CMS Requests Information To Assess Georgia’s ACA Section 1332 Waiver

On June 3, 2021, the Centers for Medicare and Medicaid Services (CMS) sent a letter to Governor Kemp of Georgia requesting an updated analysis of the second phase of Georgia’s waiver under Section 1332 of the Affordable Care Act (ACA), known as the Georgia Access Model. Federal officials believe that the baseline included in Georgia’s application is no longer accurate given recent increases in marketplace enrollment and the projected impact of the American Rescue Plan Act. These changes, CMS writes, warrant further evaluation and assessment of whether the waiver satisfies Section 1332’s guardrails.

Georgia’s analysis (and any other information that the state wants to submit) is due by July 3. After that, federal officials will publicly post the updated analyses and provide a 30-day federal public comment period. Stakeholders can provide comment on the analysis during this time. These additional comments will help inform further evaluation of the Georgia Access Model and whether it meets federal requirements. If federal officials find that the Georgia Access Model no longer meets these guardrails, the Biden administration could suspend or terminate the waiver so long as it follows certain procedures.

Background

Section 1332 allows states, with approval from the Departments of Health and Human Services (HHS) and Treasury, to waive some ACA requirements. These “state innovation waivers,” which became available in 2017, are designed to enable states to pursue alternative coverage approaches in the individual and small group markets that are consistent with the goals of the ACA. To help fund these efforts, the federal government can “pass through” the money that it would have spent on premium tax credits, cost-sharing reductions, and small employer tax credits to a state. Waivers can extend for up to five years and may be continued by a state, subject to federal disapproval.

States must meet certain procedural and substantive standards to be granted a waiver. There must be a state and federal opportunity for public comment and a set timeline for review by federal officials. And federal officials can grant a Section 1332 waiver only if a state demonstrates that their proposal meets certain “guardrails” outlined in the statute. These guardrails require a waiver proposal to 1) provide coverage that is at least as comprehensive as ACA coverage ( “comprehensiveness” guardrail); 2) provide coverage and cost-sharing protections that are at least as affordable as ACA requirements (“affordability” guardrail); 3) provide coverage to at least a comparable number of residents as under the ACA ( “coverage” guardrail); and 4) not increase the federal deficit.

Dueling Interpretations Of Section 1332

Congress instructed HHS and Treasury to promulgate regulations to implement Section 1332 within 180 days of enactment of the ACA. The Departments finalized a rule in 2012, but this rule was limited to implementing the procedural requirements of Section 1332 and did not address the substantive guardrails beyond restating the statutory criteria. The preamble to that rule suggested that the Departments would issue future guidance to develop the “substantive component” of the waiver approval process. The Obama administration did so in interpretive guidance issued in 2015. This guidance provided additional information about the requirements that must be met, the federal application review procedures, the calculation of federal pass-through funding, analytical requirements, and operational considerations.

In 2018, the Trump administration replaced the 2015 guidance and adopted its own interpretation, which many argued was inconsistent with Section 1332. The 2018 guidance allowed waivers where only some coverage (instead of all coverage) satisfied the comprehensiveness and affordability guardrails. Under this view, waivers could be approved even if only some coverage under the waiver was as comprehensive, as affordable, and as available as coverage provided under the ACA.

The 2018 guidance also allowed waivers to expand access to plans that do not have to meet the ACA’s requirements, such as short-term plans. The Trump administration encouraged the adoption of its preferred waiver policies by releasing new tools, such as waiver concepts, checklists, and data briefs. It ultimately codified the 2018 guidance’s interpretations into regulations in the final 2022 payment rule, although that part of the rule is expected to be amended soon through new rulemaking.

Georgia’s Waiver

Despite the Trump administration’s encouragement, most approved Section 1332 waivers have been relatively narrow. Of the sixteen currently approved waivers, fifteen are for state-based reinsurance programs. Though some states have submitted broader waiver requests, many have been deemed incomplete or withdrawn by state officials.

Only one state, Georgia, received approval for a broader waiver to restructure its individual market. Georgia’s two-phase waiver was approved on November 1, 2020. The initial waiver application was submitted in December 2019, deemed partially complete in February 2020, overhauled in July with only 15 days of public comment, deemed fully complete in August 2020, apparently supplemented in October 2020, and approved in November 2020.

Georgia was approved to 1) establish a state-based reinsurance program beginning with the 2022 plan year; and 2) eliminate the use of HealthCare.gov (without transitioning to a state-based marketplace) beginning with the 2023 plan year. This second phase of the waiver, which eliminates HealthCare.gov, is known as the Georgia Access Model and would make Georgia the only state without a single one-stop-shop marketplace for consumers in need of private health insurance. Instead of a single marketplace such as HealthCare.gov, consumers would transition to a decentralized enrollment system that uses web-brokers and insurers. Georgia believes a decentralized system would do a better job reaching uninsured residents, asserting that web-brokers will be more incentivized to enroll people in coverage.

