No matter what you think about the Affordable Care Act (ACA) — whether you supported President Obama’s signature health care law or opposed it — the facts show that individual health insurance markets across the country have been struggling.
Health insurance premiums have more than doubled in states using HealthCare.gov between 2013 and 2017. Many insurers have left the market, leaving too many people with just one insurer available to them, and insurer monopolies that are leading to higher prices. The best evidence of the unpopularity of these plans: exchange enrollment is more than 60 percent below expectations.
In short, Obamacare is not working out as its proponents promised.
Unfortunately, as the head of the Centers for Medicare & Medicaid Services (CMS), which is tasked with implementing a large portion of the ACA, I can tell you that there is only so much the administration can do without congressional action. Although Congress did not enact broader reforms to Obamacare. the repeal of the individual mandate penalty is crucial in allowing people greater freedom to purchase health care in ways that work best for them.
Federal law might be hard to change in Washington, but in some cases, states are able to take advantage of flexibility built into federal law to develop new programs and approaches. This is true under federal Medicaid law and it is also true under the ACA, which is why CMS recently stepped up efforts to support state-specific strategies to improve their individual health insurance markets and to develop alternatives to Obamacare that better meet the needs of their residents.
Specifically, section 1332 of the ACA allows states to request the waiver of certain Obamacare requirements to pursue innovative strategies for providing their residents access to high-quality, affordable health coverage.
CMS and the U.S. Department of the Treasury recently issued new guidance to give states more flexibility to develop innovative alternatives to Obamacare. This new guidance rescinded prior guidance that had proven to be unnecessarily restrictive for states.
That was certainly my experience before coming to CMS when I worked directly with states to develop waivers. Innovative ideas were very difficult to develop under this prior guidance and many states gave up.
We’ve named these waivers State Relief and Empowerment Waivers to reflect this new direction, and we’ve provided states with several waiver concepts to illustrate ways states can take advantage of this new flexibility.
The waiver concept with perhaps the best potential to improve consumer control and generate health system reforms would permit states to develop a new account-based program to help subsidize health care expenses. Instead of the complicated way Obamacare currently subsidizes individual market premiums, states could provide a defined contribution to an account for people to use to pay premiums and, if funds remain in the account, any out-of-pocket health expenses.
By providing contributions to an account, this approach could substantially increase consumer engagement and control over their healthcare dollars. Maybe most importantly, this approach could give people stronger incentives to make smarter decisions with their health care dollars and increase the demand for price transparency, because people directly retain the benefit of any unspent dollars from the account.
Instead of federal subsidies automatically growing in step with premiums as they currently do, a contribution to an account could also establish a personal healthcare budget that helps create a target for health plans when they set premiums, which creates at least some pressure to contain premium growth.
When I was working in Indiana we set up similar accounts to create the nation’s first consumer-directed Medicaid program. We found that regardless of their socio-economic status, people wanted to make decisions about their care. And when given the opportunity to control their own accounts, according to an evaluation by the LewinGroup, consumers used the health care system more appropriately and had better health outcomes.
The account-based approach might hold the most promise, but we’ve released three additional Waiver Concepts for how states can better target subsidies, increase coverage options, and address the needs of high-risk individual.
Absent any additional changes to federal law, it’s up to the states to chart a new path. Through State Relief and Empowerment Waivers, states now have the opportunity to advance alternatives to the ACA.
Our hope is that these waiver concepts foster further discussion and spur innovative thinking among states that drive toward real solutions to improve access to quality, affordable coverage for all Americans.
• Seema Verma, administrator of the Centers for Medicare and Medicaid Services.