1332 Waivers: A New Opportunity to Reduce Costs and Increase Access of Comprehensive Health Coverage

High Health Care Costs in Texas

The approaching Supreme Court hearing on the Affordable Care Act case and the COVID-19 crisis remind us of the value of affordable health insurance coverage and the peace of mind it brings to Texans and their families. The COVID-19 crisis has also provided many examples of problems with health care costs that plague Texas, such as questionable billing practices and price gouging. The New York Times, ProPublica, Politico, and other media outlets repeatedly turn to Texas when reporting on the worst examples of these problems.

Every Texan deserves access to affordable, high-quality health coverage, but health care is unaffordable for too many families. As the costs of health care services such as emergency care, inpatient hospital stays, medical screenings, and prescription drugs continue to increase, the price of insurance has to go up to cover those costs. The problem of high costs is worse in Texas than in other states. Now is the time for Texas to focus on bringing down health care costs for everyone, regardless of how much money they make, whether they have pre-existing conditions, or where they get their care and coverage. We need to focus on using proven, free market solutions to improve what’s working and to fix what’s broken to achieve affordable, high-quality health coverage for every Texan.

1332 Waivers & the Texas Health Insurance Pool

While the ACA remains in place, section 1332 state innovation waivers present a vital opportunity for states to pursue unique solutions to improve access to health care in new and better ways. Texas can take advantage of this opportunity to localize health care, reduce time spent on administration, lower the cost of care, and improve access to health insurance for families and small businesses.

Since its passage in 2010, the ACA has improved the health care system by protecting patients with pre-existing conditions, delivering affordable coverage options in the individual and group markets, reducing the uninsured by expanding Medicaid, and lowering costs for seniors on Medicare. The ACA has provided almost 2 million hard-working Texans the ability to purchase their coverage through the individual market. Prior to the ACA, Texas had a limited individual health insurance market—before 2014, only about 700,000 Texans were covered through purchased insurance in the individual market each year. Health plans could deny coverage based on medical history, did not have to cover pre-existing conditions, and had the option to exclude maternity costs. Texas maintained the Texas Health Insurance Pool (a “high-risk pool”) to help individuals with pre-existing conditions buy health coverage, but it did not work for most Texans. While it did make coverage available, it had significant limitations. In its last year (2013), the high-risk pool covered only 28,000 Texans, was extremely expensive for enrollees with average premiums of over $600 a month, and imposed a significant tax on consumers through assessments on health insurance in the state. The pool had a three month waiting period and did not always provide coverage for pre-existing conditions.

Cost of Health Coverage in Texas (2016 - 2020) 

The ACA dramatically changed the individual market in America and in Texas. The size of Texas’ individual market more than doubled following adoption of the ACA, which provided comprehensive coverage for Texans who enrolled at monthly premiums that were substantially lower than those previously available in the Texas high-risk pool. Any Texan can purchase health coverage in the individual market regardless of age, pre-existing conditions, or health status.

Number of Texans who Purchased Insurance on Individual Market and Exchange (2010 - 2018)

While the ACA has helped get more Texans covered, the state continues to face challenges related to providing access to affordable, quality, sustainable health coverage. Texas currently has the highest rate of uninsured people in the country — and that number is still rising. Most uninsured Texans are members of low-income working families. In Texas, individuals whose family incomes are between 100% and 400% of the federal poverty level (FPL) are eligible for federal subsidies (tax credits) that substantially lower their premiums in the individual market. As a result of these subsidies, premiums are about $70-$80 a month. But Texans whose incomes are below 100% of the FPL fall within the “Coverage Gap,” meaning they are not eligible for any subsidies and are forced to pay full premiums, which are around $440 a month. These uninsured Texans who are not eligible for the ACA’s subsidies (tax credits) are finding the full cost of premiums to be high and, for some, unaffordable.

With rising unemployment and uncertainty around the ACA, it is more important than ever for us to ensure Texans have access to a stable and affordable individual health insurance market. Texas has several opportunities to innovate in the individual market in ways that could lead to more affordable coverage, increased choice, and more competition.

TAHP recommends that the Texas Legislature consider the following four opportunities to reduce the cost of premiums for individuals and families directly purchasing health coverage in Texas:

1. Establishing a State-Based Exchange in Texas. States that operate their own exchanges have somewhat stronger enrollment (both on and off the exchanges) and lower premiums than states using the federally-facilitated marketplace (FFM). In 2018, The Commonwealth Fund found that in the individual market, insurers projected premiums that averaged 21% higher in states using the federal marketplace than in those running their own. 
2. Reducing the Cost of Health Coverage Through Reinsurance (1332 Waiver.) The availability of 1332 waivers, which allow states to waive key portions of the ACA, gives Texas the opportunity to make changes that increase the stability of the individual health insurance market, encourage competition, and increase affordability. The main obstacle Texas has faced to requesting and implementing a 1332 reinsurance program has been the cost, but Pennsylvania recently received federal approval for an innovative solution to this problem.
3. Right-Sizing Subsidies (Tax Credits.) Texas should study policy options that right-size these subsidies or expand access to subsidies so that working Texans below the poverty limit are not put at a disadvantage. It makes no sense that Texans above the poverty limit receive substantial government support to purchase health coverage in the individual market while working Texans below the poverty limit receive no support.
4. Helping Small Employers Use HRAs to Provide Employee Coverage. Last summer, a federal rule was adopted that allows employers of all sizes that do not offer a group coverage plan to fund a new kind of HRA, known as an individual coverage HRA (ICHRA). Employees can use this employer-funded HRA to purchase individual health coverage. We recommend the Legislature codify the availability of these new HRAs. Additionally, Texas should recognize and actively promote ICHRAs to Texas employers as an option for providing their employees with critical access to affordable coverage. Texas should also consider any other options that will incentivize or encourage small employers that have not previously provided coverage to provide these new HRAs. 

Learn More

If you want to learn more about these opportunities and what is happening to health coverage in Texas, read our interim charge recommendations to the Texas House insurance committee and register for TAHP’s Texas Covered 2020 virtual conference to listen to our featured forum presentations on these topics:

October 22: The Rise of ICHRAs: How a New Form of Health Care Savings Account Increases Access to Health Coverage

October 22: How Will COVID-19 Scramble the Health Insurance Enrollment Mix?

November 19: Lessons from Pennsylvania on Reducing the Cost of Health Coverage: Insights from the Keystone State on 1332 Waivers and Running Its Own Health Insurance Exchange

November 19: A Conversation on the Role of Marketplaces in Re-Envisioning Commercial Health Insurance Coverage Post-COVID-19