Does the Alexander-Murray bill adequately protect vulnerable groups?

The changes to the ACA's Section 1332 state innovation waivers in the Alexander-Murray marketplace stabilization bill  have broad support, having been proposed by multiple HELP Committee hearing participants and endorsed by bipartisan outside advocates including  former acting CMS director Andy Slavitt, one of the ACA's most vocal defenders. These include providing for an expedited waiver process, an emergency waiver process, and the creation of "cookie cutter" waiver templates that multiple states may opt to adopt. (There are dissenters, however, as discussed below.)

Also a matter of broad consensus: easing the terms by which states meet the requirement that a waiver proposal be budget-neutral by 1) allowing states to combine Section 1332 waivers with Medicaid and CHIP waivers and using savings from one to offset extra spending on another, and 2) considering budget impact over the 6-year term of the waiver and a ten-year budget plan.

There is one alteration, though, that gets to the crux of the debate over state flexibility, and was probably a matter of intense negotiation. That is a change to the so-called "guardrails" pertaining to quality and affordability of coverage.

Under Section 1332, states can propose to change or eliminate almost all core ACA features: the individual and employer mandates, plan design including the Essential Health Benefits, and the subsidy basis and schedule.  For a waiver to pass muster, however, the state must demonstrate that it will cover as many people, with coverage as affordable and comprehensive as the default structure, and must not increase the deficit.

That's a pretty high bar. And at the end of 2015, HHS issued guidance that raised it further, largely by specifying that the waiver proposal not disadvantage "vulnerable residents." With regard to the requirement that the waiver proposal cover as many of the state's residence as would be covered without the waiver, for example, the 2015 guidance stipulates:

Assessment of whether the proposal covers a comparable number of individuals also takes into account the effects across different groups of state residents, and, in particular, vulnerable residents, including low-income individuals, elderly individuals, and those with serious health issues or who have a greater risk of developing serious health issues. Reducing coverage for these types of vulnerable groups would cause a waiver application to fail this requirement, even if the waiver would provide coverage to a comparable number of residents overall. 

With regard to affordability, the 2015 guidance was protective of the Cost Sharing Reduction subsidies that the ACA provides to low income marketplace enrollees:

Waivers are evaluated not only based on how they affect affordability on average, but also on how they affect the number of individuals with large health care spending burdens relative to their incomes. Increasing the number of state residents with large health care spending burdens would cause a waiver to fail the affordability requirement, even if the waiver would increase affordability for many other state residents. Assessment of whether the proposal meets the affordability requirement also takes into account the effects across different groups of state residents, and, in particular, vulnerable residents, including low-income individuals, elderly individuals, and those with serious health issues or who have a greater risk of developing serious health issues. Reducing affordability for these types of vulnerable groups would cause a waiver to fail this requirement, even if the waiver maintained affordability in the aggregate.

Those fine-grained protections are frustrating to conservatives. They would by any reasonable reading scuttle the original Iowa waiver proposal, for example  which lowered premiums and extended them up the income chain but eliminated CSR subsidies and left all residents with deductibles north of $7,000 (albeit with many services not subject to the deductible). Amid reports that even the Price HHS was poised to reject the proposal, Iowa has since restored CSR to the proposed scheme.

The Alexander-Murray bill, released last night, repeals the 2015 HHS guidance, along with detailed regulations governing waiver submission and assessment issued in 2012. But there's a bid to preserve the substance of the 2015 guidance with respect to protecting vulnerable populations. In the provision addressing affordability, the bill amends the text of ACA Section 1332 as follows, stipulating that the state plan:

(B) will provide coverage and cost sharing protections against excessive out-of-pocket spending that are at least as affordable of comparable affordability, including for low-income people, people with serious health needs, and other vulnerable populations as the provisions of this title  would provide 

"Of comparable affordability" seems a somewhat looser standard than "at least as affordable." The language requiring coverage of as many people and coverage at least as comprehensive is unchanged. As noted above, the terms by which budget neutrality is assessed are changed. The 2015 HHS guidance disappointed many people by stipulating that the waiver proposal had to be budget-neutral in each year of operation.

With the 2015 guidance repealed, the language quoted above setting the standard for covering "at least as many residents" is gone. Arguably, the requirements for affordability would provide sufficient protection on that score. But what about the lost language setting stringent requirements for comprehensiveness below?

