On his first day in office, as part of his mission to dismantle the Affordable Care Act, President Trump signed an order promising to give states flexibility “to create a more free and open healthcare market.”

The administration on Thursday released an official set of examples to help states flex these powers.

It is intended to roll back key elements of Obama-era requirements, which were designed to promote enrollment in ACA plans that cover a broad range of medical needs and meet uniform national standards.

Seema Verma, the Centers for Medicare & Medicaid Services administrator, said those strict rules were seen by many as burdensome, and “virtually impossible” for states to meet.

Instead, the Trump administration wants states to innovate in ways that could produce more lower-cost options, even if those alternatives do not provide the same level of financial or medical coverage as an ACA plan.

“I’m confident states will come up with ideas that will work better,” said Verma.

Still, coupled with other ongoing efforts by the Trump administration to gut Obamacare, policy experts predict the ideas would further foster a parallel market of cheaper, less robust coverage that could draw younger or healthier consumers, but drive up premiums for those who remain in ACA market plans.

“Invariably, the coverage is going to be more expensive for people who really need comprehensive coverage,” said Timothy Jost, a retired Washington and Lee University law professor who follows the ACA closely.

States could change who gets subsidies

One of the biggest changes signaled by the administration involves allowing states to revamp how federal subsidies are used. Currently, these subsidies are strictly targeted to lower-income Americans and are seen as key to bolstering enrollment in marketplace plans.

The Trump guidance would give states wider latitude to expand or narrow the income range eligible for subsidies, target them toward younger people or allow them to be used for less costly but skimpier types of insurance.

This would “potentially upend the subsidy structure,” said Sabrina Corlette, a research professor at Georgetown University’s Health Policy Institute.

Another example would, for the first time, make federal subsidy money available to people who get job-based insurance, countering Obama-era rules that generally prohibited that. It would let states use federal dollars to fund accounts consumers could use to buy insurance or pay other health costs, such as deductibles or copayments. Employers or consumers could also add additional funds to these accounts.

Still, managing those accounts would be a large administrative expense for a state to oversee, said Corlette. “I don’t understand why a state would want to set it up,” she added.

Supporters of Trump’s plan say the examples unveiled Thursday would give consumers more control over how they choose to spend their health care dollars and the types of coverage they want to buy. They say it might also improve the markets, which are seeing declining enrollment as premiums rise.

“If states can provide larger subsidies to younger individuals to attract them to enroll, that will improve the market overall,” said Christopher Condeluci, a Washington, D.C., attorney who specializes in employee benefits and has served as the tax and benefits counsel to the U.S. Senate Finance Committee.

However, if many states follow the administration’s lead, critics say, it would bring back the days when insurance rules varied widely state by state. Consumers could end up buying skimpier plans that leave them vulnerable to high, unexpected medical bills.

While not prescriptive, the examples are designed to encourage states to innovate and apply for permission to offer more choices for consumers, so long as the proposals don’t cost taxpayers more and don’t reduce access to ACA plans, said Verma.

State proposals would still have to be affordable, comprehensive and not raise the federal deficit, she said. And CMS would pay particular attention to potential effects on low-income Americans, she added.

Reshaping the individual insurance market

The administration’s examples focus on states’ health marketplaces, where insurance plans are designed for small businesses and for individuals who don’t get job-based coverage. An estimated 14 million people buy their own coverage through those markets or through brokers.

Premiums in those markets have risen substantially since the law took effect in 2014, for a variety of reasons. Among those reasons are lower-than-expected enrollment by healthy people; actions taken by Congress and the Trump administration that removed the tax penalty for failing to have coverage; and other moves that eliminated some payments to insurers and loosened restrictions on alternative types of insurance plans.

The administration’s examples add a new twist to a provision of the ACA that gave states the option of seeking a federal waiver to develop alternative marketplace proposals.

To get a waiver under Obamacare rules, however, states have to meet four “guardrails” established in 2015. These require states to ensure their proposals would provide equally comprehensive and affordable coverage; would not result in fewer people enrolling; and wouldn’t increase costs for taxpayers.

The examples described Thursday — touted as “waiver concepts” by the Trump administration — build on the administration’s guidance issued in late October to loosen those guardrails.

That October guidance, to take effect in 2020, says states have to provide access to affordable and comprehensive coverage, but will not be held to a strict tally of how many people actually enroll. So long as a state could show that equal numbers of people were buying some kind of coverage — either comprehensive ACA plans or less expensive but skimpier plans — the state’s approach could pass the test.

That October announcement, and Thursday’s concepts, drew immediate criticism from ACA supporters, who said it encourages the use of subsidies to buy short-term plans, which aren’t as comprehensive as ACA coverage and can bar people who have preexisting conditions.

Congressional Democrats sent a letter to top administration officials this week, saying the process by which the changes are being made is illegal, because the administration is not following a formal rule-making process.

