This week, Senator Bill Cassidy (R-LA) and Representative Tom Price (R-GA-6) proposed new solutions for how states could respond to a ruling from the Supreme Court in the much-anticipated King v. Burwell case challenging the validity of subsidies in federal marketplace states. Price proposed a full repeal/replace measure while Cassidy proposed to largely keep PPACA federally but allow states to be able to completely opt-out of the health reform law should subsidies be struck down by the court. Instead, states would receive federal funding that they otherwise would have received for PPACA implementation to create their own health reform programs at the state level to cover the uninsured. The proposal is similar in scope to a provision already included in the PPACA, Section 1332, which is set to go into effect in 2017.
The Price bill, Empowering Patients First Act, would repeal and replace the PPACA. This is the new iteration of previous repeal/replace efforts by Price in the 111th, 112th and 113th Congresses. In place of the health law, individuals would receive annual tax credits ranging from $900 for children, to $1,200 for those 18-45 up, to $3,000 for those ages 50 and over. Individuals could also opt out of their employer-based plan, Medicare, Medicaid, TRICARE or VA coverage and instead use the tax credit to purchase coverage on the individual market. HSAs could also be funded with refundable tax credits of $1,000 annually. The employer exclusions would continue for plans up to $20,000 for families and $8,000 for individuals, while also allowing employers the ability to provide a defined contribution for individuals to purchase outside coverage.
Cassidy’s plan would keep the federal health reform law but allow states to set up programs that wouldn’t be subjected to federal mandates. There would be no individual or employer mandates and no corresponding fines for not purchasing or providing insurance, respectively. States would also have the option to scrap the law’s essential health benefits and age-rating requirements. The PPACA’s guarantee issue requirement would be slightly varied to allow denial based on preexisting conditions if the individual doesn’t enroll in the open enrollment period. The federal funds that otherwise would have gone to providing PPACA coverage would instead be used to provide HSAs to residents, with contribution amounts determined by age. The HSAs could be used to cover the cost of premiums on the individual market or pay for other out-of-pocket costs.
Cassidy’s proposal is very similar to the waiver program written into the PPACA that was championed by Senator Ron Wyden (D-OR) to give states more flexibility in designing health reform appropriate to their own state. Beginning on January 1, 2017, states can ask the federal government for permission to implement a program to cover their state’s uninsured population using federal funding that would have otherwise gone to the state in the form of individual subsidies, cost-sharing reductions and small business tax credits. Medicaid funding, another major component of the PPACA’s financing for covering uninsured populations in states, is already covered under the Section 1115 waiver, which predates the law. However, states could combine their 1115 and 1332 waivers into a single application for an alternative health reform proposal. The Section 1332 waivers would eliminate the state from being subjected to the law’s individual and employer mandates, health insurance exchanges, benefit requirements and other major components. In turn, the state’s alternative model must cover the same number of individuals that would otherwise have been covered, be as comprehensive as the federal law, be at least as affordable as comparable PPACA options and not increase the federal budget deficit.
NAHU supports the waiver concept and has called on the Administration and Congress to move up the effective date for when states can apply for these waivers to immediately. NAHU also supports additional flexibility for states to implement their own health reform without as many federal requirements to meet the base-line requirements of the PPACA that would allow them to make more appropriate market reforms based on their populations. Because of its ability to respond on a state-appropriate basis, we expect the waiver concept to gain more traction among policy makers, including in states that have opposed implementing the PPACA at the state level to this point, and could prove instrumental in giving states room to respond should subsidies be struck down.