Brief State Roles Using 1332 Health Waivers

How States Are Using Section 1332 Waivers

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.

To pursue CMS approval of a Section 1332 waiver, states must develop and post a draft application for public comment and input. State legislation authorizing a certain entity—such as a state department of insurance or governor’s office—to apply for a waiver is also often required.

Additionally, states must demonstrate through actuarial analysis how their Section 1332 waiver application meets the following statutory requirements, or “guardrails:”

While earlier CMS guidance from 2015 provided a strict interpretation of Section 1332 waiver guardrails, the Trump Administration released guidance in October 2018 establishing several “less restrictive” changes for evaluating waivers. These included relaxing the comprehensive and affordability standards; allowing states to forgo HealthCare.gov and instead sell both ACA and non-ACA compliant health plans through private insurers and web brokers’ websites; and allowing states to pursue executive orders and regulations in conjunction with existing state laws in order to seek 1332 waivers.

The Biden Administration proposed new rules in June 2021 to supersede the Trump-era guidance and largely return to the 2015 interpretation of the statutory guardrails. This includes removing the less restrictive standards for determining whether coverage is as comprehensive, affordable and covers a comparable number of individuals. Additionally, the proposed rules require states to ensure implementing a waiver would not negatively affect vulnerable populations. States are also encouraged to determine whether a waiver promotes health equity.