Are 1332 Waivers the Next Frontier of Obamacare Reform?

Forty-nine Democrats and three Republicans delivered a blow to Affordable Care Act (ACA) repeal efforts last week by voting against what was then seen as the final effort to pass a bill through the Senate. Already this week, talks have ramped up of both a new repeal effort as well as bipartisan efforts to force through a “market stabilization bill.” Despite the focus on possible repeal legislation, the administration already holds one powerful card in their hand – the use of 1332 waivers – that could provide an avenue for healthcare reform through state action.

How Do These Waivers Work?

Under the 1332 waivers, states can apply to change certain ACA rules, such as which benefits are covered, subsidy levels and metal tiers, regulations governing the Exchanges and individual and employer mandates. Under the current statute, however, coverage must be as accessible, comprehensive, and affordable as without the waiver and must not add to the federal deficit.

Administration’s New Relaxed Approach to 1332 Waiver Approval

Since their passage, the Department of Health & Human Services (HHS) has stuck to a very conservative interpretation of the waiver guidelines, making it quite difficult for states to actually make significant changes to their Exchange.

A few months back, however, Tom Price, Secretary of HHS, sent a letter to the states encouraging the use of 1332 waivers to make program changes, signifying a shift to a more flexible approach in waiver approval. While we have not seen any come out yet, we may see a move away from the Obama administration’s interpretation of the statute put into guidance shortly as well.

This move led to much more state interest regarding the use of 1332 waivers going forward. Most recently, Alaska’s waiver was approved under which the state will receive federal pass-through funds to finance a reinsurance program. Several other states have expressed interest in similar waivers, such as Minnesota and Iowa. This is the first example of the type of change HHS has allowed under the waivers, and we may see more comprehensive health reform take shape as guidance on these waivers is expanded, with health insurers at the helm of providing innovative solutions to making states’ health programs more successful.

What’s NEXT – Will There Be a Bill on 1332 Waivers?

In the Better Care Reconciliation Act (BCRA), Republicans called for greater 1332 waiver flexibility. BCRA essentially proposed HHS would be allowed to approve waivers as long as they did not add to the federal deficit. Similarly, the Graham-Cassidy proposal floated around this week touts a similar move back to state autonomy in establishing their health programs. Finally, Senator Alexander set bipartisan meetings for the Senate Health committees for which he expressed a desire to not only pay out cost-sharing subsidies but also create more state flexibility in running their Exchanges.

While the manner in which Congress and the administration will proceed is unclear, it is very likely we will see a much greater emphasis on waiver authority.



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