State Innovation Waiver Policy Forum: Preliminary Policy Options for - - PowerPoint PPT Presentation

State Innovation Waiver Policy Forum:

Preliminary Policy Options for Further Consideration

AUDREY MORSE GASTEIER Director of Policy and Outreach EMILY BRICE Senior Policy Advisor on State Innovation Waivers November 25, 2015

Goals for Today’s Discussion

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 Reminder of policy evaluation framework  Preliminary policy options for further consideration  Proposed next steps  Discussion and open public comment

Policy Evaluation Framework

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Stakeholder Feedback on Sec. 1332

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 Themes included: − Desire for greater simplification for individuals, employers, issuers, and Commonwealth − Remaining concerns about affordability for individuals and employers − Interest in a period of stability before undertaking additional systemic reforms  Greatest interest in policy solutions to: − Simplify the experience for individuals and families, including Health Connector alignment with MassHealth and addressing dual individual mandates − Addressing emerging affordability pressures, including rising costs in employer-sponsored insurance − Stabilizing the small group market

Feedback ck Opportu tunit nities  5 public meetings  Open call for comments – received and posted 5 comments  Inter-agency and intra- agency dialogue

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Stakeholder Policy Areas of Interest

Issue sue Initi tial al Policy cy Areas for Further her Explor

• rat

ation

• n

Individual and Employer Mandates

• Streamline the federal individual mandate to address redundancy with state individual

mandate

• Streamline employer reporting of employee Minimum Essential Coverage

Metallic Tiers

• Develop state approach to components of metallic tiers and actuarial value requirements,

such as flexibility in permitted de minimus variation Small Employer Coverage Options

• Refine the choices available for employers and employees in the Small Business Health

Options Program (SHOP) Small Group Rating Timing

• Maintain quarterly rate filing for small group plans in merged market

Individual Eligibility

• Streamline eligibility and income rules between MassHealth and the Health Connector

Subsidy Mechanism

• Modify subsidy mechanism to buffer enrollees from complexities of premium tax credits

and reconciliation, while maintaining same subsidy level Family Affordability

• Measure “affordability” of employer-sponsored insurance in a manner that incorporates

total cost of family coverage Continuity of Coverage

• Modify approach to “grace period” for enrollees receiving premium tax credits to prevent

retroactive terminations of coverage

Element Description

State-Based Principles

Affordability of Coverage Creating a consumer-centric approach to ensuring that all Massachusetts residents avail themselves of available health insurance subsidies to make health care affordable to as many people as possible Appropriateness of Coverage Offering appropriate health insurance coverage to eligible individuals and employers by defining both the populations affected and the health benefits that meet their needs Continuity of Coverage Focusing on simplicity and continuity of coverage for members by streamlining coverage types, thereby making noticing and explanation of benefits more understandable, and also minimizing disruptions in coverage Integrated Eligibility Creating a single, integrated process to determine eligibility for the full range of health insurance programs, including Medicaid, CHIP, and premium tax credits and cost-sharing subsidies State Fiscal Responsibility Working within state fiscal realities, and making effective use of available federal funding Administrative Efficiency Creating an efficient administrative infrastructure that leverages technology and eliminates administrative duplication Health Systems Transformation Creating opportunities to achieve payment and delivery system reforms that ensure continued coverage, access and cost containment and improve the overall health of the populations served Precedent & Stability Building off the lessons learned since passage of Chapter 58 and ACA implementation to date, mindful of multiple years of implementation and transition for consumers and stakeholders

ACA 1332

Scope of Coverage Providing coverage to at least a comparable number of its residents as under Title I of the ACA Comprehensiveness of Coverage Providing coverage that is at least as comprehensive as the coverage defined in Section 1302(b) of the ACA and offered through Exchanges Affordability of Coverage Providing coverage and cost-sharing protections against excessive out-of-pocket spending that are at least as affordable as under Title I of the ACA Federal Deficit Neutrality Will not increase the federal deficit

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Framework for Policy Analysis

Timing Considerations

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Using evaluation framework, sorted policy issues by possible timing:  Issues for Phase 1 waiver application, possibly spring 2016: − Enjoy broad consensus; − Could be analyzed fully within a relatively brief timeframe − Do not require extensive implementation planning prior to application  Issues for Phase 2 waiver application, after spring 2016: − Require lengthier and more detailed stakeholder feedback; − Require extensive analysis; or − Require complex implementation planning prior to application  For some policy issues, additional analysis is needed to determine whether a Phase 1 strategy may be viable  Not aware of any federal limit on multiple waiver applications

Preliminary Policy Options for Further Consideration

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# 1: Small Group Quarterly Rating

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Should MA seek a waiver to maintain quarterly rating for small groups?

