New ACA Waivers Could Subsidize Short-Term Coverage

Major changes in the way innovation waivers are vetted could set the stage for federal subsidies of non-ACA-compliant plans.

A drastic overhaul of the way the federal government handles innovation waivers under the Affordable Care Act opens the door for states to offer skimpier health plans with federal subsidies, potentially incentivizing a migration out of the markets for ACA-compliant plans.

Each state's waiver application would still need specific approval from the Centers for Medicare & Medicaid Services, but the Trump administration's announcement Monday that states will have far greater flexibility under the ACA's Section 1332 waivers than they have in the past signals a willingness to consider proposals the prior administration would have rejected.

Matthew Fiedler, PhD, a fellow with the Brookings Institution Center for Health Policy who served as chief economist of the Council of Economic Advisers during the Obama administration, said the changes outlined in the new guidance document could enable states to redirect federal subsidy dollars from ACA-compliant plans to cheaper alternatives that offer less coverage.

"Naturally, the more money the state redirects, the more money the healthier people in the short-term market have to work with and, correspondingly, the larger adverse impacts on the ACA-compliant market and people with greater health care needs," Fiedler told HealthLeaders in an email, warning that an exodus of healthy people from ACA-compliant plans would drive up premiums for those left behind and could result in a complete collapse of the ACA-compliant markets.

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