Health Center State Policy

States Work to Stabilize Health Insurance Marketplaces

By Erin Sheehan and Kersten Burns Lausch

As states continue to see rising premiums and fleeing insurers in their individual insurance marketplaces, a number are looking to the new Section 1332 State Innovation Waiver option to make reforms and increase stability in the marketplaces.

What is a 1332 Waiver?

Created by Section 1332 of the Affordable Care Act (ACA), a 1332 waiver allows states to seek federal approval to waive certain ACA requirements related to the health insurance marketplaces and the employer and individual mandates. Waiver proposals must follow a standard state and federal review process that allows for considerable public comment and meet four criteria:

  1. Scope of Coverage
  2. Affordability of Coverage
  3. Comprehensiveness of Coverage
  4. Deficit Neutrality

Under the Obama administration, the Department of Health and Human Services (HHS) issued guidance defining these criteria and the formal process an application must follow.

Read NACHC’s publication 1332 Waivers and Health Centers to learn more about the criteria and process for 1332 waivers and what health centers need to understand about 1332 waivers.

Recent 1332 Waiver Activity in the States

In late 2016, Alaska became the first state to submit a 1332 waiver application targeted at increasing stability in its individual health insurance marketplace. The application received support from the Obama administration and was approved by the Trump administration in July 2017.  Under the approved waiver, Alaska will receive federal funding to invest in its state-operated reinsurance program (known as the Alaska Comprehensive Health Insurance Fund). The program is designed to reinsure the one remaining insurer offering health coverage on the marketplace for costs to treat people with life-threatening, chronic conditions (such as HIV/AIDS and cancer).  By subsidizing the costs of individuals with high-cost diagnoses, the state expects premiums will be 20 percent lower in 2018 than they otherwise would be and also expects that an additional 1,460 individuals will gain coverage.

Other states are following Alaska’s reinsurance program strategy. Two are currently awaiting approval from CMS:

  • Minnesota: The state submitted their 1332 waiver application for federal review in May 2017. The waiver would create a reinsurance program similar to the program in Alaska. The state predicts that, if approved, the waiver would result in a reduction of premiums by an average of over 20 percent. Additionally, the individual market will increase enrollment of healthy residents by 20,000. The state has requested an expedited review.
  • Iowa: The state applied for a 1332 waiver in June 2017. The application was initially developed after all three of the state’s main carriers announced they would not offer ACA-compliant plans. One insurer, Medica later announced they would keep selling marketplace policies, with a 43% increase of premiums. If approved, the waiver would make such changes as establishing a reinsurance program and a state premium tax credit program. Iowa also requested expedited review; however, the waiver has raised questions of legality as components of the proposal may not meet the required waiver criteria.
1332 Waivers under the Trump Administration

While the new administration has not proposed regulations to redefine the 1332 waiver criteria, it has taken opportunities to encourage states to pursue 1332 waivers.

  • On January 20, President Trump issued an executive order pushing his administration to “take all actions consistent with law to minimize unwarranted economic and regulatory burdens of the [Affordable Care] Act, and prepare to afford states more flexibility and control. The executive order also grants the HHS Secretary the authority and responsibility to “waive, defer, [and] grant exemptions from…any provision [of the ACA] that would impose a fiscal burden.”
  • On March 13, HHS Secretary Tom Price wrote to governors encouraging them to consider State Innovation Waivers. He focused on waivers “that implement high-risk pool/state-operated reinsurance programs” as an “opportunity for states to lower premiums for consumers, improve market stability, and increase consumer choice.”
  • On May 11, HHS and the Department of the Treasury provided a checklist for states, “intended to help states pursuing Section 1332 waivers as they develop and complete the required elements of the application.” Like Secretary Price’s letter, the checklist focuses specifically on waivers that implement high-risk pools and state-operated reinsurance programs.

NACHC continues to work closely with state primary care associations around the country to closely monitor waiver activity.

For more information about 1332 waivers, contact NACHC’s State Affairs team at state@nachc.org.