State Innovation Waivers – Section 1332

Under Section 1332 of the Affordable Care Act (ACA), states can receive permission to waive key provisions of the law in order to implement innovative, alternate health coverage rules or programs while retaining basic consumer protections. States can apply for the five-year waivers through the Department of Health and Human Services (HHS).

What can and cannot be waived 
In the application, states can request to waive or modify any or all of the following ACA provisions.

• Individual and/or employer mandate penalties*
• Essential Health Benefits (EHBs) and cost-sharing requirements 
• Premium tax credits and cost-sharing reductions
• Standards for Marketplaces
• “Plan categories” (or metal levels) on Marketplaces 

Waivers cannot be used to modify or eliminate other patient protections, such as prohibiting annual or lifetime limits or charging higher premiums for those with preexisting conditions.

Waiver guardrails
States seeking a 1332 waiver must demonstrate that its innovation plan stays within certain waiver “guardrails.”

• Comprehensiveness: The coverage must be as comprehensive as coverage available on the public Marketplaces.
• Affordability: The coverage must provide protections against excessive out-of-pocket spending and be as affordable as coverage offered through the public Marketplaces.
• Scope of coverage: Coverage must be accessible to at least as many people as the ACA would cover without the waiver. 
• Deficit neutral: The coverage must not increase the federal deficit.

Federal funding 
As part of the application, states can request a subsidy pass-through to assist with funding the plan. The pass-through provides the state with funds equal to the total premium tax credits, cost-sharing reductions (CSRs) and small business credits that residents would otherwise have received from the Marketplace.

Expenses above and beyond what can be covered using pass-through funding must be provided for at the state level. States are proposing different ways to cover the difference, some of which could affect insured and self-insured employer plans.

Waiver activity
Section 1332 was effective Jan. 1, 2017. Since that time, four state waivers have been approved.

• Alaska (effective 2018-2022): Waives single risk pool requirement to implement a reinsurance program.
• Hawaii (effective 2017-2021): Waives Small Business Health Options Program (SHOP) requirement and related provisions that conflict with Hawaii’s more comprehensive Prepaid Health Care Act.
• Minnesota (effective 2018-2022): Waives single risk pool requirement to implement a reinsurance program.
• Oregon (effective 2018-2022): Waives single risk pool requirement to implement a reinsurance program.

Additional states considering applying for 1332 waivers in 2018 include: