On December 11, 2015, the Department of Health and Human Services (HHS) posted guidance for states interested in seeking a State Innovation Waiver under Section 1332 of the Affordable Care Act (ACA). Effective in 2017, State Innovation Waivers provide states with the flexibility to request a waiver from certain parts of the ACA provided the state has a reasonable alternative that would accomplish a similar goal to the ACA.  For example, a state could request a waiver from having an Exchange available provided a reasonable alternative would be available where low to middle income individuals residing in the state could access comprehensive and affordable health insurance.

The guidance that was recently issued explains how HHS would evaluate the waiver requests. In order for a waiver request to be approved it must meet the following criteria:

1. Coverage. A comparable number of state residents must be forecast to have coverage under the waiver as would have coverage absent the waiver.
2. Affordability. Coverage under the waiver must be forecast to be as affordable overall for state residents as coverage absent the waiver.
3. Comprehensiveness. Coverage under the waiver must be forecast to be at least as comprehensive overall for residents of the state as coverage absent the waiver.
4. Deficit Neutrality. The waiver must not be expected to increase the federal deficit.
5. Impact of Other Programs. The assessment by HHS takes into consideration the impact of changes to other ACA provisions.

State Innovation Waivers which are approved entitle a state to receive federal funding to implement the waiver in an amount estimated to be what individuals would’ve claimed for Marketplace financial assistance but will not be claimed as a result of the waiver.

In addition, HHS has indicated that for those states who rely on Healthcare.gov for Exchange operations, it could not accommodate different rules for different states. For example, it couldn’t use different methods in determining subsidies for different states. Also, the guidance indicates that a waiver could get denied if it impacts Internal Revenue Service (IRS) processes. This would seem to imply waiver requests that would impact the Individual and/or Employer Mandates would generally not be feasible. 

Arkansas, California, Hawaii, Massachusetts, Minnesota, New Mexico and Rhode Island have already expressed interest in seeking a State Innovation Waiver. More states are likely to express interest as they evaluate the new guidance and application process.