“We believe this sub-regulatory guidance exceeds the Secretaries’ statutory authority,” wrote Ways & Means ranking member Richard Neal, D-Mass., and Energy and Commerce ranking member Frank Pallone Jr., D-N.J. “It appears to be part of the administration’s ideologically motivated efforts to sabotage the ACA.”

The Brookings Institution and other experts have raised similar questions and predicted a legal challenge.

“As soon as any state proceeds to go somewhere with this, there will be legal challenges,” said Jost.

Verma pushed back against this warning, noting that the Obama administration also issued its “guardrails” as guidance, not a formal rule.

Verma said she anticipated that critics would say the ideas would adversely affect people with preexisting medical conditions.

Those critics argue that anything that draws younger and healthier people out of the market will drive up costs for those who remain in ACA plans — including those with medical conditions, who might be barred from buying an alternative policy, such as a short-term plan.

But Verma said that “nothing in this guidance would take away protections from people with preexisting conditions.”

Kaiser Health News, a nonprofit news service covering health issues, is an editorially independent program of the Kaiser Family Foundation that is not affiliated with Kaiser Permanente.

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After years of steady decline, the number of U.S. children without health insurance rose by 276,000 in 2017, according to a Georgetown University report released Thursday.

While not a big jump statistically — the share of uninsured kids rose to 5 percent in 2017 from 4.7 percent a year earlier — it is still striking. The uninsured rate typically remains stable or drops during times of economic growth. In September, the U.S. unemployment rate hit its lowest level since 1969.

“The nation is going backwards on insuring kids and it is likely to get worse,” says Joan Alker, co-author of the study and executive director of Georgetown’s Center for Children and Families.

Alker and other advocates for children’s health place the blame for this change on the Trump administration and the Republican-controlled Congress, saying the Republican policies and actions have cast a pall on enrollment in health plans.

The number of children in the United States without coverage rose to 3.9 million in 2017 from about 3.6 million a year earlier, according to census data analyzed by Alker’s Georgetown team.

The overall uninsured rate for people of all ages — which plummeted from 2013 to 2016 following the health law’s implementation — remained unchanged at 8.8 percent last year.

The share of children with employer-sponsored health coverage rose modestly in 2017, Alker says, but not by enough to make up for the drop in children enrolling in Medicaid or getting coverage from Obamacare insurance exchanges.

While no states made significant strides in reducing the percentage of children who are uninsured, nine states saw their numbers go the wrong way. The largest negative changes occurred in South Dakota (where the rate of uninsured kids rose from 4.7 percent to 6.2 percent), Utah (up from 6 percent to 7.3 percent) and Texas (from 9.8 percent to 10.7 percent).

More than 1 in 5 uninsured children nationwide live in Texas — about 835,000 kids — by far the highest number of any state.

Florida had 325,000 uninsured kids last year, as its uninsured rate for that age group rose 0.7 percentage points to 7.3 percent. California had 301,000 children without insurance — its number remained virtually unchanged, relative to the previous year.

Other states with significant increases were Georgia, South Carolina, Ohio, Tennessee and Massachusetts.

The uninsured rates for children increased at nearly triple the rates in states that did not expand Medicaid under the Affordable Care Act, according to the report. Studies have shown that children whose parents are insured are more likely to have health coverage.

Georgetown has been tracking these figures since 2008, when 7.6 million children — or about 10 percent of kids — lacked health coverage.

Because nearly all low-income children are eligible for Medicaid or the federal Children’s Health Insurance Program, the challenge is making sure parents are aware of the programs, Alker says, and getting the kids enrolled and keeping them signed up as long as they are eligible.

Congress let the CHIP program funding lapse for several months in 2017, putting states in a position of having to warn families that enrollment would soon be frozen. Congress restored federal funding in early in 2018.

In addition, low-income families were bombarded by news reports last year that Congress was threatening to repeal the health law that expanded coverage to millions. And, in the past two years, the Trump administration has slashed funding for Obamacare navigators who help people sign up for coverage.

Alker points to the Trump administration’s September proposal, known as the “public charge” rule as another factor that may have led to fewer children getting health insurance. The rule could make it harder for legal immigrants to get green cards if they have received certain kinds of public assistance — including Medicaid, food stamps and housing subsidies. Green cards allow these legal migrants to live and work permanently in the United States.

OLE Health, a large health provider based in Napa Valley, Calif., that serves many immigrants, says it has seen patients leave the Medicaid rolls in the past year. CEO Alicia Hardy says many have dropped coverage over fears the help could jeopardize their immigration status.

“They are afraid of being deported,” she says.

All those events may have deterred families from getting their kids covered.

“The welcome mat has been pulled back,” Alker says, “and as a result we see more uninsured children.”

She says the easiest way to change the trend would be for more states to expand Medicaid under the health law. Fourteen states have yet to do so. Though the expansion largely affects adults, as parents enroll, their children are likely to follow.

Kaiser Health News, a nonprofit news service, is an editorially independent program of the Kaiser Family Foundation, and not affiliated with Kaiser Permanente. KHN’s coverage of children’s health care issues is supported in part by a grant from the Heising-Simons Foundation.

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