The U.S. Department of Health and Human Services (HHS) and the U.S. Department of the Treasury issued proposed rules on March 14 on the Waiver for State Innovation provisions under section 1332 of the Affordable Care Act (ACA).   President Obama announced on March 1 that he supports bi-partisan legislation (The Empowering States to Innovate Act, S. 248, H.R. 844) introduced by Senators Ron Wyden (D-OR) and Scott Brown (R-MA) on February 7 that would make section 1332 effective before full implementation of the ACA in January 2014.  This pending legislation, which has five co-sponsors in the Senate and is under consideration in the Senate Finance Committee, could transform section 1332 from an ACA opt-out for states in 2017 into an opportunity for all states to begin immediately to devise innovative, state-based alternatives to achieve key objectives of the ACA.     

Section 1332 permits waivers in individual states of various ACA requirements affecting qualified health plans, health insurance exchanges, premium reductions for low-income persons, and tax penalties to be imposed on certain employers and individuals who refuse to purchase qualified health coverage.  The rules issued on March 14 indicate that state innovation proposals may be submitted directly to HHS, which will coordinate with the Treasury and the Internal Revenue Service on any waivers of federal tax penalties.   State innovation proposals may concurrently seek waivers of Medicaid, CHIP, and Medicare requirements under the ACA, which will be reviewed by the Centers for Medicare and Medicaid Services (CMS) under longstanding section 1115 research and demonstration authority.  

The March 14 rules outline the new, consolidated waiver review process, HHS coordination of the entire process, timelines, documentation that states must submit, public notice requirements, and criteria for approval. State innovation proposals must offer health insurance coverage as comprehensive as the ACA requires, must be as affordable to consumers as the ACA requires, and must provide coverage to a comparable number of state residents. A federal budget neutrality test also applies. Supporting documentation must include enacted state legislation, economic and financial analyses, actuarial certifications, ten year budget projections, and full explanations of assumptions and methodologies.   HHS will notify the state within 45 days whether the application is complete, or ask for missing elements, and will have another 180 days to decide whether to approve or deny a complete application. HHS suggests that states submit waiver applications at least 12 months before the state’s requested effective date, but states planning to develop waiver applications should initiate rigorous program, legal, regulatory, and financial analyses long before that, and states should monitor the progress of the critical Wyden-Brown legislation.  Public comments on the March 14 rules are due May 13.   

About Tom Entrikin

A former policy specialist with the U.S. Health Care Financing Administration (now Centers for Medicare & Medicaid Services (CMS)), Tom Entrikin has vast experience providing technical assistance to states on Medicaid eligibility, coverage, and reimbursement; provider certification and enrollment; program integrity; recovery of third party liabilities; Medicaid Management Information System (MMIS) performance specifications and operations; interagency agreements; contracts with managed care organizations; and Medicaid waiver programs.

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