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We’ve heard a lot about waivers recently: Lawmakers recently passed a bill authorizing the state to apply for an Affordable Care Act waiver. Lawmakers debated but ultimately did not approve a waiver plan to accept federal funds for covering the low-income uninsured. Concern sporadically surfaces over whether Oklahoma will lose our waiver to operate Insure Oklahoma. What does all this talk of waivers mean?
As a rule, for states to receive federal funding, they have to play by federal rules on how that funding is used. But in some cases, states can apply for waivers that, if approved, authorize them to bend the rules and use federal funds for purposes not explicitly permitted by federal regulations. Two kinds of waivers recently in the news are especially important for Oklahoma’s health care system: 1115 waivers and 1332 waivers.
1115 Waivers allow states to experiment with Medicaid
Also called Section 1115 Demonstrations, these waivers allow states to experiment with Medicaid financing and delivery by waiving certain requirements of Section 1115 of the Social Security Act. Under federal law, 1115 waiver programs should attempt to improve care and efficiency while reducing costs, and they must be budget-neutral for the federal government. They usually entail expanding coverage to a group of people or health care services not typically covered by Medicaid.
1115 waivers are fairly common, and they predate the Affordable Care Act. The Insure Oklahoma program, which uses a combination of state and federal funds to subsidize private health coverage for qualifying Oklahomans, operates via an 1115 waiver. The Medicaid Rebalancing Act, had it received legislative approval, would have directed the Health Care Authority to amend that 1115 waiver to extend coverage to more of the state’s low-income uninsured using the very high federal matching rates allowed by the Affordable Care Act. Of the 31 states, including DC, that have accepted federal funds to extend health coverage, six have done so via 1115 waivers. The remaining 25 have simply expanded their Medicaid programs as outlined by the Affordable Care Act, which doesn’t require a waiver.
1332 Waivers will allow states to experiment with the Affordable Care Act
1332 waivers allow states to waive some ACA provisions relating to health insurance benefits and subsidies, marketplaces and qualified health plans, the requirement to maintain coverage, and the employer mandate. However, the ACA also sets out basic guardrails restricting what states can do with 1332 waivers: they must cover a total number of people comparable to existing coverage, and they must not reduce affordability of coverage. In addition, they have to provide benefits at least as comprehensive as existing benefits and be deficit-neutral to the federal budget throughout the duration of the waiver.
Any 1332 waivers approved by the federal government won’t take effect until January 1, 2017 at the earliest, so how they will work in practice is still a question mark. Although a handful of states have already submitted 1332 waivers for federal approval, none have yet been approved. Those submitted are largely aimed at reconciling ACA mandates with preexisting state policy. For instance, Hawaii’s 1332 waiver would align the ACA’s employer requirement with the state’s employer-sponsored insurance policy, which was already more generous than what the ACA requires.
[pullquote]“Rep. Glen Mulready (R-Tulsa) said that he’d like the state to use the waiver to relax federal restrictions against charging older people significantly higher insurance premiums than young people.”[/pullquote]
A number of state legislatures have passed measures to ask for waivers to develop new alternatives to the main provisions of Affordable Care Act. California Governor Jerry Brown recently signed off on legislation authorizing the state to apply for a waiver to offer health insurance to all Californians, regardless of immigration status. Earlier this year, Oklahoma lawmakers passed SB 1386, which authorizes the Oklahoma Department of Human Services to apply for a 1332 waiver. The bill doesn’t specify what the waiver should do, although the bill’s author Rep. Glen Mulready (R-Tulsa) said that he’d like the state to use the waiver to relax federal restrictions against charging older people significantly higher insurance premiums than young people. In addition, the Medicaid Rebalancing Act would have used a 1332 waiver to move low-income children and pregnant women from Medicaid into subsidized private insurance beginning in 2019.
The bottom line
Federal waivers allow states significant flexibility to develop tailored health care solutions. Oklahoma has already had tremendous success with its Insure Oklahoma program, which arguably paved the way for Arkansas’s coverage expansion and subsequent private coverage expansions across the US. Oklahoma’s ADvantage program, which operates under yet another Medicaid waiver, keeps more than 20,000 Oklahomans living in their homes and communities rather than in nursing homes. Experts agree that 1332 waivers offer a promising avenue for state health care innovation — with the important caveat that they can’t be used to reduce health coverage or increase the federal deficit.
