Most states (15 out of 16 with federal approval) have leveraged Section 1332 waivers to seek federal approval and pass-through funding for state-based reinsurance programs, which aim to lower health insurance premiums for plans sold in the individual insurance market. A reinsurance program is a reimbursement system that protects insurers from high medical claims for beneficiaries with complex and costly medical needs. It usually involves a third party acting as an insurer for the insurance company by paying part of a claim once it surpasses a certain amount, or by covering part or all of the claims for individuals with pre-determined, high-cost conditions.
Reinsurance programs are funded by a mix of state and federal dollars. Through a Section 1332 waiver, states receive federal pass-through funding—or the amount the federal government saves in premium subsidies resulting from the reinsurance program. States then provide additional funding for the reinsurance programs from several sources, including assessment fees on insurers and providers or state general funds.
Beyond reinsurance programs, states can use 1332 waivers for a variety of other purposes—such as waiving requirements for how states operate their insurance marketplaces. For example, Hawaii’s waiver allows the state to cease operation of the ACA’s Small Business Health Options Program (SHOP), which conflicts with certain elements of a long-standing state law requiring small and large employers to provide comprehensive coverage beyond what the ACA requires. The waiver also allows the state to receive federal pass-through funding equal to what the state would receive in small business tax credits if it were to operate SHOP.
Georgia received approval for a two-part 1332 waiver. First, CMS approved and will provide pass-through funding for a reinsurance program beginning in 2022. Additionally, CMS authorized the state to exit the federally facilitated marketplace and instead operate a decentralized, private-sector enrollment platform run by web brokers and insurers. Beginning in 2023, consumers will go to an individual web broker or insurer’s website to buy coverage rather than go to HealthCare.gov. Web brokers and insurers may offer both ACA-compliant health plans and other health insurance plans that do not have to comply with ACA requirements, such as short-term limited-duration health plans.