The $399 million reinsurance program was expected to reduce premiums by about 10 percent on average (relative to what premiums would have been in the absence of the waiver) and increase enrollment by 0.4 percent for 2022. The Georgia Access Model was estimated to increase individual market enrollment by about 25,000 individuals, most of whom (21,250 enrollees) would be eligible for marketplace subsidies. Georgia believes this would further reduce premiums by about 3.5 percent. The state-required funding for both phases of the waiver in the 2023 plan year was estimated to be $153 million and funded through a state-level user fee (previously the user fee for HealthCare.gov) and state general revenue funds.

Approval of Georgia’s waiver was controversial. Some argued that Georgia’s proposal fails to meet the statute’s procedural and substantive guardrails and thus should not have been approved. Commenters almost uniformly opposed the waiver and raised concerns about the potential for coverage losses, the steering of consumers to non-ACA plans, and consumer confusion during and after the transition away from HealthCare.gov.

Georgia’s Waiver Approval

Georgia’s waiver approval suggested that federal officials (even under the Trump administration) were concerned about a transition away from HealthCare.gov, operational readiness, and ongoing compliance with Section 1332’s statutory guardrails. An entire section was devoted to the transition from HealthCare.gov. Here, the federal government laid out an array of requirements that Georgia must meet regarding notices, an outreach and communications strategy, and the auto-reenrollment process, among other topics. Georgia must submit quarterly reports to aid evaluation of its compliance with Section 1332’s statutory guardrails, a budget report, and an operational report on its project implementation timeline. Georgia’s waiver approval also included many standards for annual, quarterly, budget, and operational reports. One of the terms and conditions for an annual report included a catch-all provision for “[a]ny other relevant data or information requested by the Departments.” And Georgia must comply with operational readiness reviews and open enrollment readiness reviews.

To the extent that Georgia does not comply with these requirements, or if the Departments conclude that the waiver does not meet Section 1332’s requirements, the state’s waiver can be suspended or terminated. Federal officials always have the authority to “suspend or terminate a waiver, in whole or in part, any time before the date of expiration, if the Secretaries determine that the state materially failed to comply with the terms.” This authority is clear and outlined in Section 1332 regulations, the 2018 guidance, and the terms of the waiver approvals themselves.

In this section, Georgia’s waiver agreement included a unique provision that limits the Departments to suspending or terminating Georgia’s waiver “only if” Georgia “materially failed to comply” with the STCs or failed to meet the statute’s substantive guardrails. It also reflects some heightened procedural requirements if the Departments reach such a conclusion. Georgia must be allowed to challenge any determination that a change to state law “materially impacts” the ability to satisfy the statute’s guardrails. And, if a federal evaluation reveals that the waiver does not satisfy Section 1332’s guardrails, the Departments must submit a report to the state with recommendations to bring the waiver into compliance.

To suspend or terminate the waiver, the Departments would notify Georgia, give an effective date for suspension or termination, and provide its rationale. Georgia would have 90 days to respond, with the possibility of providing a corrective action plan to come into compliance with the waiver conditions. Georgia must also be given an opportunity to be heard and challenge the suspension or termination.

Legal Challenge To Georgia’s Waiver Approval

Patient advocates—Planned Parenthood Southeast and the Feminist Women’s Health Center—sued the federal government to challenge the Trump administration’s approval of Georgia’s waiver. The lawsuit was filed on January 14, 2021 in federal district court in DC and was assigned to Judge James E. Boasberg, who has presided over state waiver disputes before. Judge Boasberg invalidated several Trump administration approvals of state Medicaid waivers with work requirements.

The lawsuit alleges that the Trump administration’s 2018 guidance and approval of Georgia’s waiver are contrary to Section 1332, exceed the scope of the agencies’ authority (by allowing states to waive non-waivable provisions of the ACA), and are arbitrary and capricious. The plaintiffs also argue that the waiver approval failed to satisfy procedural requirements under the ACA and the Administrative Procedure Act. Here, the plaintiffs note that Georgia went through four iterations of its waiver application, that its application was incomplete, and that only eight comments (less than one half of one percent) of the 1,826 total comments submitted during the final federal public comment period were in support of the Georgia Access Model.

The Georgia Access Model violates all four statutory guardrails because it will “drastically underperform the ACA,” according to the plaintiffs. The waiver could lead to net enrollment losses, which violates the coverage guardrail, and could lead some consumers to enroll in non-ACA plans with benefit gaps, which violates the comprehensiveness guardrail. Consumers would also have to pay higher premiums and out-of-pocket costs through higher broker commissions, reduced competition, and adverse selection against the ACA markets, which violates the affordability guardrail and potentially the deficit neutrality guardrail (since higher ACA premiums mean higher federal outlays in the form of premium tax credits).