Element nt Description Context

• In states with a single risk pool for the small group market, issuers may file index rates: (1) annually, (2)

annually with quarterly trend updates, or (3) annually and quarterly. Issuers may enroll groups on a rolling basis throughout the year.

• In states with a merged market, issues may only file index rates: (1) annually, or (2) annually with quarterly

trend updates. Issuers may only enroll groups on a calendar year basis.

• MA is one of 3 merged markets (MA, VT, DC).
• Premium rates have been relatively stable, but recent upward trend (and possible changes to cost-sharing)

Issue

• Starting in 2018, issuers of small group plans can no longer file quarterly rates and sell small group plans on a

rolling basis. This issue is unique to MA and other merged market states.

• The change could disrupt the small group market, including: (1) higher premiums as issuers rate more

cautiously, and (2) fewer choices for employers during the year. Scope

• There were ~ 487,367 covered lives in small group plans in March 2015 (Source: CHIA).

Waivab vable le provis isions ions

• 42 USC § 18032, which permits states to merge their non-group and small group markets.

Po Possible le approac

• ach
• Seek a waiver to make a limited modification to the definition of the merged market, such that MA could

maintain a single risk pool for the merged market while maintaining select features unique to the small group market: quarterly rating and rolling enrollment.

(cont’d) Small Group Quarterly Rating

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Possibility for Discussion: Pursue for Phase 1 consideration, pending further analysis.

Element nt Description Framework Factors Opportunities tunities

• Could contribute to rate stability at a time when other items are in flux –

e.g., transition to ACA-compliance rating factors, implementation of the “Cadillac tax,” end of risk corridors and reinsurance

• Precedent & stability
• Affordability of coverage
• Could minimize coverage disruptions, e.g., shortened plan years for

groups with mid-year anniversary dates

• Continuity of coverage
• Could be implemented with relatively little administrative burden or cost

to state, issuers, or employers.

• State fiscal responsibility
• Administrative efficiency

Challe lleng nges es

• Could contribute to rate volatility if issuers adjust rates frequently based
• n market competition, new costs (e.g., Rx), etc.
• Affordability of coverage

Key Areas as for Further her Analy alysis is

• Confirm ability to craft waiver within permissible 1332 legal boundaries
• Analyze historical volatility in small group costs (including cost-sharing design)
• Model likelihood of further volatility in small group costs, with and without waiver
• Model impact of waiver on state budget (e.g., premium tax) and federal budget (e.g., expected take-up of

non-group insurance with subsidies)

# 2: Small Employer Options

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Should MA seek a waiver to refine offerings for small employers?

Element nt Description Context

• Employer payments toward group insurance are tax-deductible to the employer and exempt from federal

income and payroll taxes. Employers can give employees the option to make pre-tax contributions to the employee’s share of premium through a Section 125 cafeteria plan.

• Prior to the ACA, employers could also give employees the option to make pre-tax contributions to non-group
• insurance. Chap. 58 required employers with 11+ FTEs to make this option available to employees ineligible for

group insurance, or face a “free rider” surcharge.

• ACA and related guidance prohibited employers from contributing to non-group health insurance, on the basis

that these arrangements did not meet ACA requirements for group insurance. Issue

• Section 125 cafeteria plans and similar arrangements are attractive to small employers who have limited funds

available for group coverage, but want to contribute toward the costs of their employees health coverage.

• Without this flexibility and absent a mandate to offer coverage, small employers (particularly “microgroups”)

could consider shedding coverage. Under this scenario, their employees would seek non-group insurance through the Health Connector, and many could be eligible for federal and state subsidies. Scope

• In March 2014, there were ~ 530,759 small group lives. In March 2015, there were ~ 487,367 small group
• lives. Over this period, 89% of the small group membership decline was from employers with fewer than 25
• employees. (Source: CHIA).

Waivab vable le provis isions ions

• 42 USC § 18021 and 42 USC § 18024, which contain definitions related to the group market.
• 42 USC § 18031 and 42 USC § 18032, which contain definitions related to SHOP and QHPs.

Po Possible ble approac

• ach
• Seek a waiver to make a limited modification to the definitions of group health plan or related definitions, to

permit small employers to contribute to the costs of non-group insurance for their employees. Structure these contributions through the Health Connector to promote affordability for employers and employees, while preventing “double-dipping” on tax benefits.

(cont’d) Small Employer Options

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Possibility for Discussion: Defer for Phase 2 consideration, but begin to assess market demand for choices for small employers.

