Section 1332 waivers, or state innovation waivers, allow states to apply to the federal government to waive certain provisions of the Affordable Care Act (ACA). This can allow the states to pursue innovative strategies for providing residents with access to quality, affordable insurance, while retaining the law’s basic protections. In this blog we evaluate state’s waiver approval statuses.
Below is our analysis for states with approved, pending, and withdrawn requests.
- Hawaii – Hawaii’s State Innovation waiver, which exempts the state from operating a SHOP program and allows alternative use of the small business tax credit funds, went into effect on January 1, 2017. Hawaii’s long-standing state law, referred to as the Prepaid Health Care Act, requires virtually all employers to offer coverage to their employees and provides small employers with premium assistance. According to CMS, since providing SHOP coverage is necessary to receive the Small Business Health Care Tax Credit under section 45R of the Internal Revenue Code, waiving these provisions prevents small employers in the state from being eligible for the credit.
- Alaska – Alaska’s application implemented the Alaska Reinsurance Program (ARP) for 2018 and future years in an effort to lower premiums. According to CMS, this program waived the requirement to considers all enrollees in a market to be part of a single risk pool. The ARP is a state-operated reinsurance program that covers claims in the individual market for individuals with one or more of 33 identified high-cost conditions to help stabilize premiums. Alaska projects that under this program, premiums will be 20% lower in 2018 than they would be without the waiver. The state also predicted an average of 1,460 additional individuals will have health insurance coverage due to the lower cost.
- Minnesota – Minnesota’s waiver created the Minnesota Premium Security Plan, a state-based reinsurance program to stabilize premiums in the state’s individual market. The new law authorizes $271 million per year for the reinsurance program for 2018 and 2019. According to the Minnesota Commerce Department, reinsurance would cover 80% of an individual’s annual claims cost between $50,000 and $250,000. The department projects that insurers will be able to reduce 2018 premiums by an average of 20% from what they would be without reinsurance.
- Oregon – Oregon’s 1332 waiver also created a reinsurance program. As of October 2017, the reinsurance program, created by the Oregon House Bill 2391, will reimburse carriers for high claims and will spread the cost of high-risk individuals more broadly among carriers. Oregon expects these steps will reinforce certainty in the market, slow the rise of health insurance premiums, and facilitate insurance companies’ continued participation throughout the state in the individual and small-group markets.
- New Hampshire – New Hampshire drafted a proposal to provide reinsurance, funded partly by an assessment on insurers. In the proposal, New Hampshire estimated the program would decrease premium rates by 7.3% from what they would be otherwise. However, the proposal also stated the assessment to fund the reinsurance would have slightly increased premiums for small and large group coverage. This proposal was posted on July 19, 2017 but is currently on hold as the Governor opposed the assessment.
- Vermont – Vermont proposed using the 1332 waiver to waive the requirement to set up a SHOP internet portal and instead allow small employers to enroll in qualified health plans directly with insurers. HHS determined the waiver application to be incomplete, but separately issued guidance permitting states to allow for direct enrollment into SHOP through 2018. This request has not been formally withdrawn but is currently on hold.
- Idaho – The State of Idaho, in conjunction with Your Health Idaho submitted a Section 1332 State Innovation Waiver request. If approved, the waiver would: increase participation in Idaho’s individual health insurance market; provide affordable coverage options to working Idaho households with incomes below 100% FPL and are not eligible for Medicaid; and work with Idaho’s proposed 1115 waiver – which would provide coverage to those complex needs up to 400% FPL – and individual high-risk pool to stabilize and decrease the cost of insurance premiums in the individual health insurance market through this dual waiver approach. According to the state, more than 78,000 Idahoans with incomes of under 100% FPL are without coverage. Due to the requirement to have income of at least 100% FPL in order to qualify for assistance in paying for monthly insurance premiums (APTC), these Idahoans are effectively locked out of the commercial health insurance market due to the unaffordability of coverage. In doing so, this unique usage and combination of 1115 and 1332 waivers would extend APTC and CSR eligibility to working Idaho households under 100% FPL. Following the commenting period, which closed out on December 15, 2017, Idaho took 2 actions: the Insurance Commission invited insurers to file “state-based plans” that would not cover all of the essential health benefits that marketplace plans must cover and that would vary premiums based on health status; the bill authorizing the waivers would also create work requirements for adults receiving Medicaid . According to Families USA, legal authority for the waiver is doubtful.
- Maine – State law authorized consideration of a 1332 waiver for the existing reinsurance plan and is currently in the process of authorizing its enacted legislation, as the first step in the waiver process. According to the state, it has established the Maine Guaranteed Access Reinsurance Association – a non-profit entity – and has created a guaranteed access reinsurance mechanism by issuing an amendment to 1. 24-A MRSA §3953, sub-§1 . The Amendment:
- Requires that as a condition of doing business with the state, an insurer that has issued or administered medical insurance within the previous 12 months or is actively marketing a medical insurance policy or medical insurance administrative services in this State must participate in the association;
- Suspends operations of the association until December 31, 2023; and
- Authorizes the Superintendent of Insurance to develop a proposal for an innovation waiver under Section 1332 of the ACA to facilitate the resumption of operations of the association, if approved by the Governor, to apply for and implement a Section 1332 waiver .
