CMS Confirms Colorado’s Section 1332 Waiver Amendment Application is Complete
In Brief
On January 3, 2022, the Centers for Medicare and Medicaid Services (CMS) sent a letter to Colorado confirming that the state’s application to amend its existing Section 1332 waiver is considered complete. This notice triggers the 180-day full review of the application by the agency and a 30-day federal public notice and comment period. Comments are due by February 2 and a decision from CMS could be expected sometime in July.
The waiver amendment would allow the state to implement plan-level rating variations for the Colorado Option in the individual and small group markets beginning in 2023 and extend its reinsurance program through 2027. If approved, Colorado would receive approximately $135 million annually in federal funding to top provide additional premium subsidies and to continue the state’s reinsurance program
Additional details on the 1332 waiver amendment application follow.
Overview
The Colorado Department of Insurance (DOI) Section 1332 Innovation Waiver Amendment Request would modify the current waiver for Colorado’s reinsurance program and implement the Colorado Option (standardized benefit plan) in the individual and small group markets. The pass-through savings generated through the waiver will be used to provide subsidies to individuals not eligible for premium tax credits under the Affordable Care Act (ACA) – specifically, persons ineligible due to immigration and documentation status and persons otherwise excluded from federal assistance.
Colorado is specifically seeking to waive the following provisions:
Continued waiver of the single risk pool to support and continue the reinsurance program; and
Waive the de minimis variation of actuarial value to support the Colorado Option plan design.
The waiver request demonstrates how implementing the Colorado Option satisfies the four guardrails of 1332 waivers: coverage, affordability, comprehensiveness, and deficit neutrality. Colorado estimates that the waiver will increase coverage and decrease premiums, while maintaining comprehensiveness and deficit neutrality. The five-year waiver would take effect in conjunction with the start of the Colorado Option on January 1, 2023. The waiver would end on December 31, 2027. Public comments can be submitted on the waiver until November 15, 2021. The DOI is also hosting two virtual public hearing on the waiver request on November 9 and November 10. The Centers for Medicare and Medicaid Services (CMS) is expected to review the waiver amendment for completeness and open a public comment period in the first quarter of next year.
Below are the key highlights of the waiver amendment:
The waiver is intended to secure pass-through funding to support a first-in-nation subsidy program. The premium subsidies would be provided to individuals not eligible for ACA premium tax credits (family glitch) and persons without documentation or otherwise excluded from federal assistance.
Because Colorado Option plans are required to meet certain premium reductions over the next five years, the state expects the implementation of the waiver to result in significantly lower expenditures from the federal government on tax credits. Colorado requests pass-through funding in the amount of savings in federal expenditures for premium tax credits as well as the savings generated through the reinsurance program
Waiving the de minimis variation of the actuarial value (AV) of Colorado Options plans has a two-fold purpose. Colorado notes that the first reason the state seeks to waive the de minimis variation is that when designing the standardized bronze, silver, and gold level plans, the expected AV levels of the standardized plans suggest a need to limit the de minimis variation. The state details that it will continue to review plan rates to determine the extent to which de minimis limitation is needed to prevent higher base AV levels from being reduced to meet Colorado Option premium reduction requirements.
Additionally, Colorado states that under current allowable de minimis ranges, non-Colorado Options plans could offer plans that undermine the legislation’s goals of offering equitable plans that mitigate health disparities, such as high deductible health plans. By waiving the de minimis variation, Colorado believes it will allow the DOI oversight tools necessary to ensure the Colorado Option can meet the goals of providing better coverage, mitigating health disparities, and reducing costs.
Enrollment is expected to increase by 4.3 percent relative to the baseline and 1.3 percent relative to the current waiver by 2027. Colorado expects the waiver to reduce the cost of coverage and offer additional subsidies, which will result in more Coloradans having insurance coverage as compared to without the waiver. The state does not expect any loss in carrier participation as a result of the waiver, but does expect increased market stability through lower overall acuity in the risk pool and increased market participation.
Premiums are estimated to decrease by 32.3 percent relative to the baseline and 16.6 percent relative to the current waiver by 2027. The state details that the combination of the reinsurance program, the subsidy program, and the Colorado Option will all have an effect of lowering premiums in the individual market as compared to costs without the waiver. In the small group market, Colorado expects that the lower Colorado Option premiums will result in small employers requiring smaller premiums contributions from employees, increasing affordability.
Implementation and uptake of the Colorado Option, made possible by the waiver, will advance the law’s health equity goals. The Colorado Option legislation requires the state to consider the implication of health coverage innovations on health equity and requires the following:
The networks available under the Colorado Option plans are “culturally responsive, and to the greatest extent possible, reflects the diversity of its enrollees in terms of race, ethnicity, gender identity, and sexual orientation in the area that the network exists;” and
Standardized benefit plans are “designed to improve racial equity and decrease racial health disparities through a variety of means”
The state details that while network elements are not contingent upon the waiver amendment approval, takeup of the Colorado Option plans may be significantly reduced without the premium reductions elements made possible by the waiver, which in turn would diminish the impact of the network elements. Additionally, Colorado asserts that implementation of the Colorado Option, through the waiver, will have a significant effect in reducing racial disparities of coverage and affordability of coverage.