Oklahoma’s 1332 application

Oklahoma is preparing a 1332 State Innovation Waiver for a customized ACA implementation in the state. It is an interesting concept and as the AHCA has failed to progress, I can see quite a few conservative states go down the 1332 route to tweak the ACA to fit local political and economic needs. And I’m okay with that.

So let’s see what Oklahoma identifies as the problem and what they then want to do with it:

Oklahoma continues to face a number of challenges related to providing individuals with access to affordable, quality, and sustainable health care coverage. Particularly telling of the necessity of swift intervention is the exodus of all but one carrier from Oklahoma’s individual insurance market for plan year 2017, premium increases in excess of 75% on average for plan year 2017, and participation of only 31% of eligible individuals for plan year 2016

They want more competition, more choices, lower premiums and more people covered. Those sound like reasonable objectives, so how will they do that?

They have a two year plan.

In 2018, they want to actually take responsibility for running their own insurance markets. States are the primary regulators and reviewers of insurance products sold in their state. However under the ACA if they declined to do so, the federal government would act in place of the state. CMS is not a state level regulating entity. They applied broad strokes of oversight but they were not familiar with state level policies nor objectives. Oklahoma wants to bring rate review and plan approval back in-house. They don’t need a 1332 for that, but this makes sense.

They also think that they can get improved quality and lower costs by having a coordinated quality metric program. That is ambitious.

The big deal in 2018 that requires a 1332 waiver is changing the age band from 3:1 to no more than 5:1. An actuarial fair age band is probably close to 9:2. This policy change will lower cost plans for young, non-subsidized buyers while hurting non-subsidized older buyers. It has no real effect on-Exchange besides the potential of slightly changing gap-optimization dynamics on-Exchange.

2019 is when things get complex. Oklahoma wants to do a lot:

  • Move off Healthcare.gov and go to a state based marketplace
  • Simplify administrative costs for carriers and change risk adjustment and re-insurance
  • Change subsidies from 100-400% FPL to 0% FPL to 300% FPL (this sounds like a back door Medicaid Expansion)
  • Use an HSA focused benefit design
  • Get rid of metal tiers
  • Minimize the required benefit package
  • Tighten up eligibility requirements and verification requirements for off-season enrollment

This is a big deal.  If implemented, it would be a uniquely Oklahoma solution to Oklahoma problems.  Senator Wyden, the author of Section 1332 waivers, would say that this is what this section is designed to do instead of the minor technical adjustments and re-alignments that other 1332 waivers are seeking.

A key mechanical point that enables every change is moving Oklahoma to their own Exchange in 2019.  Healthcare.gov has limited flexibility to support public facing 1332 waivers.  A state based marketplace is a key enabling technology.  By now, there are enough states with a stable technology platform that Oklahoma can probably buy a system off the shelf and modify it instead of developing from scratch.  This will be expensive as an initial investment but not particularly high risk.

Oklahoma has identified the clear problem than insurance is confusing and tough.  They want to use a high actuarial value (80% AV) common plan design:

; In an effort to improve ease of consumer understanding, actuarial value (AV) regulations will be simplified by establishing a standard minimum AV floor of 80% for all traditional plans. Traditional plans are defined as those plans that do not otherwise meet requirements to be a high deductible health plan (i.e., annual, individual deductible of $1,300 per IRS). This minimum AV will be coupled with easy-to-understand, fixed-cost descriptions of benefits.

This makes a lot of sense.  Insurance is confusing.  Standardized plans at a high AV are a good support tool.  Most 80% AV plans will be HDHP with an HSA anyways.

There is a thought of managing and spreading high cost and high comorbidity risk.  Oklahoma had operated a high cost risk pool pre-ACA but that was always under-funded with insufficient benefits.  They are thinking about it again as the AHCA and Price’s 2015 plan had waived the talisman of cost segregation but they also advanced two modified risk concepts.  The first is an externally funded, probably from the Feds, condition based risk pool.  This is basically making risk adjustment look like Medicare Advantage widget payment risk adjustment.  The second is a high cost re-insurance pool that spreads the cost of diseases around all carriers in the state.  If they can get outside money to subsidize the super-expensive, this would be a good thing.  Otherwise if it is just local money being shuffled around, it will change carrier strategy but not change total premiums.

