New Section 1332 Guidance A Mixed Bag For States

In December, the Department of Health and Human Services (HHS) and the Department of the Treasury released new guidance on how the agencies will evaluate state applications for the ACA’s Section 1332 State Innovation Waivers. Prior to this release, the only guidance on 1332 waivers was a regulation on the waiver application process. A substantive attempt to define the contours of the waiver—which would allow a state to waive major provisions of the ACA to experiment with different coverage models, so long as it offers comparably comprehensive and affordable coverage—was eagerly awaited by states and interested stakeholders. For states, it turned out to be a classic example of “be careful what you wish for.” From a state perspective, the new guidance considerably limits their flexibility. However, it is important to note, as states continue to consider potential waiver opportunities, that a future administration could revisit and expand this flexibility. Budgetary (in)flexibility First, the guidance strengthens the state’s budgetary guardrails, requiring waiver applications to be deficit neutral — not just over the life of the waiver, as with 1115 waivers, but in each and every year of the waiver. States would not have the flexibility to invest in initial years and ramp up to savings in later waiver years. In addition to the annual deficit test, the guidance makes clear that states must consider all impacts on federal revenue and spending as a result ...
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