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 State Relief and Empowerment Waivers (previously called State Innovation 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.
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.
For more information on guardrails and principles used by HHS to review waiver applications, review the issued regulations and guidance.
As part of the application, states can request a subsidy pass-through 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 those amounts must be provided for at the state level.
States with approved 1332 waivers to implement reinsurance programs
To date, the majority of state applications have requested waiving the single risk pool requirement in order to implement reinsurance programs.
- New Jersey
Other approved 1332 waivers
Only one state to date has applied to waive a different ACA provision.
- Hawaii – Waives the Small Business Health Options Program (SHOP) requirement and related provisions that conflict with Hawaii's more comprehensive Prepaid Health Care Act.
* The Tax Cuts and Jobs Act of 2017 includes permanent effective repeal of the individual mandate by zeroing out the penalty beginning in 2019.