qotd: Final rule on requirements for Section 1332 state waivers

Department of Health and Human Services
Department of the Treasury
To be published in the Federal Register 12/16/2015

Waivers for State Innovation

Summary

This guidance relates to Section 1332 of the Patient Protection and
Affordable Care Act (ACA) and its implementing regulations. Section 1332
provides the Secretary of Health and Human Services and the Secretary of
the Treasury with the discretion to approve a state's proposal to waive
specific provisions of the ACA (a State Innovation Waiver), provided the
proposal meets certain requirements. In particular, the Secretaries can
only exercise their discretion to approve a waiver if they find that the
waiver would provide coverage to a comparable number of residents of the
state as would be provided coverage absent the waiver, would provide
coverage that is at least as comprehensive and affordable as would be
provided absent the waiver, and would not increase the Federal deficit.
If the waiver is approved, the state may receive funding equal to the
amount of forgone Federal financial assistance that would have been
provided to its residents pursuant to specified ACA programs, known as
pass-through funding. State Innovation Waivers are available for
effective dates beginning on or after January 1, 2017. They may be
approved for periods up to 5 years and can be renewed. The Departments
promulgated implementing regulations in 2012. This document provides
additional information about the requirements that must be met, the
Secretaries' application review procedures, the amount of pass-through
funding, certain analytical requirements, and operational considerations.

Excerpts:

I. Statutory Requirements

A. Coverage

To meet the coverage requirement, a comparable number of state residents
must be forecast to have coverage under the waiver as would have
coverage absent the waiver.

The impact on all state residents is considered, regardless of the type
of coverage they would have absent the waiver.

Assessment of whether the proposal covers a comparable number of
individuals also takes into account the effects across different groups
of state residents, and, in particular, vulnerable residents, including
low-income individuals, elderly individuals, and those with serious
health issues or who have a greater risk of developing serious health
issues. Reducing coverage for these types of vulnerable groups would
cause a waiver application to fail this requirement, even if the waiver
would provide coverage to a comparable number of residents overall.

B. Affordability

To meet the affordability requirement, health care coverage under the
waiver must be
forecast to be as affordable overall for state residents as coverage
absent the waiver.

Affordability refers to state residents' ability to pay for health care
and may generally be measured by comparing residents' net out-of-pocket
spending for health coverage and services to their incomes.
Out-of-pocket expenses include both premium contributions (or equivalent
costs for enrolling in coverage), and any cost sharing, such as
deductibles, co-pays, and co-insurance, associated with the coverage.

Waivers are evaluated not only based on how they affect affordability on
average, but also on how they affect the number of individuals with
large health care spending burdens relative to their incomes. Increasing
the number of state residents with large health care spending burdens
would cause a waiver to fail the affordability requirement, even if the
waiver would increase affordability for many other state residents.
Assessment of whether the proposal meets the affordability requirement
also takes into account the effects across different groups of state
residents, and, in particular, vulnerable residents, including
low-income individuals, elderly individuals, and those with serious
health issues or who have a greater risk of developing serious health
issues. Reducing affordability for these types of vulnerable groups
would cause a waiver to fail this requirement, even if the waiver
maintained affordability in the aggregate.

In addition, a waiver would fail the affordability requirement if it
would reduce the number of individuals with coverage that provides a
minimal level of protection against excessive cost sharing.

C. Comprehensiveness

To meet the comprehensiveness requirement, health care coverage under
the waiver must
be forecast to be at least as comprehensive overall for residents of the
state as coverage absent the waiver.

Comprehensiveness refers to the scope of benefits provided by the
coverage as measured by the extent to which coverage meets the
requirements for essential health benefits (EHBs) as defined in section
1302(b) of the ACA, or, as appropriate, Medicaid and/or CHIP standards.
The impact on all state residents is considered, regardless of the type
of coverage they would have absent the waiver.

A waiver cannot satisfy the comprehensiveness requirement if the waiver
decreases: 1) the number of residents with coverage that is at least as
comprehensive as the benchmark in all ten EHB categories; 2) for any of
the ten EHB categories, the number of residents with coverage that is at
least as comprehensive as the benchmark in that category; or 3) the
number of residents whose coverage includes the full set of services
that would be covered under the state's Medicaid and/or CHIP programs,
holding the state's Medicaid and CHIP policies constant. That is, the
waiver must not decrease the number of individuals with coverage that
satisfies EHB requirements, the number of individuals with coverage of
any particular category of EHB, or the number of individuals with
coverage that includes the services covered under the state's Medicaid
and/or CHIP programs.