The plaintiffs asked the court to vacate Georgia’s approved waiver and the 2018 guidance and declare that they are unlawful. They also asked that the federal government be enjoined from taking further action on Georgia’s waiver or considering other waivers under the 2018 guidance. The plaintiffs did not sue Georgia, but Georgia asked—and was allowed—to intervene in the challenge to its waiver approval.

Briefing is ongoing, and deadlines have been extended in response to requests from the parties. Currently, the government’s response to the plaintiffs’ complaint is due on June 24. This response was previously due on May 25, but the Department of Justice asked for additional time to consult with new agency leadership under the Biden administration.

Biden Administration Requests Additional Information

That brings us to the letter issued to Georgia by CMS on June 3, 2021. CMS, on behalf of both HHS and Treasury, asks Georgia to submit updated actuarial and economic analyses of the baseline for the Georgia Access Model. CMS wants an updated analysis that reflects recent changes to federal law and policy and will use this information to evaluate whether the waiver satisfies Section 1332’s guardrails.

Georgia’s updated analysis must include a detailed 10-year budget plan, a coverage assessment, and data and assumptions used to show that the Georgia Access Model complies with the Section 1332 guardrails. This includes information on the age, income, health expenses, and current health insurance status of those affected by the waiver, the degree of job-based coverage in the market, cross-tabulations of these variables, an explanation of data sources and quality, and an explanation of budget-related assumptions (such as individual and employer participation rates, behavioral changes, and premium and price effects).

This additional analysis (and any other information that Georgia wants to submit, including an amendment request) is due by July 3, after which CMS will hold a 30-day federal comment period. Once the Departments complete their review of the analysis and comments, federal officials will determine whether the Georgia Access Model satisfies the Section 1332 guardrails (or not).

The Rationale

CMS is asking for additional information in light of “changes in both health care priorities and policies, as well as federal law.” The letter cites President Biden’s executive orders on the ACA and racial equity, ACA enhancements in the American Rescue Plan Act, the broad COVID-19 special enrollment period, and greater investments in advertising and outreach for HealthCare.gov. In requesting additional information, CMS cites the Departments’ authority to perform continued monitoring and oversight as well as the discretion to amend, suspend, or terminate a waiver.

CMS is particularly interested in the impact of recent increases in marketplace enrollment in Georgia, since current enrollment is much higher than when the state applied for the waiver in 2020. Marketplace enrollment in Georgia increased by 11 percent during the 2021 open enrollment period (relative to 2020), and there were more than 67,000 new plan selections in Georgia in the first 10 weeks of this year’s COVID-19 special enrollment period. These numbers will surely climb as the special enrollment period continues through August 15 and enrollment is bolstered by enhanced subsidies under the American Rescue Plan Act.

Prior lower enrollment data (and the fact that many uninsured Georgians already qualified for subsidized marketplace coverage) was a core part of Georgia’s rationale for pursuing the Georgia Access Model and its actuarial analysis. Because this data has changed since Georgia’s application, CMS wants an updated analysis of the waiver’s impact.

(A reference to the American Rescue Plan Act might seem odd since the law’s enhanced premium tax credits expire at the end of 2022 while the Georgia Access Model would go into effect beginning with the 2023 plan year. Said another way, the enhanced premium tax credits—if not extended—would not overlap with the Georgia Access Model. But the Congressional Budget Office estimated some spillover effect on 2023 coverage, concluding that “some of the estimated increase in enrollment would persist beyond 2022” and that the law would extend coverage to about 400,000 uninsured people in 2023.)

CMS is also concerned that enrollment shifts could reduce incentives for agents, brokers, and insurers to enroll a smaller base of remaining uninsured consumers. This bears on a key assumption made by Georgia in its application: the private sector would be incentivized to invest in outreach and advertising without competition from HealthCare.gov. These outreach efforts, CMS noted, were to be funded by “uncertain and unquantified private sector efforts, not by the state.” Given the increased federal investment in advertising and outreach for HealthCare.gov—$100 million for the current special enrollment period and $80 million for the navigator program for 2022—CMS questions whether the private sector outreach intended by Georgia will still be comparable to investments that will take place under the Biden administration and how that could impact the waiver and baseline assumptions.

The letter suggests that the Biden administration is reviewing all state Section 1332 waivers in light of federal changes. But federal officials do not have similar concerns that waivers for state-based reinsurance programs (which make up nearly all of the approved waivers under Section 1332) cannot meet Section 1332’s statutory guardrails. And the Departments already agreed to recalculate 2021 federal pass-through funding for state-based reinsurance programs. As such, CMS is not concerned about phase one of Georgia’s waiver and focuses only on the Georgia Access Model.