State Waivers

PPACA section 1332 provides for Waivers for State Innovation, which may be granted by the Secretaries of HHS and Treasury. These waivers would allow States to opt out of specific provisions of PPACA for plan years beginning on or after January 1, 2017 if they ensure that state residents have access to high quality affordable health insurance by alternative means. There are several recent developments regarding these State waivers, including proposed legislation tomove forward the opt-out date to 2014 rather than 2017. This Bulletin details the waiver requirements in the recently proposed regulations.

Proposed Legislation on Waivers
"Empowering States to Innovate" is a bipartisan bill introduced by Sens. Widen, Brown and Landrieu that would allow states to receive waivers as soon as 2014 so long as they meet certain criteria (listed below). On February 28, President Obama announced his support for this legislation to accelerate state waivers from 2017 to 2014.

Proposed Regulations on Waivers
Proposed regulations were announced March 10 and published in the Federal Register March 14 that outline the steps states must take to receive a waiver and describe how state proposals may be disclosed to the public, monitored and evaluated. The regulations were published to implement the PPACA provisions scheduled to take effect in 2017, but they would conveniently facilitate implementation of the waivers in 2014 if the bipartisan bill noted above is enacted. The proposed regulations are at: www.ofr.gov/inspection.aspx.

Provisions from which States can Request Waivers
The PPACA provisions from which States can request waivers include:
  • State Health Insurance Exchanges
  • Establishment of qualified health plans
  • Reduced cost sharing for individuals enrolled in qualified health plans,
  • Refundable credits for coverage under a qualified health plan,
  • Shared responsibility for employers regarding health coverage,
  • Requirement to maintain minimum essential coverage.

Process to Apply for a Waiver and Criteria to Receive a Waiver
Before a state can apply for a waiver, it must first enact legislation authorizing a State Innovation Waiver request. The waiver application itself must specify what HCR provisions the state is requesting to be waived and why, and must include detailed information about the state legislation and the alternative program(s) the State intends to implement. The waiver application also must include actuarial certifications, economic analyses, data, and assumptions sufficient to allow HHS and Treasury to determine that the alternative state program(s) proposed under the waiver will provide coverage that will meet all the following criteria:

  • Provide coverage that is at least as comprehensive as that offered through the ACA and the Health Insurance Exchange;
  • Provide coverage that is at least as affordable as it would have been through the ACA and the Health Insurance Exchange;
  • Provide coverage to at least as many state residents as otherwise would have been covered under the ACA and the Health Insurance Exchange; and
  • Not increase the Federal deficit.

State Innovation Waivers may be granted for up to five years and may be renewed if the State demonstrates that it meets the above criteria. If a State's alternative program does not meet the criteria, the provisions in the ACA would become effective.

Possible State-Based Innovations

States have significant flexibility to implement health care reform. Several potential state-based innovations listed in White House and HHS news releases include:

  • A streamlined system that links tax credits for small businesses and low income families;
  • Automatically enrolling individuals in health plans;
  • Immediately allowing large employers to buy health insurance through the new State Health Insurance Exchanges;
  • Alternative health plan options and/or an increase in the number of benefit levels.

States are also free to propose other alternatives.

The proposed regulations also specify the timeframes for public notice and comment periods at the state level before a waiver application is submitted and at the federal level after an initial determination is made. The purpose is to ensure that the public receives adequate notice and time to review and comment on any alternative policies proposed by the States. Also under the proposed regulations, states would be able to submit a single application to apply for other waivers (such as those allowed under Medicare and CHIP) as well as the state innovation waiver.