United States: HHS And Treasury Issue Guidance On 1332 Waivers

While the Affordable Care Act (ACA) created a multitude of new requirements centered around the subsidies to individuals in the new Marketplaces, it also created a potential safety valve for states to make adjustments to the federal system beginning in 2017 under Section 1332 State Innovation Waivers. Several states, including Arkansas, California, Hawaii, Massachusetts, Minnesota, New Mexico, Rhode Island, and Vermont, have indicated an interest in pursuing a Section 1332 waiver, but no such waiver application has yet been submitted or approved. On December 11, 2015, the Department of Health and Human Services (HHS) and the Department of the Treasury released draft guidance, further defining the requirements states must meet for a 1332 waiver to be approved. Comments on the guidance can be submitted at any time; there is no deadline.

Section 1332(b) of the ACA provides the four requirements that waiver applications must meet in order to be approved by the Secretary:

  1. Provides coverage that is at least as comprehensive as coverage offered through the Exchanges;
  2. Provides coverage and cost sharing protections against excessive out-of-pocket spending so coverage is at least as affordable as under the Act;
  3. Provides coverage to at least a comparable number of its residents; and
  4. Will not increase the federal deficit.

The guidance further defines these four requirements, including the criteria the Secretary will use in evaluating whether the requirements have been met and the economic and actuarial information that must be submitted in support of a waiver application. Overall, the new guidance seeks to ensure that coverage gains, particularly within certain sub-populations, become "floors" which a waiver can increase but cannot reduce, outlines additional details on the types of data states must provide as part of a waiver submission, and narrows the flexibility of the waiver as part of a systemic reform of a state's health programs.

The new guidance provides several examples of waiver requests that would cause a waiver to fail federal review, including:

  • increasing the number of state residents with large health care spending burdens relative to their income;
  • reducing affordability or comprehensiveness of coverage for vulnerable groups, such as low-income individuals, elderly individuals, and those who have or are at risk of developing serious health issues; and
  • reducing the number of individuals with coverage that provides a minimal level of protection against excessive cost sharing.

States understand the fundamental objectives of Section 1332 are to expand coverage or at least maintain the same levels of coverage, so these warnings are not unexpected. There is little guidance provided, however, on the types of waiver requests that would successfully pass federal review.

The guidance also provides greater specificity as to the data and economic analytics, such as micro-simulation, that states will be required to provide to support their waiver requests. States understand the need to make some investment in building a state-specific model. While the requirements go beyond what a state would need to provide to support a Section 1115 Demonstration Project for Medicaid, they are reasonable expectations if a state intends to submit a proposal that touches the entire health insurance system. For a state that is serious about transformation, this is not an insurmountable hurdle.

Additionally, under the guidance, Medicaid and the Children's Health Insurance Program (CHIP) are treated separately from the rest of the health insurance system. Thus, projected savings from reforms in those programs would not be considered in determining budget neutrality of a 1332 waiver. The Administration is also requesting that an application show that a waiver would be budget neutral in each year of the demonstration period. The guidance is ambiguous on this point; however, as language also suggests an application may not "fail" if it is not budget neutral in each year.

Background on Section 1332 Waivers

Section 1332 provides that "[a] State may apply to the Secretary for the waiver of any or all of the requirements ... with respect to health insurance coverage ..." (emphasis added). The requirements are as follows:

  • (A) Part I of Subtitle D
  • (B) Part II of Subtitle D
  • (C) Section 1402
  • (D) Sections 36B, 4980H, and 5000A of the Internal Revenue Code

(A) Part I of Subtitle D: Establishment of qualified health plans, includes:

  • Qualified Health Plans (QHPs)
  • Essential Health Benefits (EHB) requirements
  • Annual limits on total cost sharing
  • Actuarial value standards for "metal level" plan categories and catastrophic plan
    • Eligibility for enrollment in catastrophic plan
  • Special rules related to abortion services
  • Definition of individual, small group and large group markets, aggregation rules for small and large employers

(B) Part II of Subtitle D: Establishment of health benefit exchanges, includes:

  • Establishment of Small Business Health Options Program (SHOP) and individual exchanges
  • Products sold through exchanges
  • Exchange functions
  • Medicaid eligibility and enrollment facilitation by exchanges
  • Self-sustaining requirements
  • Certification of plans and requirements to submit justification for premium increases
  • Limitations on exchange contracting rules (including limitations re: insurance issuers operating exchanges for the state)
  • Requirements for plans to reward quality through market-based incentives and quality improvement activities – patient safety, hospital readmissions, etc.
  • Application of mental health parity to QHPs
  • Navigators
  • Single Risk Pool
  • Limitations on who can use the exchange

(C) Section 1402: Reduced cost-sharing for individuals enrolled in QHPs, includes:

  • Cost-sharing rules and how they are applied
  • How benefits in addition to the EHB are treated
  • Special rule for pediatric dental plans
  • Special rules for Indians
  • Rules for individuals not lawfully present

(D) Sections 36B, 4980H, and 5000A of the Internal Revenue Code, which include the eligibility rules for Advanced Premium Tax Credit (APTC) subsidies, cost-sharing subsidies, the employer mandate, and the individual mandate.

In a 2012 Final Rule, HHS and the Treasury set forth a process for states to apply for a 1332 waiver. A state's application must include a comprehensive description of the program, including an assurance that the state enacted legislation authorizing such a program. The application must also include an implementation timeline, an analysis of the waiver's impact on provisions of the ACA that are not waived, and a 10-year budget plan that is budget neutral to the federal government with supporting actuarial certifications and economic analysis. Section 1332 also permits states to apply in a coordinated fashion for waivers from Medicare, Medicaid, CHIP, and "any other federal law relating to the provision of health care items or services" for which the Secretary has waiver authority. A state, therefore, may submit a single application that includes waivers for other programs.

A state must provide for a process of public notice and comment, including public hearings, and a "meaningful level of public input." A state must also disclose the provisions of law that it seeks to waive. The Secretary shall make a determination on the application within 180 days of receipt. However, the entire process from completion of a draft waiver to final approval is likely to take more than 12 months. The waiver can be approved for up to five years and may be renewed.


Of note, the document has been published as guidance, rather than as a regulation, which means it will not be binding on a future Administration. In addition, the current Administration has asked for public comments and can make changes immediately. The public interests are protected by the four statutory requirements that provide guardrails so no experiment can go far off track.

States, which are the only entities that can apply for Section 1332, have expressed interest in using this new authority to solve problems both great and small. Those that are seriously interested in Section 1332 are unlikely to be discouraged or deterred by the standards set forth in the guidance, which can be changed over time.

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
26 Sep 2018, Conference, New York, United States

Dentons is delighted to support a global IT services and consulting firm Miratech as an event host partner at their annual conference called M-Force18 New York on September 27th. The event will be held at Dentons New York office in the heart of Midtown Manhattan, opposite Rockefeller Center.

2 Oct 2018, Seminar, Dallas, United States

We are pleased to offer a program of five sessions designed specifically for in-house counsel. Topics will include:

  • In-house corporate ethical issues
  • What recent Supreme Court decisions mean for business
  • Keeping lawyers out of your benefit plans
  • Litigation tactics for in-house counsel
  • Employment issues in the age of #MeToo
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions