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State innovation waivers (Section 1332 of the Affordable Care Act)

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Obamacare glossary • Effect of Obamacare • Centers for Medicare and Medicaid Services

State innovation waivers are waivers states may obtain from the federal government that allow them to opt out of certain provisions of the Affordable Care Act (ACA), also known as Obamacare. Examples of ACA provisions states can opt out of include the standard health benefits insurers must cover and the tax credits consumers are provided to purchase health plans. The requirement to cover individuals with preexisting conditions and charge them the same premiums as other enrollees are examples of provisions that may not be waived. Before being approved, states must demonstrate that their waiver plans meet certain conditions outlined in the law.

HIGHLIGHTS
  • As of November 2017, four states had innovation waivers approved by the federal government: Alaska, Hawaii, Minnesota, and Oregon.
  • Alaska, Minnesota, and Oregon used their waivers to establish reinsurance programs, which reimburse insurers for enrollees with high-cost health conditions.
  • Hawaii's waiver allowed it to opt out of establishing a health insurance exchange for small businesses and to enforce a state law with stricter requirements for employer-sponsored insurance than the ACA.

    • Overview

    Section 1332 of the Affordable Care Act (ACA), also known as Obamacare, allows states to apply for waivers from some of the law's provisions in order to make changes to their individual health insurance markets. These are known as state innovation waivers. The Centers for Medicare and Medicaid Services (CMS) started accepting applications for innovation waivers in 2017; if approved, waivers remain in effect for five years before requiring reauthorization.[1]

    Provisions eligible for waivers

    Among other provisions, the following requirements of the ACA may be modified or waived under Section 1332:[1][2]

    • the ten categories of essential health benefits (as defined under the law) that insurers must cover
    • the limits on cost-sharing for health plans on the exchanges
    • the standardization of plans into metal levels (bronze, silver, gold, platinum)
    • the minimum standards health plans must meet to be sold on the exchanges
    • the limitation of catastrophic health plans to individuals under 30 years old
    • the operation and design of the exchanges
    • the premium tax credits and cost-sharing reductions offered to low-income consumers to help purchase insurance
    • the requirement for individuals to purchase health insurance and the requirement for employers to offer it

    This is an incomplete list. Under Section 1332, states could waive any or all of Parts I and II of Subtitle D of the ACA, Section 1402 of the ACA, and Sections 36B, 4980H, and 5000A of the Internal Revenue Code. The Kaiser Family Foundation summarized some examples outlined in administrative guidance of limitations on the types of waivers the federal government could approve:[3][4]

    “ [T]he guidance noted that to the extent waiver programs envision new methods for determining eligibility for or delivering subsidies, states would need to build their own systems and could not rely on IRS or HHS to customize operations of healthcare.gov or the federal tax system to accommodate individual state programs.[5] ”
    —Kaiser Family Foundation

    State innovation waivers cannot change requirements for Medicaid or the Children's Health Insurance Program. Provisions of the ACA that are not in the sections listed above also may not be waived; this includes the requirement to cover individuals with preexisting conditions and the prohibition against varying premiums based on health status or gender.[2]

    Requirements for waivers

    In their applications for waivers, states must submit plans for what they will replace the ACA provisions with. Plans must meet four statutory requirements in order to be approved:[4]

    1. Health coverage provided under the state plans must offer a set of benefits at least as comprehensive as under the ACA.
    2. Health coverage provided under the state plans must be at least as affordable for consumers as under the ACA.
    3. At least a comparable number of individuals must have health insurance under state plans as under the ACA.
    4. State plans cannot increase the federal deficit.

    State governments that want to apply for a waiver must first enact legislation that grants them the authority under state law to carry out the actions proposed in the waiver.[3]

    State waivers

    As of November 2017, four states had innovation waivers approved by the federal government: Alaska, Hawaii, Minnesota, and Oregon. Two states had waivers that were under review: Idaho and Vermont. Three states' waivers had been withdrawn—California, Iowa, and Oklahoma—and Massachusetts' waiver had been denied.

