Important Concerns about the State Waiver Process

On Tuesday evening, legislative language emerged regarding a proposal negotiated by conservative and centrist House Republicans. The proposal, which would further amend the Obamacare “repeal-and-replace” legislation, would allow states to waive some (but not all) of the law’s major insurance regulations.

Specifically, states could request a waiver to:

  • Beginning in January 2018, vary rating by age more than Obamacare (current law says that insurers cannot charge older individuals more than three times the premiums paid by younger enrollees);
  • Beginning in January 2020, set their own essential health benefits—the categories of services all insurance sold must cover; and
  • Beginning after the 2018 open enrollment period, permit insurers to vary premiums by health status and/or eliminate the mandatory 30 percent penalty for individuals who do not maintain continuous insurance coverage—provided that the state has established a program of actual or invisible high-risk pools, or some other mechanism through the bill’s Stability Fund to stabilize its insurance markets.

Some conservatives may have philosophical concerns with this approach, on several levels. It perpetuates a federal regulatory regime for health insurance, maintaining Obamacare as the default option. Not only does the bill take the position that “If you like your Obamacare, you can keep it,” it ensures that states will keep Obamacare unless and until they affirmatively do something to opt out of the law—a position that turns federalism on its head.

Over and above those philosophical concerns, two very practical matters lurk.

How Many States Will Actually Apply for Waivers?

While Washington has discussed this waiver concept for nearly a month, exactly zero Republican governors have publicly expressed an interest in applying for a waiver. Granted, details have been scarce to find, and frequently changing. But with Republicans occupying literally two-thirds of the nation’s governorships, the silence from state houses seems deafening.

Two plausible theories could explain the silence. First, in some states, governors need explicit authority from their legislatures to take an action like applying for a waiver. Unless and until their legislatures provide explicit authorization, governors cannot apply for anything, even if they wanted to.

With most legislatures heading out of session, and filing deadlines for the 2018 plan year fast approaching, it seems a stretch to think that many, if any, states will apply for a waiver for next year, even if the bill gets signed into law within a month. And with 36 governors’ races on the line next fall, how many governors will want to implement waivers for the 2019 plan year—thus guaranteeing Obamacare will be an issue in the last week of their campaigns, with open enrollment starting mere days before the November 6 plebiscite?

Moreover, on the political front, the waiver process essentially punts to the states a decision—repeal of the Obamacare regulatory regime—that Congress can, and should, have taken on its own. Why should anyone believe that states will request waivers from the Obamacare regulations, when it was Congress’ own lack of political will that shifted the decision to the states in the first place?

Can a Future Administration Deny Waiver Renewals?

Supporters of the waiver concept have attempted to reassure conservatives that the state waivers would be automatic from Washington, and could not be held up by a future Democrat Administration. And with respect to initial approval of waiver applications, the language released does seem fairly straight-forward: It allows states to self-certify they are applying to achieve at least one of several stated objectives, and deems waivers approved, allowing the Secretary of Health and Human Services (HHS) to deny them only in the case of an incomplete application.

But the language in subsection (4)(A), reproduced in full below, suggests that extending waivers once granted could be far from a sure thing:

No waiver for a State under this subsection may extend over a period of longer than 10 years unless the State requests continuation of such waiver, and such request shall be deemed granted unless the Secretary, within 90 days after the date of its submission to the Secretary, either denies such request in writing or informs the State in writing with respect to any additional information which is needed in order to make a final determination with respect to the request. [Emphasis mine.]

The bill text distinguishes between “an application submitted in paragraph (1)”—the initial waiver application—and a “continuation of such waiver.” That distinction, coupled with the permissive language given to the HHS Secretary—who has the power to “den[y] such request in writing,” for reasons not explicitly stated—could give a future Administration all the opening it needs to deny future waiver extensions.

A Better Solution

The above concerns notwithstanding, the waiver debate has put paid to the notion that Congress cannot repeal Obamacare’s major insurance regulations as part of a repeal bill passed through budget reconciliation. In other words, the question is not one of process, and what the Senate parliamentarian will allow, but one of political will—whether Republicans want to repeal Obamacare or not. Rather than punting those decisions off to governors, and keeping the law’s regulatory structure firmly intact in Washington, Congress should finish its job and deliver the repeal it has promised the American people for the past seven years.