Although the debate over the future of the Affordable Care Act (ACA) focuses largely on federal legislation, repeal and replacement efforts would significantly affect state approaches to insurance regulation.
State-level legislation and regulations help ensure that state regulators have full authority to enforce the ACA market reforms. As of November 2013, 32 states and D.C. had taken legislative or regulatory action to implement at least one of them. States with full enforcement authority can, for example, issue regulations or guidance, undertake market conduct exams, or take disciplinary action related to the law’s consumer protections, such as its ban on denying coverage based on preexisting conditions or charging women more than men. (To learn more about states’ approaches, see this resource and previous reports on implementation of the early market reforms and the 2014 market reforms.)
These state laws further complicate congressional efforts to repeal and replace the ACA. This is particularly true if Congress votes to repeal the law without a replacement plan in place—even if it allows for a multiyear transition period. If Congress were to repeal the ACA’s subsidies and individual mandate while leaving the market reforms in place—a likely scenario if it opts for partial repeal using the budget reconciliation process—state insurance markets could be devastated, as indicated by experience and described in a recent post.
Some state legislatures may want to revisit how they regulate their insurance markets during the 2017 legislative session based on Congress’ pledge to repeal the law, but doing so could be challenging. If a federal replacement plan is not in place, state legislators would have little guidance about whether they should, for instance, explore alternative regulatory approaches or coverage mechanisms such as high-risk pools. Premature state-level changes could contribute to the destabilization of state insurance markets, and some state legislatures meet only every other year so changes made now could not be quickly reversed.
If a state moved to repeal its state-level ACA protections before a federal repeal, the ACA’s market reforms would still remain in effect in that state until full federal repeal. In states such as Connecticut, Minnesota, and Virginia, legislation to repeal the market reforms or marketplaces is already under consideration. However, states may want to retain their current ACA protections and enforcement authority to maintain stability in their insurance market and avoid any regulatory or enforcement gaps during the transition.
Finally, polls show that the ACA is more popular than ever and many of the law’s major provisions continue to be viewed favorably even across party lines, including the ban on annual and lifetime limits, extension of dependent coverage up to age 26, coverage of preventive services without cost-sharing, and a ban on gender rating, among many others. Regardless of what happens in Congress, state policymakers should consider maintaining (or, if they have not yet done so, adopting) these provisions to ensure they are reflected in state law. New York, for instance, recently issued regulations requiring insurers to cover reproductive health care without cost-sharing, in part because of concerns about the future of this consumer protection under the ACA.
Because Congress has not yet enacted or even coalesced around a single federal replacement plan, state policymakers should exercise caution in doing so until Congress adopts new reforms to make informed decisions about changes to state law.