Can Idaho “Covered Choice” Work?

Authors: Patti Boozang, Ellen Montz and Tara Straw

Editor: Amanda Eisenberg

• Idaho has proposed a Section 1332 waiver, “Covered Choice,” giving Medicaid expansion eligible adults between 100% and 138% of the federal poverty level (FPL) the option to enroll in subsidized Marketplace coverage instead of Medicaid.

• The design has structural flaws: enrollees would face subsidized commercial-market costs, fewer benefits, and Medicaid’s work reporting and six-month redeterminations requirements layered on top of Marketplace rules.

• These flaws are not only a problem for consumers: they may make the 1332 waiver difficult if not impossible for CMS to approve under the affordability, comprehensiveness, and coverage guardrails. Idaho would also likely need Medicaid Section 1115 demonstration approval to let Medicaid eligible adults take Marketplace coverage instead of Medicaid.

• To make Covered Choice workable, Idaho should work with CMS on a coordinated 1115 and 1332 waiver approach, deem enrollees compliant with work reporting, align renewals with the Marketplace cycle, use pass-through funding to close affordability gaps, and smooth Medicaid–Marketplace transitions. It would take a good deal of work for Idaho and federal partners to make these changes.

In January 2026, the Idaho Department of Insurance submitted a 1332 waiver application to the federal Departments of Health and Human Services (HHS) and the Treasury, asking to extend the state’s existing reinsurance waiver and to amend it to add Covered Choice, a new program slated to begin January 1, 2027. Under Covered Choice, adults who qualify for Medicaid through the state’s expansion population could opt out of Medicaid and instead enroll in a subsidized plan in the Your Health Idaho marketplace, using federal Marketplace funding to support that coverage.

Some Medicaid eligible consumers want the option of commercial coverage with a different set of plans and providers. And Section 1332 is one pathway Idaho has to experiment with providing that choice. But as submitted, the program would leave consumers that choose it worse off and fail to clear the requirements for federal approval. That said, we are keeping an open mind and offering some thoughts on changes that might make Covered Choice work as a test of consumer choice.

Where the Covered Choice Proposal Misses the Mark

Idaho describes the Covered Choice program to expand coverage options and consumer choice and, alongside the reinsurance extension, to advance the ACA’s goals of broader, more affordable coverage. An inherent feature of Covered Choice is that people would give up important Medicaid protections and benefits if to opt into Marketplace coverage without relieving them of Medicaid’s administrative burdens. Idaho builds in safeguards that partially address some these issues: enrollees would be routed to silver-level plans with the lowest cost sharing rather than, say, a zero-premium bronze plan with a deductible they could never meet, and anyone who chooses a Marketplace plan can switch back to Medicaid at any time. But significant consumer risks remain:

• Affordability. The state’s data shows that Medicaid eligible individuals who opt in to Covered Choice will pay more. Idaho Medicaid has no premiums, whereas Marketplace premiums would be roughly $484 for the year. The out-of-pocket spending in Medicaid is capped at 5 percent of gross monthly income, but is $1,000 in the Marketplace, excluding premiums. In 2027, Idaho estimates Medicaid enrollees would pay no premium and $68–120 per year in medical and prescription copays; in the Marketplace, an enrollee aged 19–29 would pay $868 and someone over age 50 around $1,600. In short, Medicaid eligible individuals would be faced with much higher health care coverage expenses if they enrolled in Covered Choice.

• Benefits. While both Medicaid and Marketplace plans cover the ACA’s 10 essential health benefits, Medicaid also covers services like non-emergency medical transportation, adult dental care and long-term services and supports (LTSS) that Marketplace plans do not. Idaho acknowledges the gap but frames it as a wash by pointing to extras some Marketplace plans offer instead, like nutritional counseling or discounted gym memberships. That may be a trade off some people are willing to make, especially if they are young, healthy and have no transportation issues. And if they need benefits that only Medicaid offers, they do have the protection of pivoting back to Medicaid.

• Administrative Complexity and Risk of Coverage Loss. Idaho’s proposal contemplates that Covered Choice enrollees would be treated as Marketplace enrollees for most purposes, but Medicaid beneficiaries for some administrative purposes, even as they lose key Medicaid protections. For instance, they would be subject to work reporting requirements and to reverifying their eligibility every six months. Idaho’s proposal also assumes these enrollees would be subject to the Marketplace’s own employment-related rules in addition to the Medicaid rules: a person offered “affordable” employer-sponsored insurance (employee premiums costing less than roughly 10% of income in 2027) can lose the premium tax credit. Layering both sets of rules onto Covered Choice enrollees doubles their work to stay covered. That not only undermine the state’s “choice” objective but deters people from maintaining any coverage at all.

The “Waiver Problems”

Section 1332 waiver applications to waive ACA Marketplace statutory requirements must stay within four “guardrails” to be approvable: coverage must be at least as affordable and comprehensive as without the waiver, cover a comparable number of people, and not raise the federal deficit. These are statutory tests, and HHS and the Treasury have limited room to approve an application that does not meet them. Higher costs, thinner benefits, and the layering of Medicaid’s administrative rules onto Marketplace coverage each cut against a criterion on which the waiver will be judged. The risks Covered Choice presents for consumers appear to strain at least three of the four guardrails required for 1332 approval:

• Affordability is the clearest exposure. As discussed above, the state data shows that some individuals will pay more under Covered Choice, a typical disqualifier for waiver approval.