Assessment of whether the proposal meets the comprehensiveness
requirement also takes into account the effects across different groups
of state residents, and, in particular, vulnerable residents, including
low-income individuals, elderly individuals, and those with serious
health issues or who have a greater risk of developing serious health
issues. A waiver would fail the comprehensiveness requirement if it
would reduce the comprehensiveness of coverage provided to these types
of vulnerable groups, even if the waiver maintained comprehensiveness in
the aggregate.

D. Deficit Neutrality

Under the deficit neutrality requirement, the projected Federal spending
net of Federal revenues under the State Innovation Waiver must be equal
to or lower than projected Federal spending net of Federal revenues in
the absence of the waiver.

The estimated effect on Federal revenue includes all changes in income,
payroll, or excise tax revenue, as well as any other forms of revenue
(including user fees), that would result from the proposed waiver.
Estimated effects would include, for example, changes in: the premium
tax credit and health coverage tax credit, individual shared
responsibility payments, employer shared responsibility payments, the
excise tax on high-cost employer-sponsored plans, the credit for small
businesses offering health insurance, and changes in income and payroll
taxes resulting from changes in tax exclusions for employer-sponsored
insurance and in deductions for medical expenses.

The effect on Federal spending includes all changes in Exchange
financial assistance and other direct spending, such as changes in
Medicaid spending (while holding the state's Medicaid policies constant)
that result from the changes made through the State Innovation Waiver.
Projected Federal spending under the waiver proposal also includes all
administrative costs to the Federal government, including any changes in
Internal Revenue Service administrative costs, Federal Exchange
administrative costs, or other administrative costs associated with the
waiver.

V. Operational Considerations

A. Federally-Facilitated Exchanges

The Centers for Medicare & Medicaid Services (CMS) operates the
Federally-facilitated Exchange (FFE) platform. Certain changes that
affect FFE processes may make a waiver proposal not feasible to
implement at this time. Until further guidance is issued, the Federal
platform cannot accommodate different rules for different states.

B. Internal Revenue Service

Certain changes that affect Internal Revenue Service (IRS)
administrative processes may make a waiver proposal not feasible to
implement. At this time, the IRS is not generally able to administer
different sets of rules in different states.

https://www.federalregister.gov/articles/2015/12/16/2015-31563/guidance-waivers-for-state-innovation

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Comment by Don McCanne

Section 1332 of the Affordable Care Act allows states to apply for
waivers to exempt them from some of the requirements of the legislation
so that they can introduce their own innovations that they believe would
better serve their respective states. This final federal rule on the
waivers provides guidance on how much flexibility will be allowed.

The good news is that those states that would use waivers to cut back on
benefits provided under the program will not have much flexibility to do
so under these rules. Particularly important is the fact that, not only
must overall average coverage, comprehensiveness and affordability be
maintained, the states are prohibited from adopting innovations that
would leave more vulnerable individuals worse off. As we have seen from
state responses to the Medicaid expansion, some governors are quite
willing to reduce or eliminate benefits for those most in need.

The bad news is that those who have held up hopes that Section 1332
would open the doors for a state-based single payer system will find
that these rules significantly limit flexibility. Also required by these
rules is extensive documentation that would confirm that the state is
fully compliant with the specific stipulations of the waivers. That
could very difficult with a state reform model that attempts to place
everyone in one program with a single risk pool funded by multiple
sources, including ACA premium credits and cost-sharing subsidies.

Regardless, these rules should not deter state activists from moving
full steam ahead in supporting every measure possible that would improve
health care access for the residents of their states. Until we have a
political climate that would support the requisite federal legislation,
we need to accomplish whatever we can on the state level.

That said, since isolated state efforts will inevitably fall short of
achieving health care nirvana, at the same time we must intensify our
efforts to change the political climate so that we can finally achieve
our goal of enacting a single payer national health program. That still
has to be our number one priority.