Oklahoma wants to change the current 90 days of grace period after the first premium is paid to only 30 days.  Before coverage could start again, past-due premiums would need to be paid.  The objective of this change is to minimize any potential to game the system by people stopping coverage in October and then re-enrolling for January 1.  It would marignally increase the number of low cost member months in the pool.  This makes enough sense.  I don’t know how much it would help the risk pool but it should not hurt it.

Now here is the meat of the changes:

The state aims to utilize federal funds that currently are being distributed to individuals at 100-400% FPL to those with 0-300% FPL while changing the way subsidies are calculated for all recipients. The state also assumes that federal funds will be available for eligible but not enrolled populations; that is, funds for eligible individuals not currently accessing APTC and CSR will be made available to the state….

Separately, eligibility for APTCs should reconsider current exclusions under the ACA. For instance, in current law, if insurance is offered by the employer, affordability is based on only the employee premium cost – not the cost for insurance for the employee’s spouse and/or children. The employee-only cost is often less that the 9.5% threshold;


The second paragraph is elimination of the family glitch.  It will weaken the ESI market slightly but that is a valid trade-off.

The first paragraph is amazing.  This is a backdoor Medicaid expansion where the state does not need to pay either the current 5% or long run 10% of the Medicaid costs of the expansion population.  Heroic analytical assumptions will be needed to justify budget “neutrality” as Oklahoma wants to claim budget credit for people who are eligible but not enrolled.  CMS has been willing to make heroic assumptions before when it suits their priorities.  The Arkansas private option Medicaid expansion used absurd assumptions and handwaving to get to budget “neutrality.”  If Sec. Price wants to shovel federal money to core Trump voters and pay providers high rates, he can probably do so.  I have a hard time seeing who has standing and motivation to sue but I am not a lawyer.

Plan design also changes as carriers will offer two choices:

In lieu of metal tiered plans, plan options will be simplified to two standardized plan options: 1) a
comprehensive, traditional health plan with conventional cost-sharing and robust insurance coverage or 2) a high-deductible plan paired with a consumer health account. Consumers can choose to use their health accounts to purchase more comprehensive coverage or opt for lesser
coverage and more funds for first-dollar, out-of-pocket expenses available through their health account.

Subsidies are redesigned so that they are based on both age and income. I think they will not be tethered to a benchmark plan premium so individuals bear the risk of higher than expected premium increases. The goal is to have a subsidy that is large enough to make purchasing the standard plan affordable while allowing people to throw some money into an HSA if they choose the lower cost plan. This is a plausible set of trade-offs. I want to see the financials and the trade-offs for these scenarios. Low income (<100% FPL) people will need to get significant cost sharing assistance in the form of a very large subsidy to top themselves off and make themselves no worse off than if they were on Medicaid.

Oklahoma wants to do a lot for a 1332. The document that they have out there is a plan to have a plan. I spoke with an Oklahoma based analyst. They were pleasantly surprised that this proposal is still in the possibility space. Their concern was that Oklahoma has significant budget and cash constraint problems right now. Setting up a 1332 would have significant initial costs for new infrastructure and new regulatory capacity at a time when the state can barely keep current operations minimally funded.

I don’t think they have enough time nor details to get actuarial validation of their plans, gain CMS approval and then actually build the plans at the insurance companies in time for 1/1/18. I think they could do this with their 2018 goals pushed to 2019 and most of their 2019 goals pushed for the 2020 policy year. This is a complicated set of ideas with significant interaction between Medicaid, Exchange, employer sponsored insurance and Indian Health Services. Oklahoma could get approval but it is going to take some time.

I think there will be a major fight over using the 1332 process to effectively be a Medicaid expansion. Their budget and objectives for a high AV plan as the baseline plan will require heroic assumptions to gain approval. But if they can get a system where there is local buy-in to cover three quarters of a million people, I’ll wish them luck and hope for the best.

33 replies
  1. 1
    eyelessgame says:

    I always knew that the ACA would become more popular once they scraped the black part off.

  2. 2
    Snarki, child of Loki says:

    @eyelessgame: “I always knew that the ACA would become more popular once they scraped the black part off.”

    Amazing how that works, isn’t it?

  3. 3
    guachi says:

    This sounds like innovation that’s actually innovative.

    I’d be suitably impressed if Oklahoma (Oklahoma!) could actually come up with an interesting and effective plan to shovel tax dollars of rich people to cover the health of poor people in the name of covering state budgetary shortfalls.

