States Moving on Obamacare Waivers to Save Insurance Markets

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By Sara Hansard

States will step forward to request waivers from Obamacare even if Congress doesn’t act to repeal the law or stabilize the health insurance markets.

That was the assessment at a Capitol Hill briefing Sept. 19 by officials with the Blue Cross Blue Shield Association, state insurance regulators, and a group that represents employer plans and other interested parties. Section 1332 of the Affordable Care Act allows states to apply for waivers of major provisions of the law as long as the proposals don’t increase the federal deficit but still protect consumers.

Making changes to the Section 1332 waiver process has been a focus of efforts by leaders of the Senate Health, Education, Labor and Pensions Committee to quickly craft narrow, bipartisan legislation to help stabilize the troubled 2018 ACA exchanges, where premiums could go up nearly 20 percent and nearly half of all counties are likely to have only one plan. “Waivers can definitely stabilize markets, but the waivers would be more effective if Congress and the administration acted” to make it easier for states to get the waivers, Joel White, president of the Council for Affordable Health Coverage, said at the briefing.

Major Provisions Could Be Waived

The House’s American Health Care Act ( H.R. 1628) passed in May and the Senate’s Better Care Reconciliation Act considered by the Senate both included changes to Section 1332. The provision allows states to apply to the Department of Health and Human Services for approval to waive major parts of the law, including essential health benefit coverage requirements, the actuarial value of claims covered, financial assistance for consumers, the individual and employer mandates for coverage, as well as whether consumers can buy plans outside of exchanges, White said.

To receive approval for the waivers, states must enact legislation and go through a lengthy application process demonstrating that their changes will result in coverage at least as comprehensive, cover as many people, and be as affordable as coverage without the waivers, and won’t increase the federal deficit.

Hawaii and Alaska have received approval for their 1332 waivers, and Minnesota, Iowa, and Oregon have submitted applications to the HHS. Ten states have enacted 1332 legislation, White said. Kentucky, Ohio, Massachusetts, Rhode Island, Arkansas, New Hampshire, Maine, and Nebraska are considering applying for waivers, according to White and Brian Webb, assistant director for health policy and legislation for the National Association of Insurance Commissioners.

What Can’t Be Waived

Some things can’t be waived, including the requirement that people with medical problems be covered without charging more, limits on how much more older people can be charged compared with young people, prohibitions on annual and lifetime limits, and the requirement that plans allow young adults to stay on parents’ plans until age 26, Webb said.

States are looking at how their exchanges work, how subsidies should be allocated, the medical loss ratio requirement that plans spend at least 80 percent of premiums on claims or quality improvements, and actuarial value requirements, Webb said.

Alaska’s waiver creating a reinsurance program is serving as a model for other states, Webb said. The program covers enrollees with the costliest claims in the state’s exchange and has resulted in lower premiums and savings to the federal government from lower premium tax credit subsidies, he said.

Iowa, Oklahoma Applying for Broad Waivers

Iowa and Oklahoma have applied for broader waivers, Webb said. Those states are proposing changing the way subsidies are allocated, getting rid of the exchanges, and changing the essential health benefit requirement, Webb said.

Many states don’t have the money to set up their own reinsurance programs as Alaska did, Webb said. In addition to shortening the process, states would like to see repealed the requirement that legislation be passed, and they would like to be able to use waivers approved for other states as templates for their own applications, Webb said.

But Kris Haltmeyer, vice president of legislative and regulatory policy for the Blue Cross Blue Shield Association, expressed concerns about repealing the requirement that state legislation be enacted in order for 1332 waivers to be approved. “When states have to pass a law there’s some level of public debate about what’s included in that law,” he said. “Having that public approval is one of those controls to make sure that states are really doing things that will benefit the market overall and benefit consumers rather than things that just seem politically attractive.”

Subsidizing Young Would Help Markets

Changing subsidies so that young people can get more tax credit subsidies, which is what Iowa and Oklahoma are proposing, would result in more young people buying coverage, Haltmeyer said. The exchanges have suffered from high numbers of sicker enrollees and not enough young people, which have led to heavy losses by insurers and many insurers leaving the markets.

But there are limits on how much flexibility should be given regarding the 10 categories of essential health benefits that must be covered under the ACA, Haltmeyer said. “When you start modifying the categories of covered services, there’s a real potential for risk adjustment not to function in a market, and for health plans to start competing again based on risk selection and the way they design their products,” he said.

The ACA includes a risk adjustment program, under which plans that cover sicker enrollees receive payments from plans that cover healthier people.

To contact the reporter on this story: Sara Hansard in Washington at

To contact the editor responsible for this story: Kendra Casey Plank at

For More Information

Information on the Council for Health Coverage briefing is available at HHS's 2018 Projected Health Insurance Exchange Coverage Maps are at on the American Health Care Act (H.R. 1628) is at on the Better Care Reconciliation Act is at on Section 1332 state innovation waivers is at's 1332 waiver approval is at

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