Element nt Description Framework Factors Opportunities tunities

• Could encourage small employers to continue to contribute to employee

insurance, in a way that reflects previous policy in Chap. 58 and current merged market

• Precedent & stability
• Affordability of coverage
• Could generate cost-savings over the long-term for the Commonwealth

and/or federal government, if tax benefits structured carefully to minimize use of subsidies

• State fiscal responsibility
• Administrative efficiency

Challe lleng nges es

• Could require significant implementation, e.g. change in state law and IT

changes to the Health Connector

• Precedent & stability
• Administrative efficiency
• State fiscal responsibility
• Could prove confusing to small employers and employees
• Could potentially increase the likelihood of “crowd-out” of small group

insurance

• Continuity of coverage
• Appropriateness of coverage

Key Areas as for Further her Analy alysis is

• Confirm ability to craft waiver within permissible 1332 legal boundaries
• Model ability to structure tax benefits to prevent “double-dipping” or increases utilization in subsidies
• Assess market demand and availability of other options to facilitate choice for small employers
• Model changes to affordability and changes to employer/employee behavior (e.g., take-up, crowd-out)
• Model impact of waiver on state budget (e.g., premium tax) and federal budget (e.g., expected take-up of

non-group with subsidies)

# 3: Approach to Actuarial Value

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Should MA seek a waiver to develop a state-specific approach to AV?

Element nt Description Context

• The ACA requires non-grandfathered plans in the merged market to meet specific actuarial value (AV) ranges

that correspond with metal-level tiers (bronze 60% +/- 2%, silver 70% +/- 2%, gold 80% +/- 2%, platinum 90% +/- 2%). Issuers must use a federal AV calculator provided by HHS to ensure compliance with these AV ranges – unless they can demonstrate they meet the AV ranges through “unique plan design.”

• HHS updates the AV calculator on an annual basis. These changes can have unpredictable results on a local
• level. For example, a plan with an identical plan design can have a different actuarial value from year to year.

Issue

• In MA, changes to the 2016 AV calculator meant that plan designs that were previously categorized as bronze

in 2015 had an average AV of 67% in 2016. Because these plans could no longer be sold as bronze, issuers had to lower the benefit level of their bronze offerings and the Health Connector had to de-standardize its product shelf, resulting in plans that offered an overall lower cost-sharing value to consumers.

• MA is uniquely impacted by the federal AV calculator because: (1) the Health Connector plays a role in product

design through the Seal of Approval, (2) MA issuers had a stable product line that was largely ACA-compliant prior to the ACA, and (3) MA plans tend to feature unique elements, such as multiple tiers of provider networks. Scope

• The AV calculator impacts 694,984 lives in the merged market. (Source: CHIA)
• In the Health Connector, 18% of unsubsidized QHP and QHP with APTC have a bronze-level plan. (Source: CCA,
• Oct. 2015)

Waivab vable le provis isions ions

• 42 USC § 18022 contains the requirement for plans to meet metal-level tiers, calculated according to the HHS

method. Po Possible le approac

• ach
• Seek a waiver from the requirement to use the federal AV calculator. Instead, develop a state-specific or

regional approach to a calculator, or seek flexibility from limited aspects of the federal approach.

(cont’d) Approach to Actuarial Value

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Possibility for Discussion: Defer for Phase 2 consideration, but continue to analyze state impact of federal AV calculator in interim.

Element nt Description Framework Factors Opportunities tunities

• Could provide greater ability for MA to hold the value of plans steady

from year to year, improving enrollees’ ability to understand and predict their overall costs of coverage

• Affordability of coverage
• Could provider greater ability for MA issuers to respond to local needs in

plan design

• Appropriateness of coverage

Challe lleng nges es

• Would require state resources to develop a state-specific approach
• State fiscal responsibility
• Administrative efficiency
• Would require issuer resources to transition to state-specific approach,

which may particularly impact issuers that offer in multiple states and potentially destabilize plan offerings

• Precedent & stability

Key Areas as for Further her Analy alysis is

• Analyze impact of recent federal guidance on AV of market for plan year 2017
• Model impact of state-specific calculator on plan design and subsequent take-up of coverage
• Model impact of waiver on state budget (e.g., costs of development) and federal budget (e.g., changes in

take-up of particular metal-levels that impact federal subsidies)

# 4: Shared Responsibility

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Should MA seek a waiver to streamline the individual or employer mandates?

Element nt Description Context

• MA law requires adults to have insurance that meets Minimum Creditable Coverage, if it is affordable per a

state schedule. Coverage providers send Form 1099 HC to residents with their coverage information, and also report this data to DOR. Residents send Schedule HC to DOR to demonstrate coverage or face a state penalty.