• Comprehensiveness is the second vulnerability. Idaho’s “it’s a benefit wash” framing is unlikely to satisfy a test that asks whether covered benefits are at least as generous as they would be without the waiver (i.e., a gym membership does not substitute for dental care).

• The coverage guardrail is the third problem. Idaho’s claim that a comparable number of people will be covered leans heavily on reinsurance, drawing in more unsubsidized, higher-income enrollees through lower gross premiums. But the analysis doesn’t account for the administrative drag of living under both sets of rules, and the absence of any coordination between Medicaid and the Marketplace. Consider the Covered Choice enrollee who loses a qualified health plan for non-payment of premiums (a very likely scenario). That person may return to Medicaid, but not automatically, and coverage will be lost in the gap.

Beyond the 1332 approval challenges, we believe that Idaho would need a companion Medicaid Section 1115 waiver to allow Medicaid-expansion-eligible adults to be able to elect subsidized Marketplace coverage in lieu of Medicaid. Federal 1332 regulations expressly contemplate a coordinated waiver process when a state innovation plan also requires authority under Titles XVIII, XIX or XXI, including Section 1115 demonstrations. That does seem to be the case for Idaho to implement Covered Choice, which implicates a long list of Medicaid statutory requirements for Medicaid expansion beneficiaries who opt in to Covered Choice: charging Marketplace premiums and cost sharing runs past Medicaid’s limits on what beneficiaries can be asked to pay; substituting a qualified health plan for the state’s Medicaid benefit package raises comparability of benefits and may put specific entitlements in play, including EPSDT for 19- and 20-year-olds and non-emergency medical transportation; and eliminating retroactive coverage and steering enrollees into closed commercial networks depart from Medicaid rules on retroactive eligibility and free choice of provider.

Is There a Way to Make Covered Choice Work?

There are changes that may make Covered Choice potentially workable for consumers, and may create a path for federal approval:

1. Smooth the affordability cliff using targeted pass-through dollars. Section 1332 lets states request an aggregate payment of the premium tax credits and cost-sharing reductions residents would otherwise receive, and Idaho already receives pass-through funding for reinsurance. Rather than directing all of it to broad premium reduction across the individual market, the state could carve out a targeted wrap for the Covered Choice population, buying down the roughly $484 in annual premiums and reducing copays and deductibles so that a 19-to-29-year-old’s projected $868 in annual costs, and an older adult’s $1,600, move toward Medicaid-comparable levels. This would require Idaho to amend its 1332 waiver request.

2. Work with CMS to obtain approval for a companion Section 1115 demonstration for the Covered Choice program. Idaho should work with CMS to craft a coordinated Medicaid and Marketplace approach and waiver, including a combined federal budget neutrality assessment. Breaking new ground here could be a precedent for other coverage and affordability innovation proposals that are implemented in and require combined federal budget neutrality assessment across Medicaid and the Marketplaces.

3. Deem the Covered Choice population compliant with the Medicaid work requirement (because they are). Covered Choice is open only to adults with incomes above 100% FPL. Under HR 1 and the CMS interim final rule implementing it, a person satisfies the community engagement requirement by earning at least $580 a month. A single adult at 100% FPL earns roughly $1,330 a month; at 138% FPL, closer to $1,830. Every person eligible for Covered Choice clears the income test by more than double, and the rule expressly contemplates criteria for being deemed compliant without further action by the enrollee. This could potentially be accomplished through the State proposing and CMS approving a WCER SPA that deems Community Choice enrollees compliant with WCER requirements.

4. Let Covered Choice coverage behave like Marketplace coverage, with annual renewals rather than six-month redeterminations. These enrollees are opting into a commercial product: they give up Medicaid’s benefit package, its retroactive coverage, and its near-zero out-of-pocket costs. Having accepted those trade-offs, they should get the administrative treatment that comes with commercial coverage. Idaho should align Covered Choice with an annual re-enrollment process and reserve mid-year action for the enrollee who wants it: the person choosing to return to Medicaid. Idaho may need to request this authority as part of its 1115 Medicaid waiver request, but could work with CMS to accomplish it administratively, if permissible.

5. Fix the Bridge Between Medicaid and the Marketplace. Idaho does not expressly frame Covered Choice as a fix for the coverage transitions faced by people between 100% and 138% FPL (those on the bubble between Medicaid and the Marketplace), but the proposal does partially address that problem. For enrollees who elect Covered Choice and later cross the expansion threshold from 138% to 139% FPL, Covered Choice makes that move less disruptive. Idaho should finish the job for those 99% to 100% FPL for people who elect Covered Choice, and from 138% to 139% FPL for those who do not. Closing those gaps, ideally through automatic transfers between Medicaid and the Marketplace requiring no additional action from the enrollee, would benefit many more individuals who encounter changes in eligibility.

Idaho is exploring whether it’s possible to give Medicaid expansion enrollees the choice of Marketplace coverage, and Section 1332 gives states room to test new coverage models. But as submitted, Covered Choice asks consumers to pay more for fewer benefits while still carrying Medicaid’s administrative burdens, creating real risk for consumers and serious problems under the 1332 affordability, comprehensiveness, and coverage guardrails.

Perhaps Covered Choice could be made workable, but only with changes: early CMS engagement on needed Medicaid authority, pass-through funding to reduce premiums and cost sharing, deemed compliance with work reporting, Marketplace-aligned renewals, and smoother transitions between Medicaid and Marketplace coverage. Without those changes, the proposal is less a model for consumer choice than a cautionary example of good intentions that create negative coverage consequences. And it should be said, it will take a good deal of work and commitment on the part of the state and its federal partners to make Covered Choice work.