State Relief and Empowerment Waivers
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.
Under new Oct. 2018 guidance, CMS has stated they will interpret some of the guardrails differently to loosen restrictions. For example:
- 2015 guidance: Focused on the number of individuals estimated to receive comprehensive and affordable coverage
- 2018 guidance: Focused on the availability of comprehensive and affordable coverage
In addition to following the basic guardrails, the Oct. 2018 guidance identified five new principles that future waiver requests should aim to achieve:
- Provide increased access to affordable private health plan coverage (including Association Health Plans and Short-Term Limited Duration Insurance Plans)
- Limit cost increases for consumers and the federal government
- Foster state innovation
- Support and empower those in need
- Promote consumer-driven health care
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.
Section 1332 was effective Jan. 1, 2017. Since that time, the following 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.
- Maine (effective 2019-2023): Waives single risk pool requirement to implement a reinsurance program.
- Maryland (effective 2019-2023): Waives single risk pool requirement to implement a reinsurance program.
- Minnesota (effective 2018-2022): Waives single risk pool requirement to implement a reinsurance program.
- New Jersey (effective 2019-2023): Waives single risk pool requirement to implement a reinsurance program.
- Oregon (effective 2018-2022): Waives single risk pool requirement to implement a reinsurance program.
- Wisconsin (effective 2019-2023): Waives single risk pool requirement to implement a reinsurance program.
* On Dec. 22, 2017, the Tax Cuts and Jobs Act was signed into law, which includes permanent effective repeal of the individual mandate by zeroing out the penalty beginning in 2019.