Clarity Sought as HHS Prepares for Innovation Waivers

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By Nathaniel Weixel

Nov. 23 — As states consider strategies in applying for broad innovation waivers under the Affordable Care Act, state health-care policy experts, as well as state governors, say the federal government needs to develop more guidance.

In addition, the lead Democrat on the Senate Finance Committee wants to make sure the HHS is prepared when the waivers begin taking effect in 2017.

According to the Centers for Medicare & Medicaid Services, the state innovation waivers (SIW) allow states to implement innovative ways to provide access to quality health care “that is at least as comprehensive and affordable as would be provided absent the waiver, provides coverage to a comparable number of residents of the state as would be provided coverage absent a waiver, and does not increase the federal deficit.”

States can apply for the five-year renewable waivers that will begin Jan. 1, 2017. The waivers are an opportunity for states to waive major coverage provisions of the ACA in order to come up with their own innovative ways to expand coverage. The states can request waivers from provisions, including those related to benefits and subsidies, the exchanges and the individual and employer mandates.

But states say they need specifics. There are fiscal “guardrails” in place that need clarifying. For example, states don't know how the waivers, known as Section 1332 waivers, could work with Medicaid coverage expansion waivers.

Cindy Gillespie, a principal in Dentons' public policy and regulation practice, told Bloomberg BNA Nov. 23 that the Department of Health and Human Services needs to better define its budget neutrality standard.

The federal government will also need to tell states how much it pays to insurers in the form of federal subsidies, and how much it collects from the employer and individual mandate penalties, Gillespie said. So if a state wants to waive those mandates, officials will need to know how much to offset in order to comply with the law.

Medicaid Expansion

According to the National Governors Association (NGA), states also are interested in using the savings from one waiver—such as Medicaid expansion—to offset the cost of their innovation waivers, and vice versa. There's no guidance from the HHS as to whether this is an acceptable policy, Gillespie said.

Sen. Ron Wyden (D-Ore.) wrote to HHS Secretary Sylvia Mathews Burwell Nov. 18, asking how the agency envisions the waivers will be used to promote the tenets of the ACA and innovative health coverage. The Section 1332 waivers should be a tool for states to help meet or surpass the progress made by the ACA, not to deconstruct the law or remove its protections, wrote Wyden, who is the top Democrat on the Senate Finance Committee.

Wyden, who authored the provision of the law related to the waivers, asked the HHS if there were any particular reforms it envisions states using the waivers for, particularly with regard to Medicaid. While 1332 waivers apply only to the insurance exchanges, they can be used in conjunction with Medicaid waivers.

“It is my hope that a state will be able to use a SIW in conjunction with a Medicaid waiver to align health coverage, innovate to improve quality health outcomes, ensure better continuity of care,” he wrote.

Wyden also asked the HHS what protections it was putting in place to make sure consumers are protected in states that move forward with the waivers, as well as if any additional steps will be necessary to ensure the waivers don't undermine the ACA.

The NGA also wrote to the HHS in late October, asking for additional guidance “that maximizes state flexibility.”

More Guidance

Judith Solomon, vice president for health policy at the Center for Budget and Policy Priorities, said she expects the HHS to answer Wyden's and the NGA's letters with some additional guidance. With regard to the Medicaid waivers, she said the agency has traditionally been reluctant to allow cross-program savings.

Solomon also said she understands Wyden's concerns about making sure the waivers are enacted to strengthen the ACA, not weaken it. Just as with the Medicaid expansion waivers, different state administrations can try to use the waivers as a vehicle to advance policies that may run counter to the law. That's also why more guidance from the HHS is needed, Solomon told Bloomberg BNA.

In addition, Solomon said even though the waivers apply to all states, the 37 states with a federally facilitated exchange don't have the same flexibility as others. “There's not a lot of customization those states can do” with regard to how they set up the exchanges or how they issue tax credits to insurers who operate on the exchange.

“You need some policy out there, so there are ground rules and standards” for states to follow, Solomon said. Wyden's letter supports that.

To contact the reporter on this story: Nathaniel Weixel in Washington at

To contact the editor responsible for this story: Brian Broderick at