    Enacted waivers

    Alaska

    The federal government approved a state innovation waiver for Alaska on July 7, 2017, for the five-year period beginning on January 1, 2018, and ending on December 31, 2022. Alaska's waiver allowed the state to opt out of the Affordable Care Act's requirement that insurers treat all enrollees in all individual health plans offered in a state as a single risk pool. Alaska waived this requirement in order to establish a reinsurance program. Reinsurance programs reimburse insurers for a portion of the medical claims of high-cost enrollees. Waiving the single risk pool allows insurers to consider reimbursements for higher cost, higher risk enrollees when setting health plan premiums, rather than considering the entire group of enrollees as the same.[6]

    Alaska's reinsurance program was enacted in 2016 to reimburse insurers for the medical claims of enrollees with one of 33 different health conditions identified by the state as high-cost. Under the program, for an enrollee identified as having one of the 33 conditions, the insurer would pay that enrollee's premiums into the reinsurance fund. The fund would then reimburse the insurer for the enrollee's medical claims. The reinsurance program was projected to reduce premiums by 20 to 22% in 2018. Because the federal government would, as a result, spend less in premium tax credits for the state, the Centers for Medicare and Medicaid Services agreed to provide the state an amount equal to this reduction in spending.[7]

    Alaska's plan for funding the program involved an assessment on all insurers, including employer-sponsored insurers, and the federal funding that would have been spent on tax credits.[7]

    Hawaii

    The federal government approved a state innovation waiver for Hawaii on December 30, 2016, for the five-year period beginning on January 1, 2017, and ending on December 31, 2021. Hawaii's waiver modified the Affordable Care Act's provisions related to employer-sponsored insurance.[8]

    Under a state law in effect since 1974, employers in Hawaii with at least one full-time employee were required to offer health insurance. This state law impacted more employers and required them to provide more generous coverage than under the ACA. Hawaii's waiver allowed the state's employer-sponsored insurance law to remain in effect.[2]

    The waiver also permitted Hawaii to opt out of establishing a health insurance exchange for small businesses and provided for $2.8 million over five years to be sent to the state in lieu of the tax credits that small businesses would have received through the exchange. Hawaii stated that this funding would be used for a program administered by the state to help small businesses with healthcare costs for their employees.[8]

    Minnesota

    The federal government approved a state innovation waiver for Minnesota on September 22, 2017, for the five-year period beginning on January 1, 2018, and ending on December 31, 2022. Minnesota's waiver allowed the state to opt out of the Affordable Care Act's requirement that insurers treat all enrollees in all individual health plans offered in a state as a single risk pool. Minnesota waived this requirement in order to establish a reinsurance program. Reinsurance programs reimburse insurers for a portion of the medical claims of high-cost enrollees. Waiving the single risk pool allows insurers to consider reimbursements for higher cost, higher risk enrollees when setting health plan premiums, rather than considering the entire group of enrollees as the same.[9]

    Minnesota's reinsurance program was designed to reimburse insurers for 80% of certain claims that fall between a lower threshold and an upper cap on reimbursements. Since the reinsurance program was projected to lower premiums and thus premium tax credits, the Centers for Medicare and Medicaid Services agreed to provide the state an amount equal to the reduction in federal spending on tax credits for the state. Minnesota stated that this funding would be used to operate the reinsurance program.[10]

    Oregon

    The federal government approved a state innovation waiver for Oregon on October 19, 2017, for the five-year period beginning on January 1, 2018, and ending on December 31, 2022. Oregon's waiver allowed the state to opt out of the Affordable Care Act's requirement that insurers treat all enrollees in all individual health plans offered in a state as a single risk pool. Oregon waived this requirement in order to establish a reinsurance program. Reinsurance programs reimburse insurers for a portion of the medical claims of high-cost enrollees. Waiving the single risk pool allows insurers to take into consideration the reimbursements for higher cost, higher risk enrollees when setting health plan premiums, rather than considering the entire group of enrollees as the same.[11]

