49 of 50 states have balanced budget requirements. States are experiencing a massive revenue shortfall due to the COVID pandemic. State budgets have core priorities of education, medical care, criminal justice and civil courts, transportation, infrastructure and recreation on public lands. State budgets also have short run fixed costs of pensions and debt upkeep as well. After those expenses, other add-ons can be included.
One of the add-ons that about a dozen states have chosen to spend money is Section 1332 reinsurance waivers for the ACA individual market. These waivers have a couple of different flavors but fundamentally they are similar. A source of money that is not tied to premiums is injected into the claim paying pool. This external money takes on a share of the claims and allows premiums to drop. The lower premium level triggers lower federal subsidy payments which then gets recycled back into the external source of money. The key here is the external source of money. Some states use general fund revenues, others use a general insurer assessment while others have other dedicated funding streams.
These waivers serve a fairly small number of people in the state. The waivers make insurance cheaper for individuals earning over 400% FPL and slightly more expensive for subsidized individuals who choose a plan that costs less than the benchmark plan. The marginal cost of insuring one extra person is fairly high.
States will have to make very hard choices in the next several weeks as updated revenue and expenditure projections come in. 1332 waivers can be either reduced or eliminated to free up the funding stream that went to the waiver. The freed up funds could be redirected to other, higher priority programs.
Below is the language from the Colorado 1332 waiver approval letter that outlines early termination procedures. The key is a notification by July 1st.
If a waiver was to be terminated, we should hear rumbles in the next week or so and then comment periods in two or three weeks.
This is worth keeping an eye on.
Just what people who’ve spent weeks in the hospital and have heart or kidney damage or lungs full of tiny blood clots want to hear.
A slightly different topic: I am already bracing myself for significant State cuts to the disabilities funding that plays for services and supports for Ohio Son. That funding is through Medicaid and goes to local nonprofits which provide the programming.
I will not be surprised if some of the smaller nonprofits fold up or are merged into larger ones. That is a trend that was already in place and I expect it to accelerate.
What this means is Ohio will be expecting all of us “natural supports” (jargon for family) to take a larger role. As if we weren’t already the main provider of supports and services.
@Ohio Mom: I really do not understand the federal GOP deciding to kneecap state governments -NOW- rather than helping them through hard times. Without significant aid, the states will be cutting school budgets by 25% and firing more teachers than were fired during the 2008-2020 financial crisis. Also police and first responders go away, as well.
Colorado is facing a $3 billion budget shortfall, and we are uniquely screwed in that we have a ratcheting effect of three different amendments to the state consitution : the TABOR (Tax Payers Bill of Rights) Amendment, which prohibits any government, state or local, from being able to establish a “rainy day fund” *or* allowing progressive taxation on higher incomes; the Gallagher Amendment, which basically puts a cap on residential property taxation and forces much higher business property taxation as a result; and Amendment 23, which forces the state to keep increasing K-12 spending at the expense of other items in the budget if there are revenue shortfalls.
I am one of the folks who gets the CO insurance subsidy. I am betting it will have to vanish like smoke.
catclub: It’s true that ALL state services are going to take big hits. I’m just always fixated on disability finding because that is most immediate to me.
One widely unpopular move Ohio’s new governor took earlier this year was raising the gas tax to bring in money for road repair — now gas sales are down and the roads are going to stay in their sorry condition if not continue to crumble.
Yes, education, police, fire, snow removal, parks, the list goes on and on, all decimated to varying degrees — some localities will try to raise taxes and levies to make up some of the difference. I don’t know how successful they’ll be in the growing economic downturn.
Mitch and his pals didn’t want to waste an opportunity to shovel money to their allies, that’s done and now so are we.
As usual, their MO is leaving a mess for the next Democratic administration to clean up.
Miss Bianca: I had no idea Colorado had been taken over by the ALEC crowd. That’s quite the trifecta.
Not allowing rainy day funds is downright irresponsible.
The rainy day fund is what saved Ohio during the Great Recession. The Democratic governor spent almost all of it, under a dollar was left. Then the Republicans ran on the Democrats leaving the state broke. Schmucks.
@Ohio Mom: I forget who said it – probably someone here – but the notion that any government or legislature’s ability to tax should be dependent on the whims of a ballot initiative is just fucking nuts. Oh, and Bruce? The guy who was responsible for TABOR? In prison here in CO for – wait for it – tax evasion. So, to add insult to injury, MY tax dollars are now going towards feeding his ass in jail.
Miss Bianca, I hope you can take a little pleasure in the idea that Bruce probably isn’t enjoying prison cuisine. I’m glad to hear he’s where he belongs.
Republicans who follow take the position that teachers, firefighters, et al are extremely overpaid, and we should not hesitate to tighten their belts for them.
Well, in some parts of the country these groups probably are overpaid and are certainly over-pensioned.
One solution (as always) would be to lower all salaries by 10 per cent and avoid layoffs. Some private employers have done this with decent results.
But public employee unions always fight against this. I assume this is because the senior employees are over-represented in their ranks.
@catclub: The cruelty IS THE POINT. This isn’t about economics or even policy, it’s about hurting people that conservatives think should be hurt.
Put another way, 49 of 50 states have had their budgeting process sabotaged by conservatives to fail in EXACTLY this situation. They’ve spent the last few decades working at every level possible to make “government doesn’t work” the truth by wrecking anything they can touch.
WTF is “over-pensioned” even supposed to mean? The contracts were negotiated, you don’t just get to unilaterally bail on them.
Better idea: raise the taxes on every person who claims “we need belt-tightening” by 10%. Alternatively, offer them a flat 10% reduction in height, taken from the top…
Check out the website called Pension Tsunami on all the gov’t employees who get 6 figure pensions, and can spike their pensions with extra overtime in their last few years.
Now, it may be that this looting is greatest in Cal and Illinois and Wash DC. That is an argument I would entertain.