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Opportunities for California Under Section 1332 of the Affordable Care Act

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ITUP’s report, Opportunities for California Under Section 1332 of the Affordable Care Act, is now available.

California has made great progress implementing the Affordable Care Act (ACA), with 6 million people newly enrolled in either Medi-Cal or Covered California since December 2013. The state strives to improve the quality, outcomes and effectiveness of care and the performance of its safety net delivery systems with its recent renewal of its §1115 Medicaid waiver. Beginning in 2017, the ACA offers another major opportunity for states to meet these goals with a section 1332 waiver. These broad waivers would allow states the ability to waive several requirements of the ACA to create new and innovative models to improve and expand health coverage.

To create and finance a new coverage framework, a section 1332 waiver would allow states to waive four major planks of the ACA:

  1. The individual mandate to have health coverage
  2. The employer mandate to offer coverage
  3. The health benefit exchanges and the essential health benefits requirement
  4. The premium and cost-sharing subsidies available through the Exchanges.

The ACA requires that states’ section 1332 programs would have to exceed or be comparable to the law’s standard coverage framework in four ways, so the challenge for California is whether it can design reforms that exceed the following:

  1. The number of people covered
  2. The scope of health benefits
  3. Consumer affordability
  4. Containing the cost to the federal government.

In other words, a state’s section 1332 waiver can cover more people, and/or more services at a lower cost to individuals and equal or lower cost to the federal government. The ACA sets the floor or the minimum that states can use a section 1332 waiver to exceed.

States may not waive certain basic rights for all Americans – the many other insurance market reforms of the ACA, including its guaranteed issue requirement and prohibitions on increasing premiums for consumers with preexisting conditions. In addition, the lifetime and annual coverage limits, coverage of preventive care and dependents up to age 26 may not be subject to a waiver.

Under the ACA, California has made major strides to expand and improve health coverage for millions of Californians; the State could use a section 1332 waiver to align and advance program and delivery system reforms even further. The ACA largely built around the existing patchwork of health coverage programs that already existed. As a consequence, the landscape became more complicated and confusing for many consumers and providers, despite the expansion of health insurance and consumer protection. Can we use the waiver to make the system simpler and easier to navigate for Californians and their providers? The remainder of this brief explores some ways that California might design a section 1332 waiver to make health coverage more consumer-friendly, affordable, and supportive of payment and delivery system reforms that both improve health outcomes and slow the growth in health spending.

The full report can be downloaded here.

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