As the Trump administration pushes for more flexibility and innovation at the state level, Section 1332 (State Innovation Waivers) of the Affordable Care Act (ACA) is now uniquely relevant. The waivers, with a first potential initial effective date of January 1, 2017, enable each state to adapt ACA requirements for their residents’ specific needs. But just how do these waivers work?
According to CMS, “State Innovation Waivers allow states to implement innovative ways to provide access to quality health care that is at least as comprehensive and affordable as would be provided absent the waiver, provides coverage to a comparable number of residents of the state as would be provided coverage absent a waiver, and does not increase the federal deficit.”
Essentially, the waivers encourage states to tailor health insurance programs for their state’s needs, while maintaining the same—or better—standards of coverage as provided under the Affordable Care Act. The waivers are good for five years and may be renewed. 1332 waivers are restricted to the following four sections of the ACA:
- The individual mandate — the requirements that individuals must purchase health insurance or pay a tax penalty.
- The employer mandate — which imposes federal tax penalties on employers with 50 or more full-time equivalent employees who fail to offer affordable and comprehensive insurance coverage as described under the ACA.
- Essential health benefits and subsidies — under the ACA, each health insurance plan must offer ten essential health benefits including outpatient care, maternity services, mental health services, and prescription drug coverage. Under the ACA, subsidies are also provided based on the cost of the second-lowest-priced silver plan. Subsidies take into account premium price, household income, family size, and geographical location.
- Qualified health plan certification and health insurance exchanges — states can eliminate or change what it means to be a qualified health plan, as well as the need for a health insurance exchange.
There are prerequisites that need to be met before a state can submit a waiver, such as making the proposal public, allowing time for open feedback, and passing legislation that allows the state to apply for and implement the waiver provisions.
Here’s how the three states who have submitted applications to date have used the waiver process:
- Alaska — wants to re-implement a reinsurance program that the state is funding in 2017, and is asking the feds to partially fund it in 2018 with the savings that it will help realize. They are also seeking a waiver of CO-OP provisions.
- Hawaii — wants exemption from the requirement that it operate a Small Business Health Options Program (SHOP). The waiver allows the small business tax credit amounts that would otherwise be paid to small employers who purchase coverage through the SHOP to be provided to Hawaii and used primarily to support a state fund that helps small businesses offer health coverage. This is the only waiver so far that has been approved.
- Vermont — initially wanted a state single payor system but the current waiver is asking to maintain its current configuration of its small group market by eliminating the requirement to have a small business exchange website for enrollment and premium processing and instead enroll directly with the carriers.
Regardless of what happens with the ACA, it appears that under this Administration, the trend toward giving more power to the states will continue. This is bolstered by the HHS letter to state governors in March 2017 promoting the use of 1332 waivers. That’s why it makes sense for states to move forward in the face of uncertainty — particularly for states who are not using healthcare.gov or states who are considering moving from healthcare.gov to their own exchange. Those states should use 2017 to evaluate potential 1332 strategies.