As 2017 draws closer, state interest in Section 1332 Waivers (also called State Innovation Waivers) is heating up. This is not entirely unexpected given that January 1, 2017 is the first day that these waiver programs could take effect. It is heartening to see that states are looking to this opportunity to make the Affordable Care Act (ACA) work better in their states, especially in the face of what many (including us) see as unduly restrictive guidance issued by the administration.
New 1332 Developments
In just the past few weeks, there have been interesting new developments on the 1332 waiver front.
Hawaii’s 1332 waiver to align its Hawaii Prepaid Health Care Act with the ACA has been deemed complete. The waiver will allow Hawaii to continue to administer its program that provides comprehensive coverage to nearly every full-time and many part-time employees in Hawaii. The completion notice from HHS means that Hawaii’s waiver will move to the analysis and approval process.
Covered California, the state’s health insurance marketplace, submitted its waiver to allow undocumented persons to purchase coverage on the marketplace. These purchases would not be eligible for tax credits or cost-sharing subsidies. The waiver application will now go through a completeness review by the federal government.
Alaska recently passed a state-funded reinsurance plan for its individual market. Over the summer, guidance from the Center for Consumer Information and Insurance Oversight (CCIIO) encouraged states that invested in the stability of their state health insurance market to seek federal support through Section 1332 waivers. Alaska is signaling its intent to submit a waiver to further stabilize rising premiums and bolster its individual market.
What do these all have in common? These states are looking to use Section 1332 waiver flexibility to tailor solutions that meet the needs of their health care system. Each of these innovative solutions is unique to the state’s health care market, but together, they provide lessons for the future of state-based efforts to adapt the ACA’s coverage provisions according to state needs.
We have previously written about the opportunities (and limits) of Section 1332 waivers, and are not surprised that these three examples are targeted waivers designed to fit the narrow guidelines issued earlier this year by the Obama Administration. In each of these cases, the state is forging forward on state-specific decisions that thread the needle on acceptable waivers.
In Hawaii, the wavier protects its highly successful, pre-ACA (indeed pre-ERISA) employer mandate program, known as “Prepaid.” The state is seeking to waive some provisions that could cause either consumer or insurer confusion, but the waiver is not forecasted to change the affordability or comprehensiveness of coverage, nor change the number of people enrolled. In California, as part of a broader immigrant inclusion effort, which includes outreach efforts and coverage expansions, Covered California seeks to allow anyone, regardless of immigration status, to purchase unsubsidized coverage on the marketplace. The premiums and comprehensiveness of the plans for sale would not change. And while the details of Alaska’s wavier program are not available, one potential path based on the CCIIO guidance would be to leverage the savings in advanced premium tax credits from the lower premiums engendered by Alaska’s reinsurance plan, which will help stabilize the individual market. These savings could then be reinvested into the reinsurance program to increase its scope or longevity, and thereby continue or even enhance the program’s beneficial impact on rates.
States to Watch
But this is not the end of the story for 1332 waivers. Even though the path to system-wide reforms may be daunting, especially in the face of existing guidance, we continue to see states thinking about broader use of a 1332 waiver, and expect that the next Administration will consider broadening state flexibility. Two states bear watching:
Minnesota’s Health Care Financing Task Force reported on potential strategies to increase access and improve the quality of health care for Minnesotans, including the use of 1332 waivers. Legislation has been introduced that would authorize the state to pursue a public option under a 1332 waiver. Such an effort could build on the state’s successful Basic Health Program (BHP), one of two in the country. To create their BHP, the state transitioned their pre-ACA MinnesotaCare program into a high actuarial value, low cost sharing coverage option for those up to 200 percent of the federal poverty level. The public option legislation envisions allowing Minnesotans of any income level to buy into that plan through the state’s marketplace, MNsure.
Oklahoma’s 1332 State Innovation Waiver Task Force has begun meetings to explore potential state-based ways to reduce the financial burden for residents and employers seeking affordable, quality health care coverage. Created after the state legislature earlier this year authorized the state to apply for a 1332 waiver, the task force includes a range of stakeholders, including businesses, consumer advocates, health care providers, and commercial health care insurers. The task force is charged with investigating a potential “alternative pathway for affordable, high quality health care coverage in Oklahoma’s commercial insurance market that meets the needs of Oklahomans.” While the task force is just starting its work, the conversations in Oklahoma will be interesting to watch given the state’s strong political opposition to the ACA.
Minnesota and Oklahoma are interesting states to watch because of their very different approaches to the ACA: the former has embraced the ACA, expanding Medicaid and setting up a state-based marketplace, while the latter has done neither. What they have in common, though, is their desire to pursue state-based solutions to the coverage and affordability challenges in their states. Section 1332 waivers, depending on their treatment in the next administration, can provide an important tool for state efforts.