The earliest Section 1332 State Innovation Waivers are reaching their expiration dates, marking a key milestone under the Patient Protection and Affordable Care Act (ACA). This article explores the next steps those states with expiring waivers are taking. At the same time, a number of new Section 1332 Waivers were submitted recently, as outlined below. Given that the vast majority of Section 1332 Waivers are for state reinsurance programs, those waivers are the focus of this article.
Waiver Extensions
The four states that sought and were given approval for Section 1332 Waivers for state reinsurance programs earliest all secured approval to extend their waivers this month.[1] Alaska, Minnesota and Oregon were granted approval of requests to extend their waivers—all of which expire at the end of the current year—through 2027. Colorado initially sought only a two-year Section 1332 Waiver, for 2020 and 2021. That waiver was also extended through 2026 via the extension request, and through 2027 via the amendment outlined below.
Each of the states noted the positive impact the reinsurance programs have had on their states. Alaska’s application notes that its “reinsurance program was highly successful in the first five years (2018 to 2022),” reducing individual market premiums by an average of 38.5 percent, which has been particularly meaningful for the unsubsidized population. Alaska also attributes the addition of a new insurer to the market in 2020 to the waiver—which the state notes is particularly impactful given the increase in individuals in the individual market due to job loss during the COVID-19 pandemic. Likewise, Minnesota saw individual market premium reductions of 20 percent and Oregon saw individual market premiums reduced by more than 8.2 percent on average.
In its application, Colorado notes that its reinsurance program has been “highly successful,” reducing individual market premiums by over 20 percent on average, with the highest decrease accruing to the rural areas of the state that historically had the highest premiums. Colorado also saw a new market entrant in 2020.
Waiver Amendments
Likely due to the success states are experiencing with their reinsurance programs, they sought very few changes to the reinsurance programs themselves. Alaska and Oregon sought no substantive changes to their waivers in extending them. Minnesota sought only a change to its reinsurance parameters, reducing the coinsurance from 80 percent to 60 percent.
Colorado did not seek a change to its reinsurance program in its waiver extension, but did submit a waiver amendment to implement an additional waiver program, as outlined below. Similarly, Maine, which had a waiver set to expire in 2023, received approval this month to amend its waiver[2] effective at the start of 2023 through 2027. The amendment would allow the reinsurance program to apply to newly merged individual/small group market.
Upcoming Waiver Activity Including New Waiver Applications
A number of states have Section 1332 Waivers set to expire in the coming years, including Wisconsin, Maryland, and New Jersey (in 2023) and Delaware, Montana, North Dakota, and Rhode Island (in 2024). Of those states, Wisconsin is the only one to have already expressed intent to seek approval of a waiver extension, also with no substantive changes. All eyes will remain on the other six states—and New Hampshire, Pennsylvania, and Georgia, whose waivers expire in future years—to see if they also seek to continue their reinsurance programs.
At the same time, additional states have sought approval for state reinsurance programs. Virginia’s Section 1332 Waiver application was approved in May, allowing the state to implement a state reinsurance program beginning in 2023. Like most others, the program will be a traditional attachment point model, reimbursing 70 percent of claims between 40,000 and $155,000 in 2023. The commonwealth expects to see statewide premium savings of 15.6 percent and a resulting increase in enrollment of 2.9 percent.
Idaho more recently applied for a Section 1332 Waiver to support a state reinsurance program, with that request still pending. Idaho’s program is modeled similarly to Alaska’s, with coverage for enrollees with certain medical diagnoses ceded to the pool. The federal comment period recently closed on that waiver, and Idaho is seeking approval to implement for 2023.
Innovative Section 1332 Waivers
As noted above, the vast majority of waivers approved to-date have been for state reinsurance programs. Hawaii’s waiver and a controversial aspect of Georgia’s waiver[3] aside, most of the requests for other sorts of Section 1332 Waivers have not been finalized or approved.[4] However, that may be changing, and it is worth keeping an eye on states that are stepping into new territory via the Section 1332 Waiver vehicle.
Colorado gained approval of a waiver amendment in June to create reduced-cost standardized plans, known as the Colorado Option, which will operate in tandem with the state’s reinsurance program. Approval is effective from January 1, 2023 through December 31, 2027. The plans will have standardized benefits, required premium reduction targets, mechanisms to ensure providers also meet targets, and state subsidies (funded via pass-through funding). The plan requires carriers to offer state standardized plans in any county in which the issuer offers a plan in the individual or small group market, and to reduce premiums by five percent in the first year, 10 percent in the second year, and 15 percent in the third year for those plans. Thereafter, premium increases will be limited to national medical inflation. As a result, the state expects statewide individual market premiums to decrease by 14 percent on average and enrollment to increase by up to 10,0000 individuals (11 percent).
Washington State is seeking approval related to its state-based premium assistance program that will be administered through the state Exchange, the Washington Healthplanfinder, starting in 2023. The state aims to allow those who are not lawfully present to purchase Exchange coverage and benefit from the state subsidies, similar to California’s 2016 proposal.
Given the number of extension requests and new waiver applications, it seems clear that Section 1332 Waivers are here to stay—and provide an opportunity for state-to-state learning as new ideas are proposed.
Footnotes
[1] Hawaii was the first state to win approval of a Section 1332 Waiver to continue its pre-existing employer-sponsored insurance model. That waiver was also extended, effective January 1, 2022 through December 31, 2026.
[3] The Centers for Medicare and Medicaid Services (CMS) has notified Georgia that is has until the end of the month to submit a corrective action plan to bring the non-reinsurance program portion of its Section 1332 Waiver into compliance with federal requirements or it will be suspended.
[4] See California, Idaho (2019), Iowa, Massachusetts, Ohio, Oklahoma and Vermont
