Progress has continued on
state efforts to secure Section 1332 State Innovation Waivers. Oregon submitted
a waiver application at the end of August, seeking support for a state-based
reinsurance program, and that application has since been determined complete.
Iowa submitted two recent updates to its pending waiver application, which it
initially submitted in June. Its waiver application has also now been
determined complete. Despite recent
reports that the waiver will be denied, a federal public comment and review are
While those states await
decisions on their applications, at the end of September, Minnesota received
approval of its Section 1332 Waiver application that it submitted in May.
Oklahoma had also
submitted a request for a Section 1332 Waiver (also for support of a
state-based reinsurance program) in August. However, it withdrew that request
at the end of September because it was not approved in time to implement for
2018. The state said that it continues to “explore and develop 1332 waiver(s).”
Not quite three months after
its application was determined complete, Minnesota’s Section 1332 Waiver
application was approved “in part” on September 22nd, enabling the state to
receive Federal pass-through funding for its state-based reinsurance program
starting in 2018.
As a reminder, Minnesota
submitted a Section 1332 Waiver application in May of this year, seeking a
waiver and Federal funding to support its state-based traditional reinsurance
program, known as the Minnesota Premium Security Plan (MPSP). The MPSP
will reimburse 80% of claims in the individual market between $50,000 and
In their waiver approval,
the Department of Health and Human Services and the Department of Treasury (the
Departments) jointly granted the state the ability to waive the single risk
pool requirement under Section 1312(c)(1) in order to implement the MPSP,
allowing carriers to include MPSP payments when establishing premium rates.
The approval also allows
the state to receive the requested pass-through funding from savings to the premium
tax credits that will accrue as a result of the reinsurance program mitigating
expected premium increases, based which premium tax credits are calculated.
However, the Departments denied the state’s request for
pass-through funding related to savings in federal contributions to the Basic
Health Plan (BHP) as a result of the reinsurance program, noting that Section
1332(a)(3) only provides for pass-through funding related to premium tax
credits, cost sharing reductions, and small business tax credits. The state has
said that it will continue to press for the pass-through funding related to the
BHP; if that is not granted, the state’s cost for the program will be
significantly higher than expected.
The Specific Terms and
Conditions (STCs) grant the waiver and pass-through funding for five
years. The STCs estimate that
pass-through funding for 2018 will be $139.2 million and for the entire
five-year waiver period will be $1.002 billion but outline that actual payments
will be determined on an annual basis based on data provided by the state
related to premium tax credit savings.
In follow-up to its
initial waiver submission that did not meet several Section 1332 process
requirements, Iowa submitted a new Section 1332 Waiver application on August 21st
and, subsequently, filed two supplements to that application.
The substance of the
state’s Proposed Stopgap Measure (PSM) program, remains largely unchanged and
A reinsurance program – The state proposes a traditional
(attachment point) reinsurance program for the individual market.
A state-based premium subsidy mechanism – The
state will provide flat-dollar, age and income-based premium subsidies for all
individuals who purchase the standardized plan outlined below. In the supplement submissions, the state
proposed to also provide cost-sharing reductions to individuals between 133
percent and 200 percent of the Federal Poverty Level.
A state-based standard health benefits plan – As a condition of receiving reinsurance
funding, the state will require each carrier to offer the standard Iowa PSM
Plan created by the state within the Silver actuarial value range. These will
be the only plans available in the individual market in 2018 other than
grandfathered and transitional plans.
In order to implement this
plan, Iowa seeks to waive the Federal premium tax credits and cost-sharing
reductions, and the Affordable Care Act (ACA) metallic coverage level requirements. The state also
seeks pass-through funding related to the waived premium tax credits and
cost-sharing reductions, to the extent they are appropriated, to fund the
state-based premium subsidies and reinsurance program.
In addition to adding
cost-sharing reductions to the PSM, the state also completed many of the
Section 1332 process requirements prior to submitting its new waiver request,
including holding a public comment period and public hearings, conducting
tribal consultation, and completing actuarial and economic analyses. The state
has not passed authorizing legislation but reports that the program is within
its rulemaking authority and rules will receive legislative approval.
The state projects that
the PSM will decrease premiums, increase carrier competition and increase
coverage. It seeks expedited approval of its waiver.
Oregon is the latest state
to have submitted a formal request for a Section 1332 Waiver, having filed an
application on August 31st. Like other recent applications, Oregon seeks
federal support to create a state-based reinsurance program, known as the
Oregon Reinsurance Program (ORP).
The ORP will be a
traditional reinsurance program, with the parameters of the program to be
finalized based on the funding available. Like other states, Oregon is seeking
to waive Section 1312(c)(1) of the ACA to allow carriers to include
state reinsurance payments when establishing premium rates, as well as
pass-through funding from savings to Federal premium tax credit payments due to
reduced premium costs. The state projects premiums to decrease 7.5% in 2018 and
7% in 2019, leading to savings of $30 million in federal premium tax credit
payments which are based on the cost of premiums.
The state also believes that the ORP will increase coverage
rates and carrier participation.
For more detailed
information about the these and other Section 1332 waivers, click here forPCG’s updated report.