• ACA requires adults and children to have health coverage that meets Minimum Essential Coverage, if it is

affordable per a federal schedule. Coverage providers send Form 1095-A or Form 1095-B to residents with their coverage information and IRS, along with a Form 1094 summary. Residents use these forms to attest to MEC on their Form 1040 or face a federal tax penalty, and to verify the amount of any premium tax credit received/claimed on Form 8962. ACA also requires applicable large employers to report on the coverage

• ffered to each employee on Form 1095-C along with a Form 1094-C summary or pay a penalty.

Issue

• MA residents, employers, and coverage providers face a complex web of requirements under the state and

federal mandates. Sometimes these requirements are duplicative, but in other cases they are not: e.g., the state individual mandate is stronger in ways that may maintain MA’s high rate of insurance (96.3% in 2014, CHIA). While there have been efforts to reduce duplication already (e.g., layered approach to penalties), there are remaining concerns about administrative complexity. Scope

• Commonwealth has historically collected ~ $19 M/ FY in state individual mandate penalties. Based on TY

2014 data available in June 2015, MA residents claimed $5.38 M in federal penalties to offset state penalties. Waivab vable le provis isions ions

• 26 USC § 5000A contains the federal shared responsibility requirement for individuals.
• 26 USC § 4980H contains the federal shared responsibility requirement for applicable large employers.

Po Possible le approac

• ach
• Several models, including: Seek a waiver from Forms 1094 and 1095 and a special instruction on Form 1040.

Modify state individual mandate standards to meet or exceed federal standard (preserving areas where state is stronger), and modify state forms 1099 HCs and Schedule HCs to contain all information necessary to enforce the individual and employer mandates. Send all tax forms to state DOR, which could bundle information and federal share of penalties and send to IRS.

(cont’d) Shared Responsibility

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Possibility for Discussion: Defer for Phase 2 consideration, but begin probing federal capacity to accommodate flexibility now.

Element nt Description Framework Factors Opportunities tunities

• Could minimize duplicative reporting for residents, employers, issuers,

and the Health Connector

• Administrative efficiency
• Would preserve the state’s higher individual mandate standard to

promote continued insurance

• Precedent & stability
• Continuity of coverage

Challe lleng nges es

• Could require the development of state resources that duplicate existing

federal resources

• State fiscal responsibility
• Could add complexity for employers with employees in multiple states
• Precedent & stability
• Administrative efficiency

Key Areas as for Further her Analy alysis is

• Probe capacity for IRS to accommodate flexibility for states (e.g., openness to changes in forms/processes)
• Assess level of administrative burden/complexity caused by the current system (e.g., focus groups)
• Model ability of state tax forms/reporting mechanisms to fully substitute for federal
• Model impact of waiver on state budget (e.g., costs to DOR, financial impact on employers) and federal

budget (e.g., savings to IRS)

# 5: Health Connector Options

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Should MA seek a waiver to refine Connector’s eligibility/subsidy structure?

Element nt Description Context

• Prior to the ACA, Health Connector administered Commonwealth Care, a subsidy program for uninsured up to

300% FPL that aligned closely with MassHealth.

• ACA introduced a more complex subsidy structure (advance premium tax credits and cost-sharing reductions),

eligibility standards, and eligibility methodology (MAGI).

• MA preserved some elements of Commonwealth Care through additional state subsidies for those under 300%
• FPL. MA considered structuring this program through a Basic Health Program, but used a 1115 waiver instead

when federal BHP guidance was not available. Issue

• The current subsidy structure is difficult to administer and complicated for applicants and enrollees – e.g.,

financial exposure in clawback of APTCs, possible lock-out of coverage if file taxes late, inability to access federal tax information for appeals, 3-month grace period that can lead to retroactive terminations.

• The current eligibility standards and MAGI methodology do not fully resolve coverage gaps and inconsistencies

– e.g., different income standards, coverage gaps for immigrants, subsidy gap for working families Scope

• Health Connector enrollees have received ~ $235 M in federal subsidies to date in 2015, likely to rise to $295-

300 M by end of year (Source: CCA).

• 177,190 individuals are enrolled in non-group coverage through the Health Connector. 131,150 of these are in

Connector Care and 7,489 in subsidized QHP with APTC.

