What is a Section 1332 Waiver and Why You Need to Know About It

With the current push to transform health and human services from a crisis to a proactive model, states are uniquely positioned to design new initiatives that support healthier individuals, families, and communities. The uncertainty, however, around the future of the Affordable Care Act (ACA) and potential passage of the American Health Care Act (AHCA) has left states wondering what options they have in the interim. One opportunity gaining attention is the 1332 State Innovation Waiver.

On January 20, 2017 President Trump directed federal agencies to delay the implementation of “any provision or requirement of the ACA that would impose a fiscal burden on any state or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers” and others. In response, the Department of Health and Human Services (HHS) sent a letter on March 13, 2017 to state governors regarding Section 1332 of the ACA. Beginning in 2017, Section 1332 allows states to apply for a State Innovation Waiver to pursue strategies for providing access to high-quality healthcare plans at a lower cost. In order to be approved, the plans must be “at least as comprehensive and affordable as would be provided without the waiver, provide coverage to at least a comparable number of residents of the state as would be provided coverage without a waiver, and not increase the federal deficit.”

The following ACA provisions may be waived through this Innovation Waiver:

  • Establishment of qualified health plans (QHPs)
  • Consumer choices and insurance competition through the Exchanges
  • Premium tax credits and cost-sharing reductions for plans offered within the Exchanges
  • The employer shared responsibility rules
  • The individual mandate

On May 15, 2017, the Centers for Medicare and Medicaid Services (CMS) and the U.S. Department of the Treasury released a checklist with further information intended to assist states in moving forward with 1332 State Innovation Waiver applications. The checklist specifically focuses on the implementation of high-risk pool/state-operated reinsurance programs in order to improve market stability, and increase consumer choice, and lower costs to consumers. According to CMS Administrator, Seema Verma, “Today’s guidance addresses the ACA’s impact in driving up insurance costs and reducing choices. State initiated waivers that implement high-risk pool/ state-operated reinsurance programs will help lower premiums, stabilize the health insurance exchange, and meet the unique needs of each state.” States interested in applying for State Innovation Waivers are encouraged to reach out to both CMS and the U.S. Department of Treasury promptly for assistance in formulating an approach that meets the requirements of Section 1332.

In a recent letter to the nation’s governors, HHS Secretary, Tom Price, encouraged states to take advantage of the Innovation Waiver. “We welcome the opportunity to work with states in particular to pursue approval of waiver proposals that include high-risk pool/state-operated reinsurance programs.”

The first state to apply for and receive an Innovation waiver in this category is Alaska. The state’s 2018 application estimates that their Reinsurance Program will save the federal government $51.6 million in Advanced Premium Tax Credits and will boost individual enrollment in the marketplace by nearly 1,650.

When formulating an approach that meets the requirements of State Innovation Waivers, it is important to keep the following in mind:

  • If a state submits an 1115 Medicaid waiver and a 1332 State Innovation Waiver, the savings accrued under one waiver cannot be used by the other to meet the deficit neutrality requirements
  • Section 1332 does not change existing waiver authority for provisions in other federal programs, such as Medicaid or Medicare (including waiver authorities specific to Section 1115 related to Medicaid and CHIP)
  • Federal officials restated and clarified that any new, 2017 state application would have to provide for a public notice and comment period, including public hearings to receive a sufficient level of public input, and enact a state law providing for its implementation of the waiver prior to the end of the 2017 legislative session

Conclusion

While the debate about the future of the ACA continues in Washington, states must decide how best to create affordable and accessible health plans for the 2018 market. Cori Uccello, Academy of Actuaries Senior Health Fellow, comments, “With the deadlines for insurer rate filings fast approaching, policymakers need to act soon to address individual market issues for next year. The consumers, insurers, and health care providers in the individual market will all be affected by whether and how these challenges are addressed.” For those states interested in submitting a 1332 State Innovation Waiver application, now is the time to get started.

Blog Resources

https://www.sullivan-benefits.com/wp-content/uploads/HHS-Promotes-ACA-Section-1332-Waivers-3-27-17.pdf

http://healthaffairs.org/blog/2017/05/12/cms-checklist-for-state-1332-waivers-focuses-on-high-risk-pools-reinsurance/

http://www.ncsl.org/research/health/state-roles-using-1332-health-waivers.aspx

https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/Downloads/Checklist-for-Section-1332-State-Innovation-Waiver-Applications-5517-cpdf.pdf

http://healthaffairs.org/blog/2016/11/02/state-interest-in-1332-waivers-gaining-steam/

https://healthpayerintelligence.com/news/cms-offers-resources-for-high-risk-pools-reinsurance-waivers

https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/Section_1332_state_Innovation_Waivers-.html#About%20the%201332%20State%20Innovation%20Waiver%20Application%20Process

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