Health Policy Check Up News

Is 2017 the Year of the 1332 Waiver?

This article was originally published in New Hampshire Business Review. Republished with permission.

The D.C. policy shift away from higher Medicaid spending will push many states to turn to waivers

The past year has been one of questions regarding health care. Will the Affordable Care Act be repealed? Will significant drug price legislation occur? But the most important question on the minds of many state policymakers is what happens to Medicaid, and Medicaid’s future will be heavily tied to the usage of the 1332 waivers.

Many states use waivers when they are making changes to their Medicaid program. Usually, states use Section 1115 of the Social Security Act (the 1115 waiver), which is a broad authority available to states for changes to Medicaid and the state Children’s Health Insurance Program (CHIP) that govern issues such as benefits, delivery systems and eligibility.

The question is, how is this different from the 1332 waiver?

Section 1332 of the ACA permits a state to apply for a State Innovation Waiver to pursue innovative strategies for providing their residents with access to high-quality, comprehensive, affordable health insurance while retaining the basic protections of the ACA. This waiver is not as clearly defined as the 1115 waiver and can give states more flexibility in how they use their Medicaid federal funds. State Innovation Waivers are approved for five-year periods and can be renewed. Waivers must not increase the federal deficit. Changes implemented by these waivers involve issues such as changes to health insurance exchanges, qualified health plans, premium tax credits and cost-sharing subsidies, as well as the individual and employer mandates.

This year, over 20 states have considered legislation on how to implement 1332 waiver application process. New Hampshire is included in this discussion, as the state this year enacted HB 469.

According to the National Conference of State Legislatures, the bill has several components. The law’s intent “is to preserve the state’s status as the primary regulator of the business of insurance within New Hampshire and the constitutional integrity and sovereignty of the state of New Hampshire under the Tenth Amendment. The commissioner may request that the board of directors of the association develop a plan of operation to support the affordability of health insurance in the individual market. The proposal may include resumption of the risk adjustment program, reopening of the high risk pool, creation and operation of a reinsurance program, or other such program. The commissioner is authorized to submit an application on behalf of the state to the U.S. Treasury, and if required, to the U.S. Secretary of Health and Human Services, to waive certain provisions of the Act, as provided in section 1332 of the (ACA), or any other applicable waiver provision. Establishes a continuous quality improvement program for pharmacies; also authorizes vaccines to be administered by pharmacists.”

In the midst of health care policy uncertainty, we are seeing a more definitive call for congressional risk-shifting onto state policymakers, and the Trump administration has outlined five health care policy pillars that emphasized greater consumer and state involvement.

While the administration discussed issues like new tax credits, health savings accounts, retaining the most popular ACA provisions and allowing insurance across state lines, the most important pillar has been greater state flexibility for Medicaid. This has unnerved some state policymakers, including states that rely heavily on ACA subsidies for Medicaid expansion. Shrinking the federal budget for other priorities now means that Congress and the Administration foresee a larger amount of accountability for governors and state legislatures on Medicaid spending.

While the House and Senate versions of the ACA repeal were vastly different, both contained the aforementioned aspects of risk-shifting toward the states. Issues such as Medicaid block grants, per capita caps and 1332 waivers were discussed in great detail, and while neither bill passed both chambers to date, it is becoming increasingly apparent that states will now have to consider greater cost-containment protocols. This is seen as more states adopt new ways to use the currently undefined 1332 waiver as a way to achieve more self sustainability.

The policy shift away from higher Medicaid spending will push many states to create new programs using the 1332 waivers. So far, there is no indication that the Centers for Medicare and Medicaid Services will limit the state’s power by denying waivers.

In the future, Medicaid policy may depend on these waivers as a means to distribute resources within the program. Anyone who is connected to health care should start to pay attention to their state’s 1332 waiver and plan accordingly.