Waivers Are Temporary

 Section 1115 waivers come with prescribed expiration dates. By law, the secretary of HHS may approve a Medicaid waiver for “the period he finds necessary,” which is generally five years.[18] As a waiver’s initial experimental period nears its expiration,[19] the state may re-apply for a three- to five-year extension, but recent evidence shows that HHS will not simply rubber-stamp a state’s request for renewal.

For instance, HHS denied the state of Oklahoma’s waiver extension request for its Insure Oklahoma program in May of this year, because the program used “enrollment caps,” which were designed to keep the cost of the program in line with state revenues.[20] In denying the state’s request, HHS indicated that any pilot project with enrollment caps will “not be approved under 1115 demonstrations for the new adult group or similar populations,” a move that will force Oklahoma to shutter a program created in 2004 and that assists about 30,000 low-income Oklahomans in affording health insurance coverage.[21] Even an eight-year track record of success will not guarantee a waiver extension.

Stay Engaged

Receive our weekly emails!

Indiana faced similar difficulties in its attempts over the past several years to renew its Healthy Indiana Plan. HIP establishes medical savings accounts for those who qualify, but requires recipients to contribute between 2 and 5 percent of their gross family income toward the benefits they receive, which include a high-deductible insurance policy and up to $1,100 in contributions to a “POWER  Account” (similar to a health savings account).[22] Failure to meet this copay obligation would bar the recipient from coverage for one year — giving teeth to the requirement and providing a limited but more effective cost-control mechanism for the state.[23] A CQ HealthBeat report described HIP as a Medicaid program “that covers thousands of previously uninsured residents in the state while charging them premiums in an effort to promote personal responsibility.”[24]

HHS denied Indiana’s request for a multi-year extension of the program in 2012,[25] but Indiana has continued to negotiate with HHS in effort to save HIP before its waiver expires in December of this year.[26]

Waiver denials are not just a “red state” problem, either. Connecticut requested a Section 1115 waiver for the state’s “Medicaid Low-Income Adult Coverage Demonstration” to raise the total asset test limit for eligibility and save the state about $50 million.[27] The changes would have reduced coverage for 13,381 individuals for one year.[28] HHS rejected Connecticut’s request because such restrictions and ineligibility periods are “not consistent with the general statutory objective to extend coverage to low-income populations.”[29]

Other Section 1115 waiver requests have also been denied recently, including Arizona’s cost-sharing increases for children and pregnant women, California’s request to charge copayments, and Florida’s proposal “to charge a $10 monthly premium and $100 copayment for non-emergent use of the emergency room for most Medicaid beneficiaries.”[30]

Enrollment caps and copayment policies may not be the only types of pilot projects to be denied waivers or extensions. For example, HHS warned in April of 2013 that reforms which include a “period of ineligibility” are inconsistent with the goals of the Medicaid expansion, and — as Oklahoma discovered — the agency will deny any waiver application that contains one:

[Enrollment caps and periods of ineligibility] policies do not further the objectives of the Medicaid program, which is the statutory requirement for allowing section 1115 demonstrations. As such, we do not anticipate that we would authorize enrollment caps or similar policies through section 1115 demonstrations for the new adult group or similar populations.[31]

State policymakers should be aware that HHS does and will deny Section 1115 waivers and extensions of these waivers based on “periods of ineligibility,” “enrollment caps” or similar policies — the very policies that many states are considering using to make their expanded Medicaid programs more cost-effective and flexible.