News & Perspectives

Developments in Section 1332 State Innovation Waivers

6. October 2017 Lisa Kaplan-Howe Health

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 still pending.

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 $250,000.

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 would include:

  • 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 for PCG’s updated report.