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On October 22, 2018, the Centers for Medicare & Medicaid Services (CMS) and the U.S. Department of Treasury jointly announced new guidance overhauling the 1332 Waiver process, which will take effect in 2020. With modification of the 1332 waiver process, the new policy will address states’ request for greater flexibility. It will also permit states to use waivers to increase choice and competition within their insurance markets, use subsidies to help consumers afford health coverage, and introduce new flexibilities.  

According to the press release, the “… guidance marks a new direction that delivers the flexibility that the law always intended for states.”  The establishment of the waiver builds on CMS’ measures to provide relief to American families impacted by the rising cost of insurance and HHS’ Notice of Benefit and Payment Parameters for 2019’s goal of increasing state flexibility, while improving program integrity, and reducing regulatory burdens.   

Among the changes include a restructuring of the 1332 Waiver process and guardrails. According to the guidance, states will no longer be subject to obtaining state waiver plan approval from their state legislature. Rather, moving forward, governors will be able to take action on their own. In 2020, CMS will also begin to calculate the waiver costs over the entire life of the proposal, rather than each year, according to Rea Hederman Jr., executive director of the Economic Research Center and vice president of policy at The Buckeye Institute.  

The announcement also unveiled a new type of waiver, known as a State Relied and Empowerment Waiver. This will aid states in their ability to establish new approaches that provide increased access to affordable private market coverage, encourage sustainable spending growth, foster state innovation, support and empower those in need, and promote consumer-driven healthcare. The waiver, which is intended to give states increased choice and competition within their insurance markets, is anticipated to help lower costs and increase coverage accessibility for consumers. Adding to this, the guidance will also introduce new flexibilities for states by: 

  • Allowing states to provide consumers with plan options that best meet their needs while at the same time ensuring people, including those with pre-existing conditions, retain access to the same level of coverage available today without the waiver;    
  • Continuing to require that a comparable number of people have coverage, but expands the definition of coverage to include more types of coverage, such as short-term plans; 
  • Providing greater flexibility for states to consider improvements in comprehensiveness and affordability for state residents as a whole versus the prior focus on specific populations; 
  • Supporting increased variation and flexibility for states that may want to leverage components of the Federal Exchange platform to implement new models; and 
  • Providing flexibility for states to meet the state legislative authority requirement. The guidance clarifies that in certain circumstances, existing state legislation that provides statutory authority to enforce ACA provisions and the state plan, combined with a duly-enacted state regulation or executive order, may satisfy the requirement that the state enact a law.    

Lastly, CMS has altered the definition of ACA health plans for 2020 and beyond to include short-term and association health plans. As a result, the guidance will permit states to use federal funding to provide subsidies to people buying short-term health insurance policies. CMS Administrator, Seema Verma, stated in an interview that this will help states “…to provide consumers plan options that best meet their needs, while at the same time ensuring that those with preexisting conditions retain access to the same coverage as today.” 

CMS’ announcement also disclosed that it is preparing to release waiver concepts to help “spur conversations and ideas with states and illustrate how states might take advantage of this new opportunity to move beyond the ACA.” According to Seema Verma, CMS is expected to publish an array of potential waiver applications in the coming weeks.  



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