Policy & Practice June 2015

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By Jan Ruff

State Transformation Opportunities for Health Insurance Coverage

W hen the Affordable Care Act (ACA) was signed into law five years ago, a primary objective was to increase affordable health insurance coverage. The federal and state gov- ernments, and more specifically state health and human service agencies, have had their share of successes in achieving this, but they’ve also encountered struggles and challenges in meeting the law’s requirements— and this is expected to continue into the future. One of the provisions in the ACA that has the potential to transform the way some states insure their popula- tion is Section 1332, also known as the 2017 State Innovation Waiver. It provides state leaders with the incen- tive and means to re-imagine their Medicaid, Children’s Health Insurance Program (CHIP), and Health Insurance Exchange programs in ways that better reflect their policy goals, state demo- graphics, budgetary constraints, and political culture. In many ways, the 2017 State Innovation waiver becomes the new frontier for state-based health insurance transformation that directly impacts the processes and technolo- gies state health and human service agencies use today. Though 2017 may seem a bit far away, the path toward achievement of such waivers is complex and involves significant policy, operational, and political considerations. States should already be thinking about how to take advantage of the discretionary authority available to them, and health program innovators should be engaging in discussions about the best way to capitalize on this opportunity.

Defining the 2017 State Innovation Waiver The policy implications of the 2017 State Innovation Waiver are suffi- ciently broad enough to attract interest among a diverse array of states. Much of this interest focuses on how it might address some of the ACA’s greatest challenges, such as: Š Š “Churning” of individuals between primary programs as their incomes, family size, and employment situ- ation change, which can impact an individual’s continuity of care and is a particular concern in states that expanded their Medicaid programs under the ACA Š Š Stratification of families for health insurance purposes, with some members qualifying for the exchange, and others for Medicaid or CHIP, which can lead to continuity

of care difficulties within a family because of varying provider networks Š Š The inequity of the employee-only Employee Sponsored Insurance (ESI) affordability test, in which individuals and families with access to ESI do not qualify for exchange subsidies, except in rare situations (sometimes called the “family glitch”) Š Š The incentive for employers with disproportionate numbers of low- income employees to drop coverage because their employees can get sub- sidized coverage in the exchange Š Š Problematic technology, operations, and communication links between the exchange, Medicaid, and CHIP programs

See Health Insurance on page 38

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