Autopsy of a Failed Health Insurance Experiment: Did It Die of Natural Causes, or Was It Murdered?

It was just another week for the Trump administration. A senior official resigned after admitting to major ethics violations, the President insulted millions of innocent brown-skinned Americans on Twitter, and quietly—so quietly that almost no one noticed—the Department of Health and Human Services pulled another Jenga block out of the teetering tower that is the Affordable Care Act. Fortunately, it did not fall.But it did become more expensive. And in that understated tragedy, we find our mystery: Was that HHS’s intent all along?It all started back in February when Gov. Mary Fallin announced that Oklahoma would submit a 1332 waiver request to the Centers for Medicare and Medicaid Services. At the time, no one really knew how 1332 waivers would work. All they knew was that Oklahoma needed to try something different.Oklahoma had the same problem that a lot of heavily rural states had. Even with the subsidies in the ACA, it wasn’t very profitable for health insurers to compete in many counties. Sparsely populated areas have always been harder to service. It’s why Lyndon Johnson led the charge to electrify Texas, why rural phone rates went up after the courts broke up Ma Bell, and why small-town Post Offices are closing around the country. Add in the fact that rural Americans pose higher health risks on average, and it’s not hard to see why insurers are wary of setting up shop in these communities.Sen. Ron Wyden anticipated that states might face these kinds of challenges when he insisted on adding Section 1332 to the ACA in committee markup. It allowed HHS to grant waivers for “state innovation” so long as the state’s plan would provide coverage at least as comprehensive as the ACA with costs at least as affordable to “a comparable number of its residents” without increasing the federal deficit. In other words, states couldn’t use it to negate the ACA.Waivers have a history of abuse. The Reagan and first Bush administrations used them to punish Medicaid enrollees who couldn’t prove that they were looking for a job. They penalized single mothers who gave birth to a new kid. On the campaign trail, Mitt Romney promised he’d issue 1332 waivers to all fifty states to escape their ACA obligations. All these usages directly violated the original intent of the law.This is the double-edged sword of federalism. Like all forms of freedom, we only like it when it’s used for things we approve of. But if we only allowed it in those instances, it wouldn’t really be freedom, would it?This is a good point at which to bring the Trump administration into the story because it’s its job to set the boundaries within which states can experiment, to draw the line between acceptable and unacceptable waivers, to find a middle ground.When you think of the Trump administration, “the middle ground” probably isn’t the first phrase that comes to mind. And even if it were, politicians in general don’t have a reassuring track record in this department. As my colleague Pamela Clouser McCann shows in her new book The Federal Design Dilemma, legislators tend to delegate power to the states or the feds based on where their party has more control at the time. It isn’t clear who gets the edge when a Republican president meets a Republican governor, but it probably isn’t going to end well for the ACA.At first, it appeared that both parties were committed to shoring up the ACA exchange in Oklahoma. A month after Gov. Fallin’s announcement, HHS Secretary Tom Price encouraged governors to apply for 1332 waivers to create their own reinsurance programs. Basically, they could use federal funding to insure the insurance companies to cover their unusually high claims.This was the first time anyone had had to come up with an approval process for 1332 waivers. The authors of the ACA wanted the exchanges up and running for a few years before states started getting exemptions, so they didn’t allow them to get waivers until 2017. It wasn’t until HHS released a checklist in May that Oklahoma had a roadmap for expedited approval.A lot changed between May and September, when Oklahoma needed to finalize their reinsurance program for 2018. Republicans in Congress repeatedly tried and failed to repeal and replace the ACA. HHS eviscerated the budget for outreach and enrollment assistance. The President trashed the law and threatened to cut payments promised to the insurance companies. Everything the Trump administration did indicated that they wanted the law to fail.Everything, that is, except the 1332 waivers. In fact, if you were Terry Cline, the Secretary of Oklahoma’s HHS, you could be forgiven for thinking that you could actually trust the Trump administration. After all, not only had they agreed to the entire checklist for your reinsurance program, but also they had approved similar waivers for Alaska and Minnesota.So it must have come as quite a shock when, on Monday, September 25, the last possible day that you could put the reinsurance program into operation, the day they promised they’d give you approval by, they simply said no.If you’re conducting a murder investigation, the first thing you want to do is get your timeline straight.On September 13, twelve days before the drop-dead date, Tom Price took the first of five private plane flights that cost the taxpayers over $60,000.On September 19, POLITCO reporters Dan Diamond and Rachana Pradhan broke the story.On September 22, the Friday before approval was due, Cline claims that HHS agreed to the entire waiver package and promised to approve it.So if you’re thinking that HHS was too busy with the scandal to review the waiver, apparently they did. And they said yes.Were they lying? Did they change their minds? Nobody really knows. But Oklahoma deserves an explanation. So too, for that matter, do the rest of the states.Two things are for certain: Oklahomans will have more expensive health insurance, and it’ll cost a heck of a lot more than $60,000.POLITICO was right to report that story, and Secretary Price was right to resign. But there is even bigger malfeasance happening inside HHS. It may not be as sexy as private plane flights, but that doesn’t mean it matters less. On the contrary, it probably matters more in the long run. And it isn’t being reported.As a result, no one is being held accountable.There are a lot of things that have us feeling powerless these days. This doesn’t have to be one of those things. We can demand that the media investigate this decision. We can uncover the faults—either in the process or the personnel—that misled Oklahoma and ultimately failed Oklahomans. And in the meantime, we can think more deeply about reforming a system that clearly isn’t working well enough for rural America. We have to ask ourselves whether we really want to rely on state-by-state waivers—at the discretion of an unreliable executive branch—or whether it’s better to have some national system that ensures every state, every county, every household has affordable insurance (and if need be, reinsurance) options.Unfortunately, this administration has made it clear that’s not a conversation they’re interested in having.==========This essay was originally published on the "Bill of Health" blog at Harvard Law School.