Over the past four years, thirteen states have received approval to implement State Innovation Waivers (renamed “State Relief and Empowerment Waivers” by CMS in October 2018) under the authority of Section 1332 of the Affordable Care Act. Twelve of those states (all except Hawaii) leveraged Section 1332 to implement reinsurance programs aimed at reducing premiums.
Reinsurance programs were categorized as a “risk stabilization” waiver concept by CMS in the agency’s November 29, 2018 State Relief and Empowerment Waiver Discussion Paper. That paper provides four unique waiver concepts states could consider adopting to provide alternative features to their health insurance marketplaces.
Reinsurance programs reduce premiums by providing separate funding to carriers for certain high-cost claims. This permits carriers to establish premiums for individual market risk pool plans at a reduced rate. As a result, reinsurance programs reduce federal spending on Advance Premium Tax Credits (APTCs), which are calculated based on the premium for the Second Lowest Cost Silver Plan in the state. For this reason, states may access federal pass-through funding to partially finance the cost of a reinsurance waiver.
This article takes a closer look at a program model, referred to as a State Complex Care Plan (SCCP), that CMS introduced in its July 5, 2019 “Blue Paper” as another specific risk stabilization approach available to states. CMS describes SCCPs as taking risk stabilization a step further than reinsurance by attempting to reduce the total cost of the enrollee’s care, not just financing the cost of care differently.
CMS envisions an SCCP to function as separate state-authorized healthcare coverage program available exclusively to individual market enrollees with chronic conditions or other complex care needs. Enrollment in an SCCP is intended to be voluntary. An SCCP’s status as a state-authorized program, not an insurance product, would permit enrollment to be limited to those with complex care needs. Members would choose an SCCP instead of a Qualified Health Plan (QHP) based on its customized plan features and/or reduced premiums or cost sharing.
An SCCP would operate outside of the individual market risk pool and could be administered directly by a state or through a third-party administrator. To make the plan financially affordable and attractive for those with high-cost conditions, states would have the option of implementing a separate state subsidy structure to reduce premiums and cost sharing for enrollees. State funding to support an SCCP would reduce federal spending on APTCs because an SCCP would improve the overall risk profile of the individual market. Based on the resulting reduced APTCs (in the same manner APTCs are reduced by virtue of reinsurance programs), a state could seek federal pass-through dollars to partially finance an SCCP.
In the same July “Blue Paper,” CMS underscores the benefits of a state-authorized program for those with complex care needs. Operating SCCPs outside of the individual market would provide care management and cost containment opportunities similar to those employers have pursued for years in the self-funded insurance market. This includes direct contracting with providers, implementation of reference-based pricing, and care navigation services to assist consumers with effective management of complex medical events.
CMS further provides three options for states to consider for administering an SCCP. Under the first option, states would maintain the same subsidy structure that is currently authorized in federal law for Marketplace consumers with incomes less than four times the federal poverty level. This would provide significant administrative simplification for states. However, this approach does not provide additional financial incentives to attract consumers into the SCCP. In this scenario, consumers would voluntarily enroll in the SCCP based entirely on the customized nature of the plan.
The second option permits states to retain the existing federal subsidy structure for all non-SCCP enrollees who purchase a QHP in the individual market. However, states would establish a unique subsidy structure for their SCCP that could include additional financial incentives to those who enroll.
Finally, under the third option, states would effectively implement a state-specific premium subsidy program across the entire individual marketplace. State-specific subsidies are another one of the four 1332 waiver concepts identified by CMS in the November 29, 2018 State Relief and Empowerment Waiver Discussion Paper. While this option provides states with the most flexibility, and federal pass-through funding is available because the state subsidies would replace APTCs, it also presents the highest administrative burden, requiring states to design and develop an information technology system to award, pay, and reconcile new subsidy amounts.
A possible challenge for states in implementing an SCCP is the new state funding commitment that would likely emerge, especially if subsidy amounts are more generous than those currently awarded for the same consumers in the Marketplace. At the same time, an SCCP could become a focal point for state public health efforts with targeted diseases such as asthma, diabetes, and chronic obstructive pulmonary disease (COPD). To that end, state public health funding may be a source for supplementing federal pass-through funding to alleviate the need for new state appropriations to support an SCCP.
In many ways, SCCPs mirror the policy goals of Patient Centered Medical Homes authorized under Section 1945 of the ACA. The program model targets chronic disease care management and provides an administrative structure aimed at reducing healthcare costs and improving care outcomes. An SCCP is another option for states seeking customized solutions to address state healthcare needs.