State Roles Using 1332 Health Waivers

Jack Pitsor, Samantha Scotti 7/1/2021

As state policymakers look to control rising health insurance premiums and enhance affordable coverage options, many states have applied for and implemented Section 1332 waivers—also known as State Innovation Waivers or State Relief and Empowerment Waivers. Section 1332 of the Affordable Care Act (ACA) allows states to waive certain ACA requirements in order to customize their health insurance systems to better meet the state’s context and needs while retaining the basic protections of the ACA. States must seek federal approval for a Section 1332 waiver from the Centers for Medicare and Medicaid Services (CMS). The waivers were first made available in 2017.

State Action on Section 1332 Waivers

As of June 2021, CMS has approved waiver applications for 16 states. At least seven states have enacted legislation authorizing a Section 1332 waiver application but have yet to submit a waiver to CMS. And, after previously receiving federal approval for a Section 1332 waiver, Colorado and Maine enacted legislation to seek an additional waiver or amend its current waiver.  

Approved
Pending
Enacted Legislation
Enacted Legislation and Approved Waiver
N/A
 
State Action on Section 1332 Waivers AL AK AZ AR CA CO CT DE FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MO MS MT NE NV NH NY NJ NM NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY DC AS GU MP PR VI

USA States

Click on a state for details.

Alabama

 

Alaska

Description: Federal pass-through funding for a reinsurance program.

Date Approved: July 2017

Authorizing Legislation: HB 374

Arizona

Arkansas

California

Colorado

Reinsurance Program

Description: Federal pass-through funding for a reinsurance program.

Date Approved: July 2019

Authorizing Legislation: HB 1168

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Standardized Health Benefit Plan Legislation

Description: Requires the insurance commissioner to seek a Section 1332 Waiver to implement standardized health benefits plans in the individual and small-group marketplaces. The legislation requires the commissioner to identify any savings to the federal government attributed to implementing standardized health benefits plans in order to receive federal pass-through funding.

Year Enacted: 2021

Authorizing LegislationHB 1232

Connecticut

Delaware

Description: Federal pass-through funding for a reinsurance program.

Date Approved: August 2019

Authorizing Legislation: SCR 70, HB 193

District of Columbia

Florida

Georgia

Description: Federal pass-through funding for a reinsurance program. Additionally, the state received approval for transitioning away from HealthCare.gov to the Georgia Access Model—a decentralized marketplace for selling both qualified health plans (QHPs) and non-QHPs.

Date Approved: November 2020

Authorizing Legislation: SB 106

Hawaii

Description: Relates to the requirement that states must operate a Small Business Health Options Program.

Date Approved: December 2016

Authorizing Legislation: SB 2775

Idaho

Illinois

Indiana

Description: Authorizes the commissioner of insurance and governor to apply for a Section 1332 waiver.

Year Enacted: 2018

Authorizing Legislation: HB 1301

Iowa

Kansas

Kentucky

Description: Authorizes the commissioner of insurance to apply for a Section 1332 waiver with respect to health insurance.

Year Enacted: 2017

Authorizing Legislation: HB 242

Louisiana

Maine

Reinsurance Program

Description: Federal pass-through funding for a reinsurance program.

Date Approved: July 2018

Authorizing Legislation: LD 659

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Extending the Reinsurance Program to Small Group Plans

Description: Requires the state to seek federal approval for an amendment to its current waiver to extend its reinsurance program to small group plans. If approved, the state will combine its individual and small group marketplaces into one pooled market.

Year Enacted: 2020

Authorizing Legislation: LD 2007

Maryland

Description: Federal pass-through funding for a reinsurance program.

Date Approved: August 2018

Authorizing Legislation: HB 1795, SB 387

Massachusetts

Michigan

Minnesota

Description: Federal pass-through funding for a reinsurance program.

Date Approved: September 2017

Authorizing Legislation: HF 5

Mississippi

Missouri

Montana

Description: Federal pass-through funding for a reinsurance program.

