Rescinding Obama-era guidance on ACA waivers invites states back to the reform table

Rescinding Obama-era guidance on ACA waivers invites states back to the reform table
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President Donald Trump’s Department of Health and Human Services (HHS) recently announced welcome new guidance to states looking to improve their health care and health insurance systems through “state innovation waivers” under Section 1332 of the Affordable Care Act (ACA). The new guidance gives states significantly more flexibility to devise creative solutions to meet the health care and insurance needs of their constituents and it builds upon new community engagement waivers that made Medicaid more flexible for states earlier this year. 

Section 1332 allows states to experiment and creatively tailor their health care coverage programs under certain conditions — provided that D.C. approves their “waiver” proposals. The Obama administration had taken a crabbed view of innovation waivers and issued rules that made it impossible for states to seek active reforms.


Several states such as: Oklahoma, Iowa and Ohio, requested waivers that would have offered more affordable health insurance, but were denied under the Obama administration’s rules, leaving them stuck with failing health insurance markets, rising premiums and falling participation rates.

President TrumpDonald TrumpJan. 6 panel plans to subpoena Trump lawyer who advised on how to overturn election Texans chairman apologizes for 'China virus' remark Biden invokes Trump in bid to boost McAuliffe ahead of Election Day MORE has taken a decidedly broader view of the states’ role in meeting the needs of their citizens. The announcement rewriting the restrictive Obama-era guidance restores Section 1332 to its rightful place under the law and extends a long overdue invitation for states to rejoin the national discussion on health care.

States may be understandably skittish to file new waiver requests after years of being spurned by Washington, but now is the time for state governors, legislatures and policymakers to answer Trump’s invitation and devise creative, responsible and workable solutions.

Under the new guidance, states may now satisfy the ACA’s coverage requirement by looking at the total number of people with health coverage rather than trying to micromanage smaller and preferred population subgroups. Even better, states will be able to offer a broader range of coverage options. Health insurance plans offered under the ACA’s short-term limited duration rules, for example, will now satisfy the requirements for a Section 1332 waiver.

Similarly, consumers currently looking to buy health care coverage on an ACA exchange have to order from a menu of government-mandated plans that may have very high deductibles. Going forward under the new guidance, however, rather than forcing people to buy insurance plans they do not want, states may offer subsidies to make preferred plans and coverage more affordable. Doing so will likely mean more people will willingly purchase more affordable coverage. 

The new state-friendly guidance, of course, should mark the beginning not the end of reasonable reforms to the ACA. President Obama’s HHS, for instance, built a high wall between Medicaid and Section 1332 innovation waivers. That wall can and should be torn down. President Trump would do well to allow states to combine their Medicaid and Section 1332 waiver proposals and thus permit states to offer private health insurance coverage instead of Medicaid. States looking for creative ways to manage the rising costs of one of the largest line items on their annual budget — Medicaid — may welcome the chance to use the power of the private sector to their advantage.

Two years ago, the Trump administration rode into Washington promising change. It claimed a revived willingness to work with governors and state legislatures on health care and health care reform. But as the weeks and months rolled by, many policymakers in and out of D.C. groused at the glacial pace of the oft-promised but seldom delivered reform. A dark cloud of doubt discouraged any hope that meaningful change in the era of Trump might ever arrive.

But rescinding the Obama-era guidance on Section 1332 waivers can shine a new ray of proverbial light in the darkness. It signals to states that they may once again propose flexible, creative solutions to some of the most difficult policy problems that the states and the country face. President Trump has just invited the states back to Washington to share their best ideas and rejoin the conversation on health care — they should be ready to have something to say.

Rea S. Hederman Jr. is executive director of the Economic Research Center and vice president of policy at The Buckeye Institute. As the co-author of Returning Health Care Power to the States and Federal Efforts to Stabilize ACA Individual Markets through State Innovation, he was one of the first health care policy experts to propose using Section 1332 waivers as a way to allow states to waive parts of the Affordable Care Act and take back the ability to regulate their insurance markets.