  4. 4
    rikyrah says:

    You have more faith in these people than I do, Mayhew. I simply don’t trust them.
    The beginning.middle.end of it.
    They never act in good faith.

  5. 5
    rikyrah says:


    I always knew that the ACA would become more popular once they scraped the black part off.

    Folks interested in the CARE now that that Obama fella isn’t President….



  6. 6

    @rikyrah: DA (and Dem policy makers) believes in the Nash equilibrium, solutions that make everyone better off. RWNJ believe in min-max equilibrium, for them to win, everyone else has to lose.

    We are getting our asses handed to us, every election. Its time we wised up and stopped being sacrificial lambs.

  7. 7
    amk says:

    Looks like at least some red state goppers are starting to realize that their decades of bunkum on their voters’ healthcare does not wash any more (Thanks Obama!).

    The DC rethugs must be ruing the day they decided to gerrymander their districts. Now their own ratfuckers in DC are out to scuttle the gopee’s grand greedy design.

  8. 8
    Brachiator says:

    participation of only 31% of eligible individuals for plan year 2016

    I’m curious as to why the participation plan is so low.

    This Oklahoma plan seems very well thought out. Would this still be possible under a Trumpcare regime?

    It’s too bad that Republican politicians continue to obstruct and fight against common sense at the federal level.

  9. 9
    David Fud says:

    Considering they are massively de-funding their schools and any other program they can gut, sure why not? Plus, with an extra bonus, more earthquakes than anywhere due to massive fracking. The cherry on top of that is the massive tax breaks for oil and gas producers. Did anyone think Kansas had a monopoly on bad state fiscal policy?

  10. 10
    StringOnAStick says:

    @Brachiator: I suspect they are planning on such a low participation rate because there will be no individual mandate to buy insurance. The individual mandate is the main thing that hate media, etc. railed against as being the thing that made Obamacare extra, super evil. Being forced to buy health insurance is the Devil’s work, being forced to buy car insurance is just meh.

  11. 11
    artem1s says:

    IF, and I mean if, the DNC or Indivisible wants to engage in the wasteland of reaching out to WWC voters and do some actual voter edjimacation, getting behind one of these state level efforts to save Ocare and shore up ACA would be worth the effort. It demonstrates a good faith effort to actually help the people who were grasping desperately at anything they could find to get out of persistent poverty. If we are ever to break thru the Cult45 information bubble, this could be the way. But it must come with the price tag of telling truth to the people who got conned. It can’t be a crapload of bothsiderism and Big Government down punching. These people have to get it thru their heads there is one party that is trying to kill them and enrich themselves, and a party that is trying to make a very complicated world work for more people, not less.

    Screw Collins. The GOP federal level ratfucking is always going to be ratfucking. Work with the states and maybe you might flip some of those state legislatures back to sanity.

  12. 12
    Calouste says:

    @schrodingers_cat: Besides not believing in win-win, RWNJs also don’t believe in lose-lose, so if someone is losing, they think they must be winning.

  13. 13
    Jacel says:

    One of your bullets about the plan was “Minimize the required benefit package”. I didn’t see more mentioned in your summary. What sorts of cuts is Oklahoma proposing here? Are they dealbreakers?

  14. 14
    Dr. Ronnie James, D.O. says:

    Many many states have gone down this road of “quality improvement will raise quality and cut costs”.

    In my previous life as a health wonk, I tracked 1115 waivers and state-level Medicaid reforms (also the basis of my master’s thesis). One of my main takeaways after studying this till my eyeballs bled (and I know this sounds mundane) is that quality improvement programs improve *quality*. And that’s it. They don’t typically cut costs.

    In even more mundane terms, “you get what you pay for.”

  15. 15
    Barbara says:

    @Brachiator: With a five to one ratio of permissible premium for the oldest purchasers, a lot of people will still be priced out of the market.

  16. 16
    Chyron HR says:

    They want more competition, more choices, lower premiums and more people covered. Those sound like reasonable objectives, so how will they do that?