- Oklahoma – In 2016, Oklahoma explored potential methods of increasing healthcare coverage to Oklahomans, which would reduce financial burdens and also provide employers with affordable coverage options for their employees . Establishing a task force of State stakeholders, the state has since indulged in analyzing options of pursuing a 1332 waiver. As of 2017, the state was anticipating 1332 waiver approval, however following approval delays Oklahoma’s Secretary of Health and Human Services, Terry Cline, withdrew its requested waiver. In her letter to then Secretary of HHS, Thomas Price, she cited that the federal government had reneged on a promise at the last minute: “As late as last Friday, September 22, an agreed upon approval package had been circulated with the state expectation, and federal department promise, that waiver approval would be forthcoming on Monday, September 25.”  The waiver would have implemented a reinsurance program for the 2018 plan year to lower premiums in the individual market. Withdrew the waiver due to CMS delays. Despite this roadblock, the state is currently considering further other reforms under 1332 waiver authority.
- Kentucky – In 2014, Kentucky expanded its Medicaid program to all newly eligible adults with an income below 134% of the federal poverty level. According to Health Management Associates (HMA), despite high enrollment numbers, the state reported that health metrics were low – under 10% of beneficiaries received an annual wellness or physical exam during the first year of implementation. As of December 2017, Kentucky had 26 million members in managed care. Kentucky’s program includes a number of changes that would impact Medicaid expansion enrollees, as well as the traditional non-disabled Medicaid enrollees; these changes were examined in our earlier blog.
- California – In 2016, California’s waiver sought to offer health insurance to individuals ineligible to purchase qualified health plans due to immigration status. These new enrollees would be eligible for subsidies but would use California’s marketplace to enroll. The application stated that approximately 13% of the state’s school-aged children have a parent who is an undocumented immigrant. With this waiver, all members of the family would be able to enroll in coverage. The UC Berkeley CalSIM team estimate that approximately 17k Californians would fain coverage as a result of this waiver. California decided to withdraw the application in January 2017.
- Oklahoma – In 2016, Oklahoma explored potential methods of increasing healthcare coverage to Oklahomans, which would reduce financial burdens and also provide employers with affordable coverage options for their employees . Establishing a task force of State stakeholders, the state has since indulged in analyzing options of pursuing a 1332 waiver. As of 2017, the state was anticipating 1332 waiver approval, however following approval delays Oklahoma’s Secretary of Health and Human Services, Terry Cline, withdrew its requested waiver. In her letter to then Secretary of HHS, Thomas Price, she cited that the federal government had reneged on a promise at the last minute: “As late as last Friday, September 22, an agreed upon approval package had been circulated with the state expectation, and federal department promise, that waiver approval would be forthcoming on Monday, September 25.”  The waiver would have implemented a reinsurance program for the 2018 plan year to lower premiums in the individual market. Oklahoma w the waiver due to CMS delays. Despite this roadblock, the state is currently considering further reforms under 1332 waiver authority.
- Iowa – This waiver proposed to offer a single, standardized silver plan to marketplace enrollees instead of requiring marketplace issuers to sell at least one silver plan, cost sharing reduction variations of that plan, and one gold plan. After filing the application, Iowa also submitted amendments to provide cost sharing reductions to some of the low to middle income Iowans qualified for federal help. The proposal would have eliminated cost sharing for residents 200-250% of the FPL and did not include Native American cost sharing protections. Iowa also proposed changes in the premium tax credit structure – only people buying the standard silver plan would be eligible for credits. CMS raised a number of questions about the proposal, particularly regarding financial estimates. Iowa withdrew the application on October 23, 2017.
Combining 1115 & 1332s
Section 1115 are waivers for Medicaid programs. However, per requirements, States that want to make a change that effects both groups – Commercial and Medicaid – will also need to gain approval for a 1332 waiver.
This has come up in a few states, including Idaho. Here’s an example: In Idaho, there has been an ongoing conversation about people that have too high an income to be on Medicaid, but don’t hit the 100% of FPL threshold to get tax credits. After proposing stopgap measures for years, this year they are trying to tie Medicaid and Commercial changes together. 20K people will get Medicaid eligibility by creating a small eligibility group via 1115, and would have an impact in the commercial market because they would be a part of what is driving up individual market costs. Pulling them out would allow carriers to reduce their premiums. As a result, there is a savings to the feds. These savings would be allocated to apply a state version of tax credits for people that do not qualify for financial assistance.
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