From Big Waiver to Waiver Unlimited

by Nicholas Bagley — Monday, June 26, 2017

The Senate has now released the Better Care Reconciliation Act of 2017, its answer to the House’s American Health Care Act. The bill is wildly unpopular and has already come under fire from Senate Republicans, either for being too mean or not mean enough. But some version of the BCRA may still get 50 votes in the Senate—and if it does, it’s likely to become law.

To a lawyer’s eyes, one of the bill’s strangest features is a breathtakingly broad provision allowing states to secure waivers from most of Obamacare’s insurance rules, as I explain in an article over at Vox:

The Senate bill retains [the ACA’s original] waiver provision—but removes the guardrails that ensured state-based alternatives would offer strong coverage. Under the Senate bill, to get a waiver, a state doesn’t have to demonstrate anything about coverage. Instead, it just has to show that the plan won’t “increase the federal deficit.” Once a state makes that showing, the bill is explicit: The secretary of health and human services “shall” approve the plan.

Not “may” approve the plan—“shall.” This is a crucial legal distinction. The Supreme Court has squarely held that this sort of mandatory language means what it says: If the condition is satisfied, the secretary has no choice but to give his approval.

That could lead to some bizarre consequences. What’s stopping a state from submitting a half-baked plan for a high-risk pool that will lead millions of people to lose coverage? Or, for that matter, from using Obamacare money to fund public schools or affordable housing? According to the Senate bill as written, the secretary would have to approve plans like that so long as they don’t increase the federal deficit. …

And once a waiver is granted, the Senate bill says that the federal government cannot terminate the waiver, no matter what. It is hard to overstate how unusual — even unique — this is. When the federal government offers money to states, it places conditions on how the states are to use that money — and reserves the right to cut off the states if they fail to adhere to those conditions. The cutoff threat is essential to prevent state abuse of federal funds.

The Senate bill removes that threat. It says that a waiver “may not be cancelled” before its expiration. If state officials blow the Obamacare money on cocaine and hookers, there’s apparently nothing the federal government can do about it. At the same time, the bill expands the duration of waivers from five years to eight years. The upshot, then, is that the next president won’t be able to renegotiate any waivers granted during the Trump administration, no matter how badly a given state might have abused its waiver.

Perhaps the biggest concern, however, relates to the way in which state waivers could degrade the financial protections available for employer-sponsored coverage:

In one of its most popular provisions, the Affordable Care Act prohibited all health plans, including those offered by employers, from imposing annual and lifetime limits on coverage. … But the waivers contemplated under the Senate bill could wipe out the ban on such limits. Under the Affordable Care Act, the ban … applies only to those benefits that are considered “essential.” If a state gets a waiver saying that no benefits would be considered essential — which was the status quo prior to Obamacare — insurers could impose lifetime and annual limits on all services.

Worse still, the choice of a single state to seek a waiver—say, Wyoming—could free employers nationwide to impose lifetime and annual limits. Yet allowing one state to drive policy for all the rest makes a mockery of very federalism that these waivers are supposed to advance.

And the risk is real. On Friday, the Center for American Progress drew on survey data to estimate that 27 million Americans with employer-based coverage would face annual or lifetime limits on their coverage if the Senate bill becomes law. The estimate is uncertain; the true figure could be higher or lower. But, for many millions of people, this new waiver provision likely means that a single cancer diagnosis or the birth of a child with a chronic illness will lead to financial ruin.

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About Nicholas Bagley

Nicholas Bagley is a Professor of Law at the University of Michigan Law School.

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