Trump Administration Widens Obamacare Escape Hatch For Red States

The Trump administration said Monday it will give states significant new ability to opt out of Obamacare requirements, a move that could boost cheaper health plans with fewer protections for pre-existing conditions.

Many health insurance experts warn the move could essentially create two health insurance markets — one for healthy people who opt for the cheaper plans and another for sicker patients who will face spiraling costs.

The Trump administration is expanding the scope of so-called state innovation waivers, an Obamacare program that lets state tinker with their health insurance markets. Republicans have long complained that the Obama administration took an overly prescriptive approach to the waiver program, limiting the ability of red states to oversee their markets.

"Guidance under previous administrations significantly thwarted innovations states could pursue," CMS Administrator Seema Verma, whose agency oversees the health law's insurance marketplaces, said during a conference call Monday. "It was nearly impossible to put forward creative ideas."

The move, however, could recharge the already inflamed debate over insurance protections for pre-existing conditions — an issue that's been especially problematic for Republicans as midterm elections approach. Republicans have recently vowed on the campaign trail to protect pre-existing conditions, even as many supported Obamacare repeal plans that would have weakened the health care law's requirements.

"The American people should look at what Republicans are doing, rather than what they're saying, when it comes to health care. Just weeks before the election," said Senate Minority Leader Chuck Schumer in a statement. "Republicans are once again undermining protections for people with pre-existing conditions and sabotaging our health care system."

The new plan, which rewrites 2015 Obama administration policy on the waiver program, allows states wider latitude to expand the markets for association health plans and short-term insurance, which often provide less coverage than Obamacare plans. States could design programs that let people tap into federal subsidies — now only reserved for Obamacare plans — to purchase less robust coverage, Verma said.

The Trump administration's move could give new life to a proposal in Idaho to create health plans exempted from many Obamacare provisions, including the protections for pre-existing conditions. The Trump administration rejected the plan earlier this year, saying it wasn't permissible under federal guidelines. Other red states had expressed interest in the idea.

"Overall, it's a big step forward," said Rea Hederman, executive director of the economic research center at the Buckeye Institute, who has long supported a more expansive waiver policy for the health care law. "States are going to have options to figure out the best ways to cover constituents."

Verma declined to comment on whether specific states would seek waivers under the new policy.