• Preliminary national data indicates 40% of those receiving APTCs received too few, and 50% received too much

(Source: IRS, July 2015 for tax year 2014). Waivab vable le provis isions ions

• 42 USC § 18032, 26 USC § 36B, and 42 USC § 18071 contain provisions related to marketplace eligibility and

federal subsidy eligibility and structure. Po Possible le approac

• ach
• Several models, including: Seek a waiver to sever links to the federal data hub and IRS, bundle and

redistribute federal subsidies, implement an alternative eligibility verification and program integrity model, and explore modifying MAGI rules to align more closely with MassHealth.

(cont’d) Health Connector Options

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Possibility for Discussion: Defer for Phase 2 consideration, but begin data collection and modeling now to inform later analysis.

Element nt Description Framework Factors Opportunities tunities

• Could offer opportunities to smooth churn between MassHealth and

Connector Care

• Continuity of coverage
• Integrated Eligibility
• Could reduce administrative costs over the long term and allow greater

state flexibility to make changes to health care systems moving forward

• Administrative efficiency
• Health systems

transformation Challe lleng nges es

• Could increase administrative and IT costs over the short-term as a

result of systems change

• Could expose Commonwealth to premium tax credit reconciliation risk
• Could require additional investment to address certain issues, e.g.,

family glitch

• State fiscal responsibility
• Administrative efficiency
• Could present new implementation challenges for Health Connector,

issuers, consumers, etc. just as systems are beginning to stabilize

• Precedent & stability

Key Areas as for Further her Analy alysis is

• Assess level of administrative burden/complexity caused by the current system
• Seek state-specific data on the level of premium tax credit reconciliation (to date, not available)
• Analyze ability of existing state programs to meet eligibility gaps (e.g., Health Safety Net)
• Model microsimulation of take-up and any impact on risk pool, costs, etc. Draw from BHP methodology and

available 1332 guidance to model ability of Commonwealth to manage subsidies within existing funds.

Proposed Next Steps

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Potential Timeline for Phase 1

• Oct. 2015
• Stakeholder dialogue
• Legislative authority to

apply

• Nov. 2015
• Identify policy areas for

consideration

• Analysis to develop

policy options

• Begin stakeholder

dialogue to narrow policy options

• Dec. 2015
• Stakeholder dialogue to

narrow policy options

• Identify policy direction
• Waiver narrative

drafting

• Actuarial & economic

analysis

• Budget and timeline

drafting

• Jan. 2016
• Draft application

available

• Public comment and

hearing

• Feb. 2016
• Second draft

application available

• Public comment and

hearing

• Mar. 2016
• Submit application
• Federal review and

public comment period (45 days + 180 days) begins

Under a two-phase timeline, MA could submit a limited-scope waiver by March 2016: MA could determine the intended direction of this waiver in December 2015.

Upcoming Stakeholder Opportunities

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Date Topic

Targeted Policy Forum # 2 Wed., Dec. 9, 9 AM – 10:00 AM

• Draft Policy Direction for Consideration

Draft Waiver Application Released Mid-January

• Two-week public comment period
• Hearing in Boston location

Revised Draft Waiver Application Release Mid-February

• Two-week public comment period
• Hearing in Western Mass location, likely Springfield

Federal review period (up to 7.5 months) Ongoing exploration of Phase 2 waiver possibilities

Written public comments are welcome throughout and will be posted online: StateInnovation@state.ma.us

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Questions? Ideas? Reactions?

Audrey Morse Gasteier Director of Policy & Outreach audrey.gasteier@state.ma.us 617-933-3094 Emily Brice Senior Advisor on State Innovation Waivers emily.brice@state.ma.us 617-933-3156

Supplemental Slides

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How to Be Involved

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To Participate and Comment:

 Add your name to the stakeholder distribution list, including language or disability accommodation requests  Request an individual meeting or discussion with your group  Submit written comments with your priorities, suggestions, and data/support (note: written comments will be posted) to StateInnovation@state.ma.us

To Stay Informed:

 Meeting information, materials and other information will be posted regularly to our dedicated State Innovation Process Website: www.MAhealthconnector.org/state-innovation-waiver

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Federal Guidance

 CCIIO 1332 Hub: www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation- Waivers/Section_1332_state_Innovation_Waivers-.html  ACA Sec. 1332: www.gpo.gov/fdsys/granule/USCODE-2010-title42/USCODE-2010- title42-chap157-subchapIII-partD-sec18052  Final federal rules: www.gpo.gov/fdsys/pkg/FR-2012-02-27/pdf/2012-4395.pdf

Massachusetts Resources

 Health Connector 1332 Hub: www.MAhealthconnector.org/innovation-waiver  BCBS Foundation/Manatt White Paper: www.manatt.com/uploadedfiles/content/5_insights/white_papers/coverageoption sforma.pdf

Key Resources