    Oregon's reinsurance program was designed to reimburse insurers for 50 percent of certain claims that fall between a lower threshold and an upper cap of $1 million. Since the reinsurance program was projected to lower premiums and thus premium tax credits, the Centers for Medicare and Medicaid Services agreed to provide the state an amount equal to the reduction in federal spending on tax credits for the state. Oregon's plan for funding the reinsurance program included a combination of levying an assessment on employer-sponsored health plans, using excess funding from other health insurance-related programs, and receiving federal funding that would have been spent on tax credits.[10]

    Proposed waivers

    California

    • California submitted a waiver application in December 2016 that, if approved, would have enabled the state to allow individuals residing in California without legal permission to purchase health plans through the health insurance exchange. Such individuals would not have received federal subsidies to purchase health insurance. California withdrew the waiver application on January 18, 2017.[3]

    Idaho

    • In November 2017, Idaho proposed submitting a waiver application that would allow state residents with incomes below the poverty level to purchase subsidized health plans through the health insurance exchange. The state would expand eligibility for subsidized health plans in lieu of expanding eligibility for Medicaid, as the ACA allows.[12]
    Simultaneously, Idaho submitted a separate Medicaid waiver application to create a new Medicaid category for individuals with high-cost, chronic conditions who earn incomes between 100 percent and 400 percent of the poverty level, individuals who were otherwise enrolled in subsidized exchange plans.[12]
    Idaho argued that by expanding eligibility for subsidized exchange plans and removing high-cost enrollees from the market, the federal government would save money on subsidies for the state. The state planned to submit the application after the close of public comments on December 15, 2017.[13]

    Iowa

    • In August 2017, Iowa submitted a waiver request to federal health officials. Under the waiver, Iowa would have created one standardized plan for exchange enrollees to buy. Insurers participating on the exchange would have been required to offer only the standard health plan. The proposal also would have altered the tax credits provided to consumers—the credits would have been based on age and income, with a greater number of age and income categories than under ACA rules. Anyone purchasing health insurance on the exchange, regardless of income, would have been eligible for tax credits. Cost-sharing reductions would have been limited to individuals earning incomes below 200 percent of the poverty level.[14]
    Iowa also proposed to implement a reinsurance program. Reinsurance programs reimburse insurers for a portion of the medical claims of high-cost enrollees. Iowa's program would have paid 85 percent of claims between $100,000 and $3 million, and all claims above $3 million.[14]
    Upon review of the proposal, the Centers for Medicare and Medicaid Services questioned Iowa's financial estimates and informed the state that a condition of approval would be that Iowa ensure it had a source of funding for the waiver. Iowa subsequently withdrew its application.[10]

    Massachusetts

    • In September 2017, Massachusetts proposed to waive acceptance of cost-sharing reduction payments and instead reimburse insurers directly. The Centers for Medicare and Medicaid Services determined that the waiver application was submitted too late in the year to be operable by the 2018 plan year and therefore deemed it incomplete.[15]

    Oklahoma

    • In August 2017, Oklahoma submitted a waiver to establish a reinsurance program. Reinsurance programs reimburse insurers for a portion of the medical claims of high-cost enrollees. Oklahoma proposed to reimburse insurers for 80 percent of medical claims that fall between a lower threshold of $15,000 and an upper cap of $400,000. Oklahoma requested an expedited review of the waiver application in order to implement the program in 2018. Oklahoma withdrew its application on September 29, 2017, stating that it was "forced to withdraw our waiver request due to failure of the Departments [of the Treasury and Health and Human Services] to provide timely waiver approval."[16][17]

