Health Reform 2.0: California Starts Sec. 1332 Waiver Discussions

As part of California’s ongoing efforts to implement and improve upon health reform, last Tuesday Covered California and the California Department of Health Care Services convened an exploratory discussion of options for California under Section 1332 of the Affordable Care Act (see the panelists’ slide deck and all materials here). Under Section 1332, states may seek a waiver from the federal government to pursue innovative approaches to achieving the primary goals of the ACA. To qualify for consideration under Sec 1332, proposal(s) should cover at least the same number of people with the same level of benefits and affordability and consumer protections and without increasing the federal deficit.

Recent federal guidance clarifying the Section 1332 option limits the state’s options even further. As presenter Heather Howard of the Robert Wood Johnson Foundation phrased it, Sec. 1332 is *not* “a get out of ACA free card.” State officials have added their own stringent criteria to the mix, for example that proposals coming from California will be revenue neutral to the state general fund. To go forward, proposals should be directly related to Covered CA’s mission; achieve cost savings or administrative simplifications for enrollees and potential enrollees and for the health plans and providers Covered CA contracts with; should improve existing processes, rather than redesign them.

To help frame the options Covered CA and HHS officials reminded us, as they have before, that they have embraced the ability they already have—even without Sec. 1332—to innovate as an “active purchaser” exchange—and Covered CA is committed to going even further as arguably the most innovative exchange in the U.S. through payment and delivery system reforms.

Where there may be room to innovate, federal officials will look carefully at pre- and post-waiver assumptions in terms of the changes that would have happened (or could happen) anyway or that resulted from any sec 1332 waiver initiative. On this point California comes to the Sec 1332 process with a distinct disadvantage: Since California already has an active purchaser exchange, and with significant savings (to consumers and the health care system) to show for it, we may not be able to “claim credit” for savings tied to the current active purchaser status of our exchange to meet budget neutrality requirements. We may need to find other sources of savings to finance some of the worthy options presented on the panel.

Kaiser Family Foundation statistics and survey findings on the remaining uninsured, presented by Larry Levitt, underscore the need both for further affordability assistance, particularly in a high cost of living state like California and for coverage solutions for the undocumented, who comprise 24% of California’s remaining uninsured, though only 16% of all states’ remaining uninsured. Many remaining uninsured Hispanics (50%) worry that signing up for coverage will draw attention to their immigration status.

The Kaiser findings helped frame the Sec. 1332 opportunities for California, as presented by Lucien Wulsin, outgoing Executive Director of Insure the Uninsured Project, and Health Access Executive Director Anthony Wright. Wulsin would like to see solutions to the family glitch problem and more affordable plan choices. Healthy San Francisco, he says, may be a model in terms of leveraging employer contributions to help pay the premiums for those eligible but not enrolled or to help cover flex workers or dependents of small business employees (see ITUP’s paper for details). Wulsin sought to distinguish between short term opportunities and long term visions of Sec 1332 initiatives aligned with delivery system reforms, including those integrated with changes in the employer-sponsored coverage market.

Wright further emphasized the distinction between things we could do now, like the proposal pending in SB 10 to allow the undocumented to buy in to Covered CA using their own money, and more complicated affordability measures for which policy development and modeling will take time. A Section 1332 waiver can move in phases, and California would be in good company, with Massachusetts, if it took a more phased approach. If in fact Covered CA is reaching some sort of plateau on enrollment, then Sec. 1332 initiatives to focus on affordability will be needed. The feasibility of the efforts to find savings in the health system, and then apply them to greater affordability assistance (such as improved cost-sharing), depends on how the federal government will analyze the financing, including the budget neutrality implications of any positive impacts on enrollment in general. (Click here to read Health Access’s discussion paper).

What Happens Next

Email comments on Sec. 1332 options to Covered CA by March 1 (tomorrow!): 1332@covered.ca.gov.

Comments should speak to what the panelists proposed and how they or other ideas address the federal guardrails and Covered CA Board guidance.  Also be specific, for example: Is this a near term or long term concept?  Also: Recognize the new reality that a new presidential administration may have different guidance on Sec. 1332.

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