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New insurance guidelines would undermine rules of the Affordable Care Act

Seema Verma, administrator of the Centers for Medicare and Medicaid Services, issued new guidance to states that would allow weakening of provisions of the Affordable Care Act. (Kate Patterson/for The Washington Post)

The Trump administration is urging states to tear down pillars of the Affordable Care Act, demolishing a basic rule that federal insurance subsidies can be used only by people buying health plans in marketplaces created under the law.

According to advice issued Thursday by federal health officials, states should be free to re­define the use of those subsidies, which began in 2014. They represent the first help the government ever has offered middle-class consumers to afford monthly premiums for private insurance.

States could allow the subsidies to be used for health plans the administration has been promoting outside the ACA marketplaces that are less expensive because they provide skimpier benefits and fewer consumer protections. In an even more dramatic change, states could let residents with ­employer-based coverage set up accounts in which they mingle the federal subsidies with health-care funds from their job or personal tax-deferred savings funds to use for premiums or other medical expenses.

If some states take up the administration’s offer, it would undermine the ACA’s central changes to the nation’s insurance system, including the establishment of nationwide standards for many kinds of health coverage sold in the United States.

Another goal of the ACA — often called Obamacare, the sprawling 2010 law that was President Barack Obama’s preeminent domestic accomplishment — was to concentrate help on people using the individual insurance market because they do not have access to affordable health benefits through a job. Prices were often out of control and discrimination against unhealthy people was more prevalent before the ACA imposed required benefits, prohibited insurers from charging more to people with preexisting conditions and created a federal health exchange and similar state-run marketplaces in which private insurance companies compete for customers.

The ACA health plans have been the only ones for which consumers can use the subsidies, which are tax credits designed to help customers with incomes up to the middle class — 400 percent of the federal poverty line — afford the premiums.

The new advice, called “waiver concepts” because they are ideas for how states could get federal permission to deviate from the law’s basic rules, stray from those goals. Significantly, they would allow states to set different income limits for the subsidies — higher or lower than the federal one — and, if a state wanted, base the amount of help on a resident’s age, not income.

In a statement Thursday, HHS Secretary Alex Azar said: “The Trump administration is committed to empowering states to think creatively about how to secure quality, affordable healthcare choices for their citizens.”

In a midday speech before a gathering of the conservative American Legislative Exchange Council, Seema Verma, the head of the Centers for Medicare and Medicaid Services (CMS), delivered a broadside against the health-care law in explaining the rationale for freeing states to rework health policies on their own. “It was such a mistake to federalize so much of health care in the ACA,” said Verma, who worked as a consultant to states before becoming one of Trump’s senior health-care advisers. While the law sought to make health coverage more available and affordable, she said, “the insurance problem has not been solved. For many Americans, it’s even been made worse.”

Two top House Democrats, Reps. Richard E. Neal (Mass.), ranking minority-party member of the Ways and Means Committee, and Frank Pallone Jr. (N.J.), his counterpart on Energy and Commerce, dispatched a letter Thursday to the secretary of HHS and two other Cabinet members in which they contended that the waiver concepts are illegal. They wrote that the suggestions “exceed the secretary’s statutory authority” and are “contrary to the plain language” of the ACA.

Neal and Pallone asked for answers to a series of questions to justify the substance of the changes and the method, which bypasses the usual process for changing regulations.

In urging states to consider the changes, CMS is renaming a provision of the law, known as 1332, which until now has mainly been used to give states permission to create programs to ease the burden on insurers of high-cost customers. CMS is switching the name to “State Relief and Empowerment Waivers,” emphasizing the administration’s desire to hand off health-care policies to states.

Larry Levitt, senior vice president of the nonprofit Kaiser Family Foundation, said the administration is using executive powers to let states “move in the direction that efforts [by congressional Republicans] to repeal and replace the law laid out last year.” He said some of the administration’s changes are even more profound than the failed efforts on Capitol Hill. For instance, a far-reaching amendment sponsored by Sen. Ted Cruz (R-Tex.) would have let insurers offer health plans that fall short of ACA rules. But it would not have let ACA subsidies be used for such plans, as CMS is now encouraging.

The concepts go beyond a variety of other steps Trump administration health officials have taken in the past year to weaken the ACA, which the president has opposed vociferously.

Until now, they have focused on bending the ACA’s rules for health plans. The administration has rewritten regulations to make it easier for Americans to buy two types of insurance that are relatively inexpensive because they do not contain all the benefits and consumer protections that the ACA typically requires.

The new steps go further by undercutting the basic ACA structure of the individual insurance marketplaces created for those who cannot get affordable health benefits through a job.

During a conference call with journalists, Verma said that no state would be allowed to retreat from a popular aspect of the ACA that protects people with preexisting medical conditions from higher prices or an inability to buy coverage.

She said that, in evaluating states’ proposals, CMS would focus on several considerations, including whether changes would foster comprehensive coverage and affordability and would not increase the federal deficit. She said federal officials would favor proposals that help, in particular, low-income residents and people with complex medical problems.

Verma reiterated an administration talking point that insurance rates have escalated since the ACA was passed and that health-plan choices within ACA marketplaces have dwindled. However, the current ACA enrollment period, lasting until mid-December, is different from previous ones because prices for the most popular tier of coverage have stabilized in many places and more insurers are taking part in the marketplaces.

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