    Vermont

    • Vermont submitted a waiver request in April 2016 to waive the requirement that the state establish an online health insurance exchange for small businesses. Instead, the waiver would have allowed small businesses in Vermont to enroll in health plans directly with insurers. The Centers for Medicare and Medicaid Services (CMS) deemed Vermont's application incomplete in June 2016, stating that it did not sufficiently show that it would provide coverage as comprehensive, affordable, and to as many people. According to CMS, the application's economic analyses, data, and assumptions were also not sufficient to meet statutory requirements for waiver applications.[18][19]

    However, in April 2016, CMS also delayed the requirement to establish online exchanges for small businesses for all states until January 1, 2019. This action essentially put Vermont's pursuit of the waiver on hold.[20]

    Recent news

    The link below is to the most recent stories in a Google news search for the terms State innovation waivers. These results are automatically generated from Google. Ballotpedia does not curate or endorse these articles.

    State innovation waivers (Section 1332 of the Affordable Care Act) - Google News

    See also

    Footnotes

    1. ↑ 1.0 1.1 U.S. Government Publishing Office, "Patient Protection and Affordable Care Act," accessed November 13, 2017
    2. ↑ 2.0 2.1 2.2 Center on Budget and Policy Priorities,"Understanding the Affordable Care Act’s State Innovation (“1332”) Waivers," September 5, 2017
    3. ↑ 3.0 3.1 3.2 Congressional Research Service, "State Innovation Waivers: Frequently Asked Questions," October 10, 2017
    4. ↑ 4.0 4.1 Kaiser Family Foundation, "Section 1332 State Innovation Waivers: Current Status and Potential Changes," July 6, 2017
    5. ↑ Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
    6. ↑ Centers for Medicare and Medicaid Services, "Alaska: State Innovation Waiver under section 1332 of the PPACA," July 11, 2017
    7. ↑ 7.0 7.1 Families USA, "Alaska’s Reinsurance 1332 Waiver: An Approach that Can Work," accessed November 14, 2017
    8. ↑ 8.0 8.1 Centers for Medicare and Medicaid Services, "FACT SHEET: Hawai’i: State Innovation Waiver," accessed November 14, 2017
    9. ↑ Centers for Medicare and Medicaid Services, "1332 Waiver Approval," September 22, 2017
    10. ↑ 10.0 10.1 10.2 Families USA, "1332 Waivers in the States," accessed November 14, 2017
    11. ↑ Centers for Medicare and Medicaid Services, "State of Oregon - Patient Protection and Affordable Care Act Section 1332 Waiver Approval," accessed November 14, 2017
    12. ↑ 12.0 12.1 Idaho Department of Insurance, "Idaho's Draft Application Pursuant to Section 1332 of the Patient Protection & Affordable Care Act, Encouraging Waivers for State Innovation," accessed November 15, 2017
    13. ↑ Idaho Department of Insurance, "Public Comments," accessed November 15, 2017
    14. ↑ 14.0 14.1 Iowa Insurance Division, "State of Iowa 1332 Waiver Submission," August 18, 2017
    15. ↑ Centers for Medicare and Medicaid Services, "Preliminary Determination of Incompleteness," October 23, 2017
    16. ↑ Oklahoma State Department of Health, "Oklahoma Section 1332 State Innovation Waiver Application," August 16, 2017
    17. ↑ Centers for Medicare and Medicaid Services, "Oklahoma 1332 Waiver Withdrawal," September 29, 2017
    18. ↑ Department of Vermont Health Access, "Vermont’s Proposal to Waive Affordable Care Act Requirement to Establish an Internet Portal for the Small Business Health Options Program (SHOP) Per Section 1332, Waivers for State Innovation," accessed November 15, 2017
    19. ↑ Centers for Medicare and Medicaid Services, "Vermont Notice of Preliminary Determination of Incompleteness," June 9, 2016
    20. ↑ Duley, Bolwar, Pederson, "Some State SHOP Exchanges May Further Delay Online Enrollment Until 2019," accessed November 17, 2017
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