set of waivers, allowing insurers to charge people with pre-existing conditions more only if states provide additional financial resources to those people, immediately poses difficult funding challenges. As I’ve already discussed, states have a history of underfunding high-risk pools for the population of people with pre-existing conditions, and many sick people go without needed care as a result. Because the AHCA appropriates fewer financial resources for states than experts estimate would likely be necessary to cover this population, these waivers are highly controversial.
Enter the Upton Amendment, which provides $8 billion from 2018-2023 to help meet the needs of those with pre-existing conditions. This is on top of $130 billion, over a decade, which was already included in the AHCA for other purposes, but which now presumably might also be used to help these patients as well. (I set aside here the fact that that sum needs a few extra zeroes to come close to adequately funding high-risk pools, if the waivers turn out to be popular.)
States that receive the third type of waiver, allowing them to charge people with pre-existing conditions more for coverage, would be eligible to receive money from this $8 billion fund. And the Amendment does give some content to how the money is to be allocated: “[I]n accordance with an allocation methodology specified by the Secretary that takes into account the relative allocation of other amounts appropriated under this subsection among such States,” where this refers to the amount the state has received of the rest of the $130 billion fund.
This is strange: the amount that states get of the $130 billion fund in 2018 and 2019 is determined by a calculation that is spelled out fairly explicitly in the AHCA. States get an amount “equal to the sum of (I) the relative incurred claims amount… and (II) the relative uninsured and issuer participation amount,” where both of those terms are defined in the statute. The AHCA goes on to place conditions on the receipt of those funds, requiring at least partial state matching.
Yet under the Upton Amendment? The Secretary needs to consider how much other states have gotten, but nothing else is specified and nothing is required on the part of the states. There appears to be a clear mismatch on this key point between the AHCA and the Upton Amendment, which was jammed last-minute into the AHCA. The result is confusing, at best.
You may say that this lack of explication in both the MacArthur and Upton Amendments is evidence of how quickly they were drafted and how little vetting they received. I might agree with you, and for more on the strangeness of the Upton Amendment in particular, see Nick Bagley’s take on the situation.
But as a substantive matter, both amendments give enormous discretion to the Secretary. And I have no doubt that Secretary Price will grant waivers freely and dispense funds to states that are particularly aggressive about seeking such waivers.
Why do I think so? Well, President Trump sort of already told him to. One of the President’s very first actions, his Executive Order to “minimiz[e] the economic burden of the [ACA] pending repeal,” instructs the Secretary—“to the maximum extent permitted by law”—to “waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden.” Yes, Republicans are presenting the AHCA as a repeal of the ACA, and so in theory this Executive Order would no longer be operational. But it isn’t really a full repeal, and it keeps many of the ACA’s provisions in place. These waivers would allow Secretary Price to gut many of its remaining protections.
It’s been quite a week for us all in health law world. I’ll be back here blogging before long, I’m sure, but for now I’ll leave you with one question. While the AHCA works its way through the Senate, insurance companies must file their rates and plans for the 2018 individual market. How can we expect insurers to stay in this market when they don’t even know what the basic rules of the game will be? More on that soon, I’m sure.