A new Government Accountability Office report to the chairman of the Senate Finance Committee claims that federal rules may hinder states from applying to waive sections of the Affordable Care Act to make marketplace health insurance provisions more innovative.
Starting Jan. 1, 2017, states may request Section 1332 waivers to the ACA as long as they meet requirements for coverage, affordability and do not increase the federal deficit.
Yet stakeholders told the GAO that the guidance will limit the number of states that apply, Katherine M. Iritani, director of Health Care, told Chairman Orrin Hatch, R-Utah, in the July letter released August 5.
One example is the Department of Health and Human Services rule that the 1332 waiver proposals will be assessed independently of Medicaid waiver requests. This provision precludes states from combining waivers for the resulting savings because it would go against the requirement of deficit neutrality.
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States may decide not to pursue waiver proposals that seek to combine Section 1332 and Medicaid waivers to expand coverage to low-income individuals, Iritani said.
"Representatives told us that states may be concerned that such proposals may not be able to meet the deficit neutrality criteria for the 1332 waiver independently of the Medicaid waiver," she said.
Another drawback for states is operational considerations, particularly the inability of the federal exchange IT platform to accommodate certain changes. This may preclude a majority of states with a federally-facilitated exchange from applying for a waiver, she said.
The Department of Health and Human Services said those states may develop their own systems to make changes to eligibility and enrollment. However, stakeholders questioned whether those states would have the resources to develop their own systems.
"Stakeholder groups representing state Medicaid and exchange officials told us that, while some states continue to explore options under 1332 waivers, they believe HHS's and Treasury's application review controls and their operational considerations may considerably limit state waiver proposals," Iritani said. "As a result, they anticipated few states would pursue 1332 waivers in 2016."
Only two states are currently developing proposals: Vermont and Hawaii.
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Both states seek to waive requirements for a small business exchange to allow small business employers to continue to buy coverage for employees directly from insurers. Both states have cited concerns about the financial viability and operational complexities of a small business exchange, given their relatively small markets, the GAO report said.
Vermont's application is under review while Hawaii is still seeking public comment, a step necessary before submitting the request.
The ACA established Section 1332 waivers to allow states to innovate health insurance provisions in the exchanges.
Twitter: @SusanJMorse