What Challenges Could State Insurance Markets Face Under the House’s American Health Care Act?

A new brief from the Kaiser Family Foundation outlines options for state insurance markets and challenges that states could face under the House’s replacement for the Affordable Care Act (ACA).

Passed by the House on May 4 and now under consideration by the Senate, the American Health Care Act (AHCA) would reduce the federal government’s role and resources in providing health insurance coverage – particularly for people with low or moderate incomes — while expanding authority and financial responsibility of the states.

The new brief describes provisions of the AHCA over which states have discretion, and it discusses challenges that the bill presents states by significantly reducing both federal payments to Medicaid and funding for subsidies in the non-group insurance market, and by repealing the requirement that individuals have health insurance, a move that could drive up premiums.

The House health bill establishes two main ways for states to address these issues. States may use money from a new Patient and State Stability Fund to offset a portion of the federal spending reductions, and they may obtain a waiver to modify important insurance provisions.

According to the brief, issues and tradeoffs states could face under the AHCA include:

• Competing demands for reduced federal funding. Resources available through the Patient and State Stability Fund would be less than the spending reductions called for in the House bill.

• Funding limitations over time. Annual appropriations to the Patient and State Stability Fund don’t grow over time and end entirely after 2026.

• Waiving essential health benefits vs. limiting availability of coverage. States could lower premium rates in the individual market by using an essential health benefits waiver to reduce the benefits that policies are required to cover. However, insurers may then choose to charge higher premiums to cover important benefits that are no longer defined as essential health benefits, or they may choose not to cover those benefits.

• Waiving community rating vs. protecting access for people who are sick. A waiver to allow insurers to use health in rating applicants with a coverage gap is another way that states could seek to lower premiums. The bill provides states with options for covering individuals with pre-existing conditions and a gap; however, states would risk some individuals being priced out of the market.