House leaders survey states on ACA Section 1332 state innovation waivers

Instead of outright repeal of the Patient Protection and Affordable Care Act’s insurance market reforms, Republican House leaders are examining a key provision of the law that permits states to dispense with many of the reform requirements state innovation waivers starting in 2017. That indicates a possible strategy shift of using the law’s provisions to shape reforms more in line with GOP thinking to give more leeway to states rather than dispensing with it wholesale.

On Dec. 2, House Majority Leader Kevin McCarthy (R-CA), committee Chairmen Kevin Brady (R-TX), Fred Upton (R-MI), John Kline (R-MN) and Chairmen-elect Greg Walden (R-OR) and Virginia Foxx (R-NC) sent a letter to state governors and insurance commissioners asking if their states had requested or plan to request a Section 1332 waiver. The letter also inquires what could be done to facilitate a Section 1332 waiver as well as the impact of repealing state statutes implementing the ACA. The letter requests a response by Jan. 6, 2017, indicating House Republicans wish to move quickly.

Section 1332 of the Affordable Care Act allows states to opt out of most the law’s individual and small group health insurance market reforms including requirements to have a health benefit exchange, that plans provide specified essential health benefits as well as advance tax credit premium subsidies and reduced cost sharing for those households meeting income criteria. Also waivable are the individual and employer shared responsibility mandates.

To qualify for a waiver from the federal government, states must demonstrate their programs would ensure individual and small group plans would offer coverage at least on a par with plans providing the essential health benefits prescribed by the Affordable Care Act. State programs would also have to ensure individuals and small employers would have access to coverage with affordable premiums and protections against “excessive” out-of-pocket costs (such as annual maximums) like those for ACA plans and cover a comparable number of residents as existing ACA plans. States granted Section 1332 waivers are eligible for “pass through” federal funding operating like an annual block grant. The funding would cumulatively represent what state residents would otherwise receive under ACA rules for premium tax credits, cost-sharing reductions and small business credits. Federal funding under the waiver cannot exceed that amount by adding to the budget deficit.

The ACA Section 1332 state innovation waiver dovetails with GOP House Speaker Paul Ryan’s “A Better Way” health care reform proposal that calls for state innovation grants. However, Ryan’s grant qualification benchmarks differ from the Affordable Care Act’s state innovation waiver, most notably reducing insurance premiums rather than merely ensuring they are affordable. According to a summary of Ryan’s proposal, states must achieve a targeted reduction of individual and small group premiums and the number of medically uninsured.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email or call 530-295-1473. 

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Frederick Pilot

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