“1332 Waivers”: Opportunities for Innovation in Healthcare Coverage with Protections for Consumers
Although the ACA expands health insurance coverage through Medicaid and the Health Insurance Marketplace, it does not limit states to using only those two options in the future. Starting in 2017, states can seek federal approval of “1332 waivers” (or State Innovation Waivers) that allow states to waive key portions of the Affordable Care Act (ACA) and instead use alternate approaches of providing insurance coverage. As you may remember, last year there was uncertainty as to whether a 1332 waiver alone could also be used to change Texas Medicaid and/or CHIP, or to provide an alternative path to Medicaid Expansion for covering adults at or near poverty.
The U.S. Department of Health and Human Services (US HHS) and the Department of the Treasury resolved much of the confusion in December 2015 when they released guidance clarifying fundamental standards or “guardrails” that the 1332 waivers must meet. The guidance reconfirms that a 1332 waiver itself cannot be used to change state Medicaid or CHIP programs.
As is true today, states wanting to test innovative, alternative approaches in Medicaid and CHIP in the future must submit an “1115 waiver.” States can submit coordinated 1115 and 1332 waiver proposals. For example, a state could design a 1332 waiver to test alternative ways to insure families above 133 percent of the federal poverty income, and also use an 1115 waiver to cover adults with incomes at or below that level. These coordinated waivers could be designed to achieve better continuity of care between Medicaid and private insurance available through the Marketplace, making the transition smoother for low-income residents.
When a state submits a 1332 waiver for the population above Medicaid income limits that is eligible for Marketplace coverage, the state must still demonstrate that the 1332 waiver will not result in a loss of coverage, affordability, or comprehensive benefits in CHIP and/or Medicaid. This standard will be applied whether or not a state submits a coordinated 1115 waiver application along with the 1332 waiver.
The guidance also clarifies “cost neutrality” requirements around Federal spending under a proposed waiver. When coordinating a 1332 waiver with a Medicaid 1115 waiver, each waiver must “stand alone” in not increasing federal spending, and savings from one cannot be used to offset costs in the other.
In summary, the 1332 waivers must:
- maintain affordability for the consumer, measured by resident’s net out-of-pocket expenses as a percentage of their income
- be as comprehensive (i.e. cover, at a minimum, a broad benefit package subject to federal standards)
- cover as many state residents as would be covered without the waiver; and
- not add to the Federal deficit during each year of the waiver and over a ten-year budget period.
In all of these aspects, there is a special consideration for vulnerable populations (e.g., low-income, elderly, or those who have or are at a higher risk of a serious health issue), who cannot be negatively impacted by the waiver.
The big takeaway for Texas is that the Section 1332 waiver opportunity offers an avenue for innovations, as long as those innovations do as much and as well for Texas consumers as they would have experienced without the waiver.
For further reading and analyses of currently proposed 1332 waivers:
- Innovation Waivers and the ACA: As Federal Officials Flesh Out Key Requirements for Modifying the Health Law, States Tread Slowly
- New Section 1332 Guidance A Mixed Bag For States
- Innovation Waivers: An Opportunity for States to Pursue Their Own Brand of Health Reform
- Understanding the Affordable Care Act’s State Innovation (“1332”) Waivers
- Manatt on Marketplaces: Vermont Posts State Innovation Proposal to Waive SHOP Requirement
- Manatt on 1332: Massachusetts Posts State Innovation Proposal to Preserve Merged Market
Contributed by CPPP Health and Wellness Policy Intern Julia Von Alexander.