State ACA Waivers: A Bipartisan Solution
The administration's victory in the latest Obamacare case, King v. Burwell, has relieved Congress of the need to quickly repair or replace the Affordable Care Act. But that does not mean Congress should sit back and wait for the 2016 election and a Republican president to fix the law. In fact, Republicans may have an easy way to reach their policy objectives, in a manner that might attract bipartisan support and even a signature from President Obama.
Starting in 2017, "State Innovation Waivers" (laid out in Section 1332 of the ACA) will allow states to apply to the federal government for five-year renewable waivers from key provisions of the law. While some provisions, like guaranteed issue and community rating (ensuring that everyone can buy insurance at similar premium regardless of their health), cannot be waived, states can request exemptions from others, such as health-care exchanges, exchange subsidies, the individual and employer mandates, and minimum benefits requirements. Proposals are subject to vague limits that coverage must be as "comprehensive" and "affordable" as coverage without the waiver, that they must cover "a comparable number of residents," and that they must be budget-neutral for the federal government. But it appears that states will have wide latitude, subject to federal approval, to alter ACA provisions.
What if Republicans suggested making these waivers available in 2016 instead of 2017? Democrats could hardly argue that this would undermine the law — it is the law. Democratic supporters of Obamacare could claim victory; the ACA is here to stay. And Democrats who are anxious to let liberal states experiment with more far-reaching proposals than the ACA currently allows might bite as well. President Obama would have trouble justifying a veto of a bill that that does nothing more than advance a section of his major legislative accomplishment.
Making the waivers available a year early would allow states to discard the much-maligned employer mandate before it is fully implemented in 2016. The mandate, which requires employers with more than 50 employees to provide coverage to all employees who work more than 30 hours per week, has discouraged firms from expanding and prompted a switch from full- to part-time employment. States could enhance their companies' positions relative to competitors in other states and stimulate employment.
States could promote high-deductible plans coupled with health savings accounts to lower premiums and draw healthy young people into the market. If successful, this would increase the number of people covered and lower the overall risk pool, leading to lower premiums for everyone. States could also alter the ACA's generous "minimum essential benefits" requirements, which mandate some types of coverage that most people neither want nor need and that drive up premiums. States would resume their historic role in setting affordable insurance standards for their own citizens.
Some states might want to jettison the ACA's exchanges (currently run by either states or the federal government) and replace them with vouchers for individuals to buy ACA-compliant insurance on the open market. Subsidies that are currently available only on the exchanges could become available to everyone buying individual health insurance, both on and off the exchanges. This would increase choice, make insurance affordable for more people, and mitigate the disparate tax treatment between employer-provided and individually purchased insurance. If the ACA's income-based subsidies were replaced with a refundable tax credit that is age-adjusted but unrelated to income, it would simplify the administrative process and make the true cost of insurance predictable and transparent.
States like Vermont, meanwhile, could seek waivers allowing them to move closer to their dream of a single-payer system. Other states could offer coverage to more people than the current law allows.
States could also coordinate their Innovation Waivers with Medicaid waivers (also a product of the ACA)to fashion the Medicaid solution that works best for them. States that have thus far resisted Medicaid expansion could take federal expansion money as a block grant and use it for subsidies for people to buy private coverage. States that have embraced Medicaid expansion, but feel it doesn't go far enough, could fashion more generous Medicaid programs. Consolidating the two waivers could also help states limit the work disincentives that people face when rising income moves them from Medicaid to the insurance marketplace.
State Innovation Waivers are of course subject to the federal government's approval. The Obama administration is likely to be less flexible in 2016 than a Republican administration could be in 2017. Nevertheless, the administration has been open to granting other types of waivers, and there is bipartisan support for changing some ACA provisions. Barring complete intransigence by the administration, states could prepare proposals during the remainder of 2015 and waivers could be approved and implemented early next year.
State Innovation Waivers are one of the few ACA policies with bipartisan support. They give states considerable flexibility in deciding how to achieve the ACA's goals of expanding access to affordable care within their borders. Allowing states to experiment with different approaches will create a natural laboratory in which to assess what works and what does not. Moving implementation up to 2016 will give ACA critics in both parties an opportunity to demonstrate their approaches and give the American people a greater say in determining their health care.
Joel Zinberg, a visiting scholar at the American Enterprise Institute, is a practicing surgeon at Mount Sinai Hospital and an associate clinical professor of surgery at the Icahn School of Medicine.