Comprehensiveness is evaluated by comparing coverage under the waiver to the state's EHB benchmark, selected by the state (or if the state does not select a benchmark, the default base-benchmark plan) pursuant to 45 CFR 156.100, as well as to, in certain cases, the coverage provided under the state's Medicaid and/or CHIP programs. A waiver cannot satisfy the comprehensiveness requirement if the waiver decreases: (1) The number of residents with coverage that is at least as comprehensive as the benchmark in all ten EHB categories; (2) for any of the ten EHB categories, the number of residents with coverage that is at least as comprehensive as the benchmark in that category; or (3) the number of residents whose coverage includes the full set of services that would be covered under the state's Medicaid and/or CHIP programs, holding the state's Medicaid and CHIP policies constant. That is, the waiver must not decrease the number of individuals with coverage that satisfies EHB requirements, the number of individuals with coverage of any particular category of EHB, or the number of individuals with coverage that includes the services covered under the state's Medicaid and/or CHIP programs.

Assessment of whether the proposal meets the comprehensiveness requirement also takes into account the effects across different groups of state residents, and, in particular, vulnerable residents, including low-income individuals, elderly individuals, and those with serious health issues or who have a greater risk of developing serious health issues. A waiver would fail the comprehensiveness requirement if it would reduce the comprehensiveness of coverage provided to these types of vulnerable groups, even if the waiver maintained comprehensiveness in the aggregate. This condition generally must be forecast to be met in each year that the waiver would be in effect.

While Section 1332 allows for alteration of EHBs, this 2015 guidance effectively negates that option, it seems to me. What's left if the guidance is repealed is the original Section 1332 text, providing that the state

will provide coverage that is at least as comprehensive as the coverage defined in section 18022(b) of this title and offered through Exchanges established under this title  as certified by Office [3] of the Actuary of the Centers for Medicare & Medicaid Services based on sufficient data from the State and from comparable States about their experience with programs created by this Act and the provisions of this Act that would be waived;

The certification of the CMS Actuary is an important control. And it should be noted that HHS could rewrite/replace the 2015 guidance at any time.

The prospect of altering the ACA's EHBs is a fraught issue, as the legislative battles over ACA repeal bills in the House and Senate proved. To remove an EHB, it is often pointed out, is to ensure that it will become unaffordable for those who seek it. In their January 2017 ACA compromise proposal, progressive Urban Institute scholars Linda Blumberg and John Holahan included "Examine the essential health benefits package" as one of nine ways to consider amending the ACA. But in an August conversation with me, Blumberg and Holahan said in effect that they have done the "examination" and couldn't think of any un-harmful way to tamper with the package.

The Alexander-Murray bill does gesture toward one path to EHB amendment floated in HELP hearings by Governor Charlie Baker of Massachusetts. Baker proposed:

Certain technical parameters of EHB make important kinds of benefit design innovation difficult. For example, in many areas, bronze and silver plan deductibles are extremely close to the maximum out of pocket (MOOP) limits. States may want to experiment with designing plans in which there are lower MOOP levels for high-value care (like chronic illness care) in exchange for a slightly higher MOOP overall, perhaps exceeding the existing EHB MOOP limit for relatively lower-value services. 

The Alexander-Murray bill stipulates that HHS shall issue guidance that includes examples of model state plans that meet the requirements for approval (so-called "cookie-cutter waivers"). These include:

(iii) waivers encouraging or requiring health plans in such State to deploy value-based insurance designs which structure enrollee cost-sharing and other health plan design elements to encourage enrollees to consume high-value clinical services;

I asked Timothy Jost, professor emeritus at Washington and Lee University School of Law, whether he thought the Alexander-Murray bill's  amendment to the Section 1332 guardrails effectively replaced the requirements not to harm vulnerable groups laid out in the repealed 2015 guidance, and adequately protected those vulnerable groups. Jost responded:

If administered by the Obama administration probably yes; if administered by the Trump administration, who knows?  I think the intent of the provision is clear—that affordability not be decreased for vulnerable populations, but the repeal of the guidance—and of the procedural rule—are to me the most troubling parts of the bill.

The procedural rule of 2012, which was responsive in many ways to extensive public comment, lays out in detail the processes by which states must apply for waivers and the federal government evaluate them.  Another person with up-close experience of how these procedures actually play out, former CMS spokesperson Emma Sandoe, also considers the current timeline and procedures appropriate.

While many people in both parties have been willing to accept the premise that the 1332 waiver application process is unduly burdensome, for progressives, that concession may be a manly matter of triage. Jost warns, “if waivers are approved too quickly and without adequate public comment, there is a real possibility that waivers will be approved that can do serious harm to those the ACA was intended to help.”