During this interim legislative year, two Texas legislative committees have been tasked with studying whether Texas could use waivers authorized by the Affordable Care Act (ACA) to help stabilize the individual health insurance market. The House Insurance Committee held a hearing on the topic on December 6, 2017 (see CPPP’s testimony here), and the Senate Business and Commerce Committee will hold a hearing on January 23, 2018 in Houston.
The individual market (which includes the ACA Marketplace) is a critical source of health insurance, and the waivers authorized under the ACA (known as 1332 waivers) are one tool that states can use to help increase stability and competition in their markets.
Texans in the Individual Health Insurance Market
About 1.7 million Texans rely on the “individual market” for coverage because they don’t get insurance through work, Medicaid or Medicare. About half get ACA subsidies to lower their premiums in the Health Insurance Marketplace; the other half pay full cost, regardless of whether they buy in or outside of the Marketplace. The share of Texans covered in the individual market is modest at six percent, but the market is still a critical source of coverage for self-employed Texans, low-wage workers, part-time employees, small business employees, and others who are not offered insurance at work and do not qualify for other coverage.
Sources of Market Instability and Harm to Texans
Insurers selling in the individual market face increasing uncertainty for 2019, due largely to two recent actions at the federal level. The first action is the repeal of the ACA “individual mandate,” which had helped to ensure that people maintained continuous coverage instead of waiting to buy insurance when they got sick. The second is efforts to encourage the growth of plans that skirt many ACA minimum benefit standards and consumer protections. These two federal actions will cause some healthier people to leave ACA-compliant plans for skimpier coverage in search of lower premiums, making the remaining population covered by ACA-compliant plans sicker and more expensive on average. Insurers will respond by raising premiums (on top of 2018 price hikes) or exiting the individual market altogether.
This instability harms Texans, and may hit those with higher incomes and those in rural areas hardest. People who qualify for subsidies are largely shielded from price hikes, but people who buy coverage at full cost (those who earn more than about $48,000/year for an individual or $98,000 for a family of four) will be most affected. Today, most urban counties have three or more insurers selling in the Marketplace, but most rural counties have just one or two. Rural Texas counties are especially at risk of losing access to coverage if insurers exit the market in 2019.
Health Insurance Waivers under the ACA
Starting in 2017, the ACA authorizes states to apply for “Section 1332 State Innovation Waivers” to experiment with different, innovative approaches to achieve the core ACA goals of increasing access to high-quality, affordable health insurance. To date, four states have received federal approval for 1332 waivers and others are at various stages of developing waiver requests.
Federal law contains strong guardrails to help ensure that low-income and vulnerable populations will maintain access to coverage when states seek a 1332 waiver. A state seeking a 1332 waiver must demonstrate that it will:
- Cover a comparable number of people (compared to the baseline with no waiver);
- Maintain affordable health coverage (both premiums and out-of-pocket costs);
- Provide benefits as comprehensive as ACA “essential health benefits;” and
- Not increase the federal deficit.
Two Approaches States Have Taken
Three of the four states with approved waivers (Alaska, Minnesota, and Oregon) have set up a “reinsurance” system that reduces some of the risks insurers take on by picking up the tab for people with the most costly health care, allowing insurers to reduce their premiums. For example, Oregon anticipates reducing premiums by seven percent through its waiver approved in October 2017.
Other states like California (waiver request withdrawn), Idaho (waiver under development), and Iowa (waiver request withdrawn) have envisioned making more sweeping changes through a 1332 wavier. Idaho is poised to submit a 1332 waiver request to expand Marketplace insurance to its Coverage Gap population and will submit a related Medicaid waiver to cover people with complex medical conditions in Medicaid. You can learn more about all state waiver requests here.
Path Forward in Texas
Texas could pursue a 1332 waiver for reinsurance to help stabilize premiums and insurer participation in the individual market. Legislation may be needed, and Texas would have to identify a source of state funding to supplement federal reinsurance funds. Texas could also work to develop a more comprehensive proposal to close the Coverage Gap like Idaho has done, though that would require the state to set up and administer a Marketplace, subsidy structure, etc.
Texas’ interim hearings focused on 1332 waivers are a good first step, but real progress would require an ongoing and robust conversation about how Texas can proactively shore up and possibly expand the individual market in 2019 and beyond. Several policy options exist. What Texans who can’t get insurance through their jobs, including those with pre-existing conditions, need is a commitment from state policymakers to foster an individual insurance market with stable premiums and accessible, quality coverage statewide.