American Benefits Council
Benefits Byte

2015-118

December 14, 2015

The Benefits Byte is the American Benefits Council’s regular e-mail and online newsletter for members only, providing timely reports on legislative, regulatory and judicial developments, along with updates on the Council’s activities in support of employer-sponsored benefit plans.

The Benefits Byte is published by the American Benefits Council, based on staff reports and edited by Jason Hammersla, Council director of communications. Contact information for Council staff related to specific topics can be found at the end of each story.

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Treasury, HHS Issue Additional Guidance on ACA State Innovation Waivers; Potentially Important Implications for Multi-State Plan Sponsors

The Obama Administration has provided additional guidance for states seeking to apply for “State Innovation Waivers” under the Affordable Care Act (ACA). The new formal guidance  explains how the waiver applications will be evaluated.

Beginning in 2017, states will be permitted to obtain “state innovation waivers” under Section 1332 of the ACA. Under this provision, the U.S. departments of Treasury and Health and Human Services (HHS) may waive certain aspects of the health care law – including qualified health plan standards and employer and individual responsibility standards – where certain criteria are met. The agencies published regulations in 2012 setting out the process for states to submit applications.  This is an important issue for major employers to carefully monitor because of the potential for federal agencies to grant states the authority to take actions that could have an impact on plan sponsors that, typically, enjoy federal preemption of state legislative or regulatory efforts.

As explained in a related HHS fact sheet, for a State Innovation Waiver to be approved, a state’s alternative model must provide access to quality health care that is at least as comprehensive and affordable as would be provided absent a waiver; provide coverage to a comparable number of residents and not increase the federal deficit. The guidance, to be published in the Federal Register on December 16 by Treasury and HHS, spells out in further detail these coverage, affordability, comprehensiveness and deficit neutrality standards, including how the effect on certain vulnerable populations should be taken into account. The guidance also discusses:

  • The impact of other program changes, including Medicaid and CHIP, on the assessment of a waiver proposal.
  • The calculation of federal pass-through funding.
  • Economic assumptions, methodological guidelines and other analysis related to waiver applications.
  • Procedures for public input on waiver applications.

The guidance discusses agency operational considerations and indicates that certain waiver proposals may not be feasible given HHS and IRS administrative processes. As explained in the guidance, the federally-facilitated exchange platform cannot accommodate different rules for different states. Similarly, the IRS is not generally able to administer different sets of tax rules in different states. As a result, rather than propose modifications to federal requirements, a state will need to consider proposing to entirely waive the application of one or more of the tax provisions listed in Section 1332 (including the employer shared responsibility or individual mandate requirements) and rely on a tax program administered by the state.

The agencies invite public comments (there is no comment deadline) and indicate that additional guidance may be issued in the future if further clarifications are necessary.

The new guidance addresses several issues and questions raised in a November 18 letter sent to HHS by Senator Ron Wyden (D-OR) – author of the waiver program during ACA negotiations – in which he wrote that the waiver process should be seen “as a tool for states to meet or surpass the progress made by the ACA” and ensure consumer protections.

The Council’s public policy strategic plan, A 2020 Vision, called for limiting the applicability and scope of State Innovation Waivers because such initiatives, particularly those that would seek to impose state employer shared responsibility rules, could erode the ability of multi-state employers to uniformly administer their benefit plans.  The Council will continue to be directly engaged in this matter to ensure  that multi-state employers’ ability to uniformly administer employee benefits plans be preserved and not undermined through the Section 1332 waiver process or other state action.

For more information, contact Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.



The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.

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