Through Section 1332 of the Affordable Care Act (ACA), states may apply for innovation waivers to alter key ACA requirements in the individual and small group insurance markets. States can use the flexibility granted by 1332 waiver authority to shore up fragile insurance markets, address unique state insurance market issues, or experiment with alternative models of providing coverage to state residents. With Congressional efforts to repeal and replace the ACA on hold, attention will likely turn to 1332 waivers as states explore ways to address access and affordability issues in their individual and small group markets.
While the ACA provides states with some flexibility to alter certain provisions using 1332 waiver authority, it establishes guardrails that limit the extent of the changes states may make. The current statutory language requires that state waiver applications must demonstrate that the innovation plan will provide coverage that is at least as comprehensive in covered benefits; at least as affordable (taking into account premiums and excessive cost sharing); cover at least a comparable number of state residents; and not increase the federal deficit. The ACA requirements states may seek to waive using Section 1332 authority include:
- Individual and employer mandates;
- Essential health benefits (EHBs);
- Limits on cost sharing for covered benefits;
- Metal tiers of coverage;
- Standards for health insurance marketplaces, including requirements to establish a website, a call center, and a navigator program; and
- Premium tax credits and cost-sharing reductions.
Additionally, states may request an aggregate payment of what residents would otherwise have received in premium tax credits and cost-sharing reductions, referred to as subsidy pass-through funding. States may not waive certain provisions through section 1332, including guaranteed issue, age rating, and prohibitions on health status and gender rating. While states can submit ACA innovation waivers in conjunction with Medicaid waivers (under Sec. 1115 of the Social Security Act), innovation waivers cannot be used to change Medicaid program requirements.