    Tulsa Race Riot 2: Electric Boogaloo

  17. 17
    Barbara says:

    @Dr. Ronnie James, D.O.: No, you don’t get what you pay for. We pay a lot more per unit of health care and have more units being consumed than anywhere else in the world and our quality is demonstrably not higher if quality is measured in any capacity by results achieved. But the real issue here is, any directed quality improvement that tries to lower costs has to identify the source of “excess costs” within the system and zero in on those areas where poor quality generates excess costs. Poor discharge planning generates additional hospital stays and breakdowns in care. I saw this in real life with my mother in law. So, improving quality is always worthwhile, but not all poor quality is associated with excess expenditures. As you note, sometimes the opposite is true.

  18. 18
    Brachiator says:


    The individual mandate is the main thing that hate media, etc. railed against as being the thing that made Obamacare extra, super evil. Being forced to buy health insurance is the Devil’s work, being forced to buy car insurance is just meh.

    I understand why people dislike the individual mandate, and you can’t blame it all on hate media. The value of universal health insurance still has to be sold to the American people. And you need a soft sell. Otherwise to some people it feels like having to buy car insurance when you don’t have a car and don’t drive.

  19. 19
    Dr. Ronnie James, D.O. says:

    @Barbara: Agreed – to be specific, these “quality improvement” regimes typically track a few metrics and pay a bonus for showing improvement or surpassing a baseline.

    But without something like penalties, bundling or capitated per member/per month payments, it doesn’t change the underlying business model for providers much to incentivize cost control. Literally no state I studied that started a quality improvement program in Medicaid with the goal to reduce costs saw cost reductions.

  20. 20
    Dr. Ronnie James, D.O. says:

    @Brachiator: As we keep seeing, any attempt to sell universal heslth insurance probably needs to start by helping a significant chunk of voting people just understand basic insurance.

  21. 21
    Brachiator says:

    @Dr. Ronnie James, D.O.:

    As we keep seeing, any attempt to sell universal health insurance probably needs to start by helping a significant chunk of voting people just understand basic insurance.

    Yeah, that’s a big part of it.

  22. 22
  23. 23
    artem1s says:

    Mcauliffe is also trying to get ACA expanded in VA. Being blocked by GOP House. so another opportunity tp strengthen ACA and educate voters on the state level. I love that so much effort is going in to getting out the word about state level races. Indivisible was a stroke of genius and exactly what the Dems needed to get moving after the election.

  24. 24
    artem1s says:


    Otherwise to some people it feels like having to buy car insurance when you don’t have a car and don’t drive.

    yea, except that is the exact disinformation we need to fight against. In this game, we all own cars. We all have bodies. No one gets out of this alive or without having healthcare bills. You can pay now or later. You can pay now and not bankrupt yourself and your kids later. You can pay now and have some money left over to pay for your kids education later. It’s a completely bogus idea to think you don’t own a car in this situation. There is no rapture for anyone. We are all going to pay that bill in the end. Let’s make sure it doesn’t send the whole country into another Depression or world war or back to the Dark Ages while we are at it.

  25. 25
    Uncle G says:

    @rikyrah: The Obama administration decided that Section 1332 waivers were not allowed until 2017. States don’t spend resources to propose waivers that are not allowed. Keep pretending silly stuff if that somehow makes you feel better; but this is a serious blog, your comments would be better served somewhere else.

  26. 26
    Stillwater says:

    Great post and great thread.

    well, I guess the post could’ve been a little bit better in the sense that I could’ve understood more of it. {{glares at David accusingly…}}

  27. 27
    Stillwater says:

    @Dr. Ronnie James, D.O.: Literally no state I studied that started a quality improvement program in Medicaid with the goal to reduce costs saw cost reductions.

    Why would it, tho? Medicaid costs are not only pegged, but they’re lower the negotiated rates providers receive from carriers, which strikes me as conflicting with that goal. Thoughts?

  28. 28
    Fred Fnord says:

    So… doesn’t this provide an incentive to lower participation, so they can use that money for other things? (I’m sure they can find a way.)

  29. 29
    Dr. Ronnie James, D.O. says:

    @Stillwater: No idea, really, but “better quality => lower costs” is one of those things that sounds *just* plausible enough that it wouldn’t throw you. Then you start to think about & investigate it & no, there’s not much connection.

  30. 30

    (Erased by author due to cynical crankiness. Updated version later, maybe.)

  31. 31
    Duane says:

    It’s Oklahoma,Jake.Forget about it.

  32. 32

    Are they asking people under the FPL to pay for insurance or face a tax penalty? Or am I missing something?

  33. 33
    David Anderson says:

    @Raven Onthill: I do not think so. They need more details

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