A Tool for Changing the ACA:  1332 State Innovation Waivers 

By Jill Zorn 

united-states-151582_960_720.pngWhen the Affordable Care Act (ACA) was passed, Congress wanted states to have the option to make changes that would make sense for their particular health care and insurance environments.  So, they included an important provision, Section 1332 State Innovation Waivers, to give states the flexibility to “pursue innovative strategies… while retaining the basic protections of the ACA.”  This provision goes into effect January 1, 2017.

 What is a 1332 Waiver? 

The 1332 waiver allows states to pursue their “own brand” of health care reform, by opting out of certain requirements of the ACA, including making such fundamental changes as eliminating the use of marketplaces for buying health insurance or changing how premiums or co-pays are subsidized.

Originally, it was anticipated that this waiver capability could be used to make major changes, up to and including implementing a form of single payer at the state level.  For example, Vermont’s failed attempt at single payer relied on eliminating their exchange and getting significant revenues through a 1332 waiver to help fund their new approach to coverage.

Waiver Rules 

But, while encouraging innovation, the legislative language includes some huge caveats.   Some of them are designed to protect people and ensure that a proposed waiver doesn’t reduce coverage:

  • Coverage must be at least as comprehensive and affordable as it is currently
  • The number of people covered should be comparable

A waiver must be approved by a state’s legislature and the application requires extensive and expensive economic modeling.  Obviously, support from both the health insurance exchange and state government administration is also necessary.

But perhaps the most challenging caveat is that the waiver cannot increase the federal deficit for the next ten years.

In December, the federal government issued guidance to further flesh out some of these ground rules.  The guidance includes “guard rails” to ensure that the waiver is not being used to subvert the ACA’s aims of comprehensive, affordable coverage.  At the same time, the guidance has made it more clear than ever that a waiver that leads to more people being covered will not be approved if this increase in covered lives will cost the federal government more money.

In May, groups from around the country, including Universal Health Care Foundation, signed a letter drafted by Families USA that pushed back against some of the obstacles in the federal guidance.  In a recent phone conversation these advocates had with government officials, however, it didn’t seem like the guidance was going to be changed in the foreseeable future.

This leaves advocates for change with a frustrating paradox:  a major goal of the ACA is to cover more people, yet a 1332 waiver may not be approved if it ends up covering more people.

Is a 1332 Waiver an Option for Connecticut? 

One idea Connecticut advocates were hoping to pursue is to use a 1332 waiver to provide more affordable coverage to low income residents who are just above the eligibility limits for Medicaid, but really cannot afford coverage through Access Health CT.  With many HUSKY parents losing their Medicaid coverage due to state budget cuts, this is an even more pressing issue.

Connecticut could also explore following California’s lead in using a waiver to give undocumented immigrants a chance to buy coverage on the exchange.  Given the dwindling competition in our health insurance marketplace, it also might be worth considering using a 1332 waiver to pursue a public option.

Yet with the current waiver guidance containing such significant obstacles, the prospect of pursuing a 1332 waiver in Connecticut seems quite daunting.  Only time will tell if a 1332 waiver will prove to be a useful tool in Connecticut.

How Are States Using 1332 Waivers? 

Because of the many hurdles discussed above, 1332 waiver applications under consideration in other states to-date mainly involve small technical changes, rather than the bold changes that had been hoped for.

One state that is thinking big, though, is California.  In February, Health Access California issued a “discussion paper” about possible options for using a 1332 waiver.  The health insurance exchange in California, in conjunction with their Medicaid agency, convened a panel discussion in February to talk through waiver options.  In May, with strong support from many stakeholders, California  began moving forward on one of the ideas:  using a waiver to allow undocumented immigrants to purchase unsubsidized coverage on the exchange.


Other Resources

Universal Health Care Foundation and Connecticut Health Foundation commissioned two papers about waivers in 2015:

How Waivers Work:  ACA Section 1332 and Medicaid Section 1115

Using Waivers to Improve Health Care Affordability and Access to Health Insurance in Connecticut

Families USA has a web page devoted to 1332 waivers

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