A Big Divergence Is Coming in Health Care Among States

Little by little, the Trump administration is dismantling elements of the Affordable Care Act and creating a health care system that looks more like the one that preceded it. But some states don’t want to go back and are working to build it back up.

Congress and the Trump administration have reduced Obamacare outreach, weakened benefit requirements, repealed the unpopular individual insurance mandate and broadened opportunities for insurers to offer inexpensive but skimpy plans to more customers.

Last week, the administration released its latest proposal along these lines, by changing the definition of so-called short-term plans. These plans don’t need to follow any of the Obamacare requirements, including popular rules that plans include a standard set of benefits, or cover people with pre-existing conditions. If the rule becomes final, these plans could go from short term to lasting nearly a year or longer.

Taken together, experts say, the administration’s actions will tend to increase the price of health insurance that follows all the Affordable Care Act’s rules and increase the popularity of health plans that cover fewer services. The result could be divided markets, where healthier people buy lightly regulated plans that don’t cover much health care, lower earners get highly subsidized Obamacare — and sicker middle-class people face escalating costs for insurance with comprehensive benefits.

But not everywhere. Several states are considering whether to adopt their own versions of the individual mandate, Obamacare’s rule that people who can afford insurance should pay a fine if they don’t obtain it. A few are looking to tighten rules for short-term health plans. Some states are investing heavily on Obamacare outreach and marketing, even as the federal government cuts back.

The result is likely to be big differences in health insurance options and coverage, depending on where you live. States that lean into the changes might have more health insurance offerings with small price tags, but ones that are inaccessible to people with health problems and don’t cover major health services, like prescription drugs. States pushing back may see more robust Obamacare markets of highly regulated plans, but the price of those plans is likely to remain higher.

Legislation to replace the individual mandate has already been introduced in Maryland and New Jersey with prominent sponsors. Political leaders in other states, including California, Washington, Rhode Island, Vermont, Connecticut as well as the District of Columbia, are weighing options for replacing the mandate this year, as Stephanie Armour reported in The Wall Street Journal. The mandate was designed to give healthier people an incentive to buy insurance before they fell ill, lowering the cost of insurance for everyone who buys it.

“Clearly, I think the federal administration and Congress are moving in one direction,” said Brian Feldman, a Maryland state senator who leads the state health subcommittee and was the primary sponsor of mandate legislation there. “And I think states like Maryland would like to move in a different direction.”

Mr. Feldman and his colleagues aren’t planning simply to replicate the federal individual mandate. Instead, they are trying a new strategy. People who fail to obtain insurance would still be charged a fine, but they would be allowed to use that money as a “down payment” on a health plan if they wished. Legislators estimate that many people subject to the penalty would not owe anything more to buy health insurance, after federal tax credits are applied.

Other states are hoping to mimic the expiring federal policy more closely. The board governing the insurance marketplace for the District of Columbia voted last week to recommend the adoption of an individual mandate replacement. Connecticut’s governor, Dannel Malloy, is considering a proposal by a Yale health economist.

Those plans are more similar to the Affordable Care Act’s approach, in part for expedience. The federal mandate is set to expire next year, and insurance companies need to develop their health plans and submit 2019 prices by this summer.

“The idea that a state would be able to stand up something, and put out any guidance, and advise stakeholders, and be able to do it by 2019, is pretty infeasible,” said Jason Levitis, a former Obama administration Treasury Department official who has developed legislation to help states draft mandate replacement bills.

Imposing state-level versions of the mandate may be a political challenge even in blue states. But other strategies are in play, too. California is one of a handful of states considering a bill that would effectively ban the short-term insurance plans proposed by the Trump administration. (New York, New Jersey and Rhode Island already effectively block them.)

A number of states across the political spectrum are also considering policies that would provide so-called reinsurance funds, to help protect health insurers from rare, very expensive patients, and help them lower the prices for everyone else.

Alaska, Minnesota and Oregon have already adopted such plans. Washington, New Jersey, Maine, Colorado, Wisconsin and Maryland are working on proposals. Heather Howard, who directs the state health and values strategies program at Princeton University, said that reinsurance plans operated more like a “carrot” in stabilizing insurance markets. They may prove appealing to a broader array of states, while the mandate, a “stick,” may interest politicians only in the most liberal places.

Some Obamacare-averse states are pursuing policies meant to circumvent the health law’s rules for insurance, and broaden options for cheaper, lightly regulated health plans. Idaho has announced a plan to allow insurers to offer health plans that don’t comply with many of Obamacare’s core rules, and one insurer, Blue Cross of Idaho, has said it will begin selling such plans next month.

Alex Azar, the Health and Human Services secretary, has been cagey about whether he will step in to enforce federal law forbidding such products. Meanwhile, the Iowa legislature is considering a bill that would allow a different type of health plan to circumvent Obamacare rules, as The Des Moines Register recently reported. Medica, the only insurer currently offering Obamacare plans, said it might depart the Iowa market if the plan were approved.

The Affordable Care Act was drafted with room for state customization, but one of its primary goals was to make health insurance around the country more uniform. Thanks to state resistance to the health law, varying local conditions and a Supreme Court decision that made the Medicaid expansion optional, results have been much more uneven. Some states have seen much bigger reductions in the share of the uninsured than others. Only some states have seen insurance premiums stabilize.

“Without question I think we’re going to see a natural experiment in the states and a growing divergence in outcomes,” said Sabrina Corlette, a research professor at Georgetown University’s Health Policy Institute.

Evidence of that divergence is already here. This year, signups for Affordable Care Act health plans were nearly flat compared with last year, despite huge cuts in federal outreach and advertisement. But states that ran their marketplaces and spent heavily on advertising saw stronger signups, while states that were more resistant to the health law experienced drops. The loss of the mandate, and the proliferation of health plans that don’t follow Obamacare’s rules, are likely to widen those gulfs.

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