States continue to pursue Section 1332 State Innovation Waivers

With repeal of the Affordable Care Act (ACA) stalled, states are increasingly considering Section 1332 Waivers as a way to expand upon or customize the ACA to best address the unique circumstances within the state. Alaska and Oklahoma are the two most recent states to take formal steps toward State Innovation Waivers, both states following on the heels of the recent Section 1332 Waiver approval granted to Hawaii, which we summarized in the February edition of Health Policy News. 

Alaska submitted a Section 1332 Waiver application on December 29, 2016, seeking federal funding to support the state-based reinsurance program. 

In response to projections that premiums in the state’s individual healthcare market would increase 42 percent for 2017, the state created the Alaska Reinsurance Program, which pays claims for individuals with high-cost conditions, removing those claims from the insurance risk pool. State funds were appropriated to fund the program only for 2017. As a result of the program, rates increased an average of only 7.3 percent.

Via the waiver, the state is seeking federal funding from the savings the federal government accrues in premium tax credits because the reinsurance program has prevented what was projected to be a significant rise in premiums.  In addition, enrollment in individual market health insurance in the state is projected to increase generally, with more healthy individuals entering the market – this is also projected to result in premium savings. The state projects premiums to actually decrease up to 4 percent for 2018, saving the federal government $51.6 million in premium tax credits.  

The state meets all comparability requirements because coverage rates are projected to increase while premiums decrease and cost sharing and benefits stay the same. The federal funding will come from savings to the federal government, with the state funding any delta between that funding the cost of the program.

The state also seeks to waive the opportunity to establish CO-OPs in Alaska. The state believes it is not feasible that a successful CO-OP could be established in the state and, therefore, projects that the introduction of a CO-OP could ultimately cause disruption to the market.

PCG’s updated, comprehensive overview of all Section 1332 Waiver requests, opportunities, and actions, including a detailed table of specific states’ requests, is available here. 

Following legislation directing the exploration of waiver opportunities and creation of a Waiver Task Force, Oklahoma published a Section 1332 concept paper in March of 2017. While many of the ideas in the paper are not fully fleshed out (or even concrete proposals), the paper starts the public, statewide discussion regarding options for advancing state-based reform. The paper is expected to be followed-up with a data-driven report in June 2017 and then a rolling implementation starting in 2018.

The primary focus of the state’s efforts is a fledgling individual insurance market. In particular, the state’s individual insurance market is reportedly suffering from:

  • Low enrollment, due to Medicaid crowd-out, lack of awareness, and lack of affordability

  • High churn, with enrollees commonly dropping coverage after they receive care or due to missed payments

  • Lack of competition in the market, as a result of the low enrollment and poor risk

  • Plan designs that do not meet the needs of consumers

  • Lack of state involvement in oversight

The goal of the proposed waivers is to stabilize the individual market by increasing state flexibility, competition, and choice while reducing costs and improving health outcomes. As outlined in greater detail in the comprehensive overview here, the state primarily proposes to do this by:

  • Eliminating the metallic coverage levels under the ACA in lieu of one actuarial value for plans other than high deductible health plans;

  • Introducing state-specific requirements focused on payment and delivery system reform for Qualified Health Plans (QHPs) and reducing the Essential Health Benefits;

  • Increasing administrative simplification for QHP carriers;

  • Ending use of the Federally-Facilitated Marketplace (FFM) and instead utilizing an existing state-based coverage portal;

  • Revisiting the dates of the Open Enrollment Period (OEP) and tighten rules for Special Enrollment Periods (SEPs);

  • Adjusting eligibility for federal financial assistance to those under 100% of the Federal Poverty Level (FPL) that are currently in the gap between Medicaid coverage and tax credits, tightening grace period rules, and enabling auto-enrollment;

  • Establishing and utilizing Health Savings Accounts (HSAs) as a vehicle for financial assistance; and

  • Eliminating certain exemptions from the individual coverage requirement.

Further, the Task Force has proposed pursuing other flexibility unrelated to 1332 waivers at the same time, including:

  • Assuming greater state responsibility over rate review and QHP certification;

  • Expanding age ratios to a maximum of 5:1 (not currently allowed); and 

  • Exploring creation of a reinsurance pool, high risk pool, or hybrid model using federal funding

Click here to read PCG’s updated overview of all Section 1332 Waiver requests, opportunities, and actions, including a detailed table of specific states’ requests and other ideas being considered. 

Our subject matter experts are monitoring all Section 1332 Waiver developments and are versed in the content of all filed 1332 Waivers. We are happy to answer questions states may have as they weigh the options available to them with the parameters of Section 1332 Waivers. Please feel free to contact with questions.