Date Approved: June 2019

Authorizing Legislation: SB 125

Nebraska

Nevada

Public Option Legislation

Description: Requires the department of health and human services director, the insurance commissioner and the health insurance exchange director to apply for a Section 1332 Waiver to obtain pass-through funding for a public option plan on the insurance exchange. The legislation also authorized the state to apply for a combination of Section 1332 and Medicaid 1115 waivers necessary to implement the public option, such as authorizing the state to combine the public option and Medicaid risk pools.

Year Enacted: 2021

Authorizing LegislationSB 420

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Previous Legislation

Description: Authorizes the commissioner of insurance to apply for a Section 1332 waiver with respect to health insurance coverage.

Year Enacted: 2019

Authorizing Legislation: SB 482

New Hampshire

Description: Federal pass-through funding for a reinsurance program.

Date Approved: August 2020

Authorizing Legislation: HB 469

New Jersey

Description: Federal pass-through funding for a reinsurance program.

Date Approved: August 2018

Authorizing Legislation: SB 1878

New Mexico

Description: Authorizes the superintendent of insurance, in consultation with the governor, to apply for a Section 1332 waiver to establish a program relating to access and affordability of health insurance coverage.

Year Enacted: 2019

Authorizing Legislation: HB 436

New York

North Carolina

North Dakota

Description: Federal pass-through funding for a reinsurance program.

Date Approved: July 2019

Authorizing Legislation: HB 1106

Ohio

Oklahoma

Oregon

Description: Federal pass-through funding for a reinsurance program.

Date Approved: October 2017

Authorizing Legislation: HB 2391

Pennsylvania

Description: Federal pass-through funding for a reinsurance program.

Date Approved: July 2020

Authorizing Legislation: HB 3

Rhode Island

Description: Federal pass-through funding for a reinsurance program.

Date Approved: August 2019

Authorizing Legislation: HB 8351

South Carolina

South Dakota

Tennessee

Texas

Description: Authorizes the commissioner of insurance to apply for a Section 1332 waiver relating to small employer health benefit plans.

Year Enacted: 2017

Authorizing Legislation: SB 1406

Utah

Vermont

Virginia

Description: Requires the Virginia State Corporation Commissioner to establish a reinsurance program upon federal approval of a Section 1332 waiver application.

Year Enacted: 2021

Authorizing LegislationHB 2332

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Previous Legislation

Description: Authorizes the secretary of health and human resources to develop and apply for a Section 1332 waiver to implement innovative solutions to help stabilize the individual insurance market. Solutions may include a state reinsurance program or market stabilization program payments, among other solutions.

Year Enacted: 2018

Authorizing Legislation: HB 5002a

West Virginia

Washington

Description: Requires the state health insurance exchange—in consultation with the Washington Health Care Authority and the Office of the Insurance Commissioner—to explore all opportunities relating to federal waivers, including Section 1332 Waivers. This includes waivers to receive federal funding to implement state-level premium subsidies, increase access to qualified health plans and implement/expand programs for health insurance affordability and access.

Year Enacted: 2021

Authorizing LegislationSB 5377

Wisconsin

Description: Federal pass-through funding for a reinsurance program.

Date Approved: July 2018

Authorizing Legislation: HB 770

Wyoming

American Samoa

Virgin Islands

Guam

Mariana Islands

Puerto Rico

Some states withdrew their waiver application or CMS deemed their application incomplete. For a list of these states, please visit the CMS website.

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.

Federal Approval Process

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:”

  1. Provides coverage that is at least as comprehensive as would be provided without the waiver.
  2. Provides coverage and cost-sharing protections against excessive out-of-pocket spending that are at least as affordable for the state’s residents as would be provided absent a waiver.
  3. Provides coverage to at least a comparable number of state residents.
  4. The proposal will not increase the federal deficit.

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. 

Additional Resources