By Erik Randolph

Amidst the noise of the presidential election, the mainstream news media missed a major announcement the prior Sunday that promises to positively impact the lives of many Georgians.

The announcement could signal a turning point in the near future, giving hope to many Georgians suffering from the unintended consequences of the Affordable Care Act (ACA) since its implementation seven years ago.

Georgia has taken advantage of Section 1332, which is possibly the best provision in the ACA. It allows states to better design a system of providing health insurance coverage by applying to the federal government to waive burdensome requirements of the law itself and some other federal regulations.

Last year, the state legislature gave Governor Brian Kemp the authority to seek waivers from the federal government, and the governor has done just that. Without much fanfare, Georgia’s Section 1332 waiver request, as amended, was finally approved on Sunday. This approval complements Georgia’s other approved waiver request on Medicaid that received widespread press coverage and was announced during a joint press conference on October 15th with the governor and Seema Verma, administrator of the federal Centers for Medicare & Medicaid Services. 

First, let’s review just some of the mess the federal law created.

The Price Sticker Shockwave

The Affordable Care Act has not lived up to its name, as demonstrated by spiking health insurance costs, especially in the individual markets.

Once the law went into effect and the new premiums took hold in the individual markets, there was a price sticker shockwave that rolled across the country. The Manhattan Institute for Policy Research calculated price increases varying from 64.5% for a 40-year-old female to a 178.8% increase for a 27-year-old male. 

Our own analysis estimated premiums increased 17 times faster than the general inflation rate from 2014 to 2019. On average, Georgians suffered average price increases of 70.7% for Bronze plans, 77.3% for Silver plans, and 70.4% for Gold plans.

The chart below shows one result of our research. We estimated that the median annual price for a pre-ACA insurance plan for a family of four in Georgia was $5,386 in January 2013. For 2019, the median prices for a family of four rose to $17,550 for a bronze plan, $18,644 for a silver plan, $23,065 for a gold plan, and $26,081 for a platinum plan.

Moreover, because of the unaffordability of the premiums, many who had insurance coverage prior to the ACA found themselves uninsured. As pointed out in the governor’s Section 1332 waiver application, 129,000 Georgians dropped out of the marketplace from 2016 to 2019, a staggering decline of 22%.

A major culprit for the price spikes and loss of coverage is the ACA itself. Many insurance policies in effect prior to the law became immediately ACA noncompliant because the law redefined what constituted a policy and mandated changes to how insurers calculate premiums. This was exacerbated by how the federal bureaucracy initially implemented the law. The political promise of “if you like your plan, you can keep your plan” turned out to be untrue. 

The impact was not just on the individual markets. Employer-based plans also experienced major price increases, but this and other unintended consequences are a topic for another day.

Hope with Reinsurance and Better Access

The first part of the approved Georgia plan will begin in 2022, which naturally brings up the question: why must we wait so long? The short answer is because we’re dealing with government bureaucracies.

Despite the slowness, the Reinsurance Program will pass through federal funding from anticipated savings from the Premium Tax Credit, expected to be $285 million in Plan Year 2022, matched with state funds from either general revenue or a state user fee to reinsure insurers to bring down the cost of premiums. The reinsurance kicks in only for insurance claims above preset thresholds up to predetermined caps. It also varies based on three regions in the state intended to bring down more quickly the cost of premiums in those regions hurt worse from the premium increases since implementation of the ACA. The reinsurance only pays for a portion of the cost above those thresholds, up to the caps, to make sure insurers have a stake in the game to keep costs down.

Governor Kemp’s approved application estimates the Reinsurance Program will, on average, increase individual market enrollment by 0.4% and lower premiums by 10.2% in the first year, which are hopefully just conservative estimates considering the damage done to the market by the ACA. The Reinsurance Program targets individuals and families between 100% and 400% of the federal poverty level (FPL), who account for 57% of Georgia’s uninsured population.

The second part of the plan—that will begin with a delayed implementation in 2023 over concerns of the impact of COVID-19 and to ensure a smooth transition—is the Georgia Access Model addressing a major complaint about the ACA. The law makes Georgians go through the Federal Facilitated Exchange (FFE) to buy insurance on the individual markets. Government’s overreach includes requiring individuals to prove to bureaucrats that they endured a qualifying life event before they are allowed to buy health insurance during any time outside the government’s mandated enrollment period. 

To be run by the state instead of the federal government, the Georgia Access Model will still allow an online exchange as before, but, importantly, it frees individuals from the mandate of going through the exchange, allowing them to shop through multiple channels, including private distribution channels, brokers, and agents. It promises to return health insurance shopping to the way functioning markets work. 

Georgia is expected to run the new exchange more efficiently. Today, FFE is separate from the Georgia Gateway that handles Medicaid. Georgia will link the two together, which brings up the approved Medicaid waiver.

Helping the Poor with Pathways to Coverage

In addition to the Section 1332 waiver, the federal government also approved a Section 1115 waiver, allowing modifications to the Medicaid program. This waiver addresses adults under 100% FPL, which is 28% of the uninsured. The remaining uninsured are children under 100% FPL who already qualify for Medicaid, and families over 400% who will benefit from the lower premiums. 

Here the Georgia state legislature and Governor Kemp need to be commended for not falling into the Medicaid expansion trap. What they succeeded in doing is getting the federal government to allow Georgia to transform the program into one that makes more sense.

One big problem with Medicaid is that it traps people in poverty. There are welfare cliffs and marriage penalties associated with it. Another big problem is that the health outcomes are among the worst of any health care system in the nation. The states that expanded Medicaid have subjugated more individuals to these negatives.

Instead, Pathways to Coverage establishes a demonstration project to help adults up to 100% of the federal poverty level. Private market practices will be introduced, including incentivizing healthy behavior and creating member reward accounts. The goal is to create a pathway to help persons transition to higher quality private coverage, consistent with other welfare policy goals of not having adults languish below the poverty line by helping them move out of poverty.

The Long Run

Ultimately, implementation of these approved plans will determine their success. Therefore, the state administration needs to be vigilant and continue working on improving.

Considering constraints placed on the states by the federal government, it is probably the best deal Georgia could have received. But, as officials in the Kemp administration recognize, these waivers are not the complete solution. More needs to be done.

What we would like to see is a more aggressive agenda to adopt our vision of establishing a true risk equalization system that can deliver universal coverage with the highest quality of care only possible through leveraging the free-enterprise system. Switzerland has already shown the way, and you can read more about our vision and the Swiss system here.

If you had personal experience with the FFE, escalating health insurance costs, lost your coverage, or other thoughts on the best solutions, we are interested in your story and thoughts. Be sure to post your experience in the comments below.

*Erik Randolph is Director of Research at the Georgia Center for Opportunity. This blog reflects his opinion and not necessarily that of the Georgia Center for Opportunity.