United States: IREG Update - November 2015

Section 1332 waivers—New flexibility coming to a state near you in 2017

The Affordable Care Act (ACA) includes many new provisions and policies that bring federal regulation into the business of health coverage—policies from the individual mandate to the essential health benefits insurance plans must cover. However, one provision that is starting to get more attention in state capitols across the country is section 1332 that gives states the opportunity to apply for waivers from certain provisions of the ACA. These waivers allow states the flexibility to craft health plans that suit the needs of their states. Section 1332 of the ACA outlines a process where states can apply to the administration for waivers that would go into effect on January 1, 2017. However, the regulations that outline the specific procedures states must follow when applying highlight both the opportunities but also the practical limitations states face when considering these waivers.

The benefits

The 1332 waiver process allows states to petition the administration to apply the federal subsidies that would otherwise have flowed to their states to fund alternative plans to address their states' health care needs. Through the 1332 process, states can develop alternative proposals that release them from several of the ACA's main requirements, including:

  • Individual mandate
  • Employer mandate
  • Creation of the health insurance marketplaces
  • Regulations determining benefit design in the ACA exchanges
  • Federal subsidies and/or cost-sharing subsidies

States can also use the 1332 waiver process to combine and coordinate applications for other already existing federal program waiver processes, like Medicaid or Medicare. This allows states additional options when it comes to the scope of their alternative plans—anywhere from expanding government programs to pursuing single payer healthcare to expanding Medicaid through private coverage to more targeted approaches like reforming the ACA exchanges.

The constraints

While a state's waiver gains them flexibility from certain ACA regulations, it still must maintain certain ACA requirements in order to gain approval. State waiver proposals must show that they still meet:

  • The comprehensive coverage requirement—That it will provide coverage that is at least as "comprehensive" as the current coverage under the ACA
  • The affordability requirement—That it will provide coverage and cost sharing protections that are at least as "affordable" as those under the ACA
  • The scope of coverage requirement—That it will provide coverage to at least as many state residents as under the ACA
  • The federal deficit requirement—That the waiver will not increase the Federal deficit

This balancing act means that states seeking waiver approval before 2017 must be strategic in both the scope and purpose of the waiver proposals they pursue. It will be crucial for states to pair their waiver applications for certain ACA provisions with alternative reform proposals that would be attractive to the current administration.

Timeline requirements

If states are contemplating whether to engage in the 1332 waiver process, there are several process requirements that dictate the need for states to take action quickly. For example, waiver applications must include:

  • A copy of the enacted state legislation that gives states the authority to implement the 1332 waiver,
  • A comprehensive description of the state legislation and program that will implement the proposed waiver plan,
  • Proof that the state has complied with the public notice requirement that includes an opportunity for a meaningful level of public input through at least two public hearings,
  • Actuarial analyses that support the state's finding that the proposal will meet the comprehensive coverage, the affordability and the scope of coverage requirements, and
  • Economic analyses that support the state's assertion that the proposal meets all four requirements, including a detailed a 10-year budget plan that proves deficit neutrality.

As state legislatures and policymakers prepare for their 2016 legislative sessions, they need to consider a few preliminary questions if they are thinking about pursuing the 1332 waiver process:

  • Do they need a state law giving them the authority to engage in the waiver process? Or a state law that creates a program to implement the waiver plan?
  • In order to comply with the public notice and comment requirements, when is it necessary to announce the state's intention to develop a 1332 waiver? How, when and where will the public hearings need to be held?
  • Conduct a balanced analysis of the size and scope of the desired waiver that will best fit the needs of the state while meeting the coverage, affordability and deficit neutrality requirements.


Noteworthy links from the past two weeks


  • The New York Department of Financial Services wrote a letter to federal regulators describing potential new cyber security requirements for insurers and banks [New York State Department of Financial Services]
  • The search for a permanent Superintendent of Financial Services in New York continued [Financial Times]


  • The Financial Stability Board issued a new list of global systemically important insurers (G-SIIs) [FinancialRegulatory.com]
  • Fitch Ratings pointed to a potential off-ramp from the G-SII list [Reactions]


  • A National Association of Insurance Commissioners subgroup proposed new revisions to a just adopted rule on Indexed Universal Life insurance illustrations [JDSupra]


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