Section 1332 Innovation Waiver Series: State Approaches to Reinsurance Waiver Programs 

As the policy landscape continues to shift at the federal level, states may have renewed interest in considering innovative opportunities to support their healthcare systems. This article is second in a series PCG began in the spring reporting on Section 1332 State Innovation Waivers. In this article, we begin to explore the different approaches to leveraging these waivers to address a state’s unique needs. This article focuses on the manners in which states have leveraged Section 1332 Waivers to support state-based reinsurance programs.   We also explore the impact of the continued debate over advance premium tax credits (APTCs) on the funding available through this waiver opportunity.  

Most states that have leveraged Section 1332 Waivers have done so to support state-based reinsurance programs, which are designed to lower premium costs across the market by subsidizing high-cost claims that can drive up the risk profile of a plan’s enrollment and result in increased premiums. The Affordable Care Act created a federal reinsurance program that phased out in 2016. By lowering premiums, reinsurance programs support access to health insurance and care and stabilize state insurance markets. The impact is felt acutely by the unsubsidized population, which, without access to employer-sponsored insurance or APTCs, must pay the full cost of insurance plans that rises annually. Because ATPCs are based on the cost of a benchmark plan in the market, reinsurance programs also lower the cost to the federal government for those subsidies (which results in waiver pass-through funding for the programs). While reinsurance programs have the same general purpose, states have the opportunity to design their features in a way to best meet the landscape and needs of the state. 

Traditional Model 

Oregon’s Section 1332 waiver was originally approved in October 2017. The Oregon model is a traditional reinsurance model wherein insurers are reimbursed by the Oregon Reinsurance Program (ORP) for a portion of enrollee’s claims based on the coinsurance rate and within a corridor between an attachment point and a certain cap. The attachment point, or the threshold for which a claim must hit to qualify for reinsurance, is decided each year by Oregon Administrative Rules (OAR) Chapter 83, Division 150. For example, in 2021, the attachment point was set at $83,000. Since, the attachment point has either increased or stayed the same yearly. In 2025, the attachment point was increased to $103,000. The cap and coinsurance rate have stayed consistent at $1,000,000 and 50%, respectively. The program is funded by a combination of federal pass-through funds and a state assessment on commercial health premiums. Upon renewal in 2022, Oregon Insurance Commission reported the ORP to have reduced premiums in the commercial market by more than 8.2% statewide. The waiver was renewed and will continue to be effective through December 31, 2027. While Oregon was an early-adopter of this model, the vast majority of Section 1332 authorized state-based reinsurance programs use this model, some adapted as outlined below. 

Clinical Condition-Based Reinsurance Model 

Both Alaska and Maine use a Clinical Condition-Based Reinsurance Model. Alaska’s Section 1332 waiver was originally approved in 2017 and extended in 2023 until the end of 2027. It funds the Alaska Reinsurance Program (ARP); unlike a traditional reinsurance program model, under the ARP, coverage of claimants with high-cost conditions is ceded to the program. While the covered individual continues to get the coverage of the insurance plan in which they enrolled, the insurer pays the premiums over to the ARP, which pays claims for that person regardless of claim amount. In order to qualify for reimbursement, the claim must fall into one of the 34 hierarchical condition categories (HCCs). These conditions were originally identified as the highest-cost claims in the individual market. During the first waiver period, the list contained 33 conditions, in 2020, cardio-respiratory failure and shock, including respiratory distress systems, was added as a condition to account for COVID-19 symptoms. ARP pays for all claims for an individual who has at least one of the high-cost conditions. Results from the first waiver period demonstrated that the program reduced individual market premiums by 30.2% in 2018, 24% in 2019, and 37.1% in 2020.  

Reinsurance Payments Based on Funding Available 

Like Oregon, New Hampshire adopted a traditional attachment point model for its reinsurance program. However, because funding for the program is coming from an insurer assessment rather than the state’s general fund, the state limited state funding to the total assessment collection based on a defined formula. The waiver was originally approved in August 2020 and the state’s request for a waiver extension was approved in November 2024 to be effective until the end of 2030. In comparison with Oregon’s reinsurance parameters, New Hampshire’s attachment point is $60,000 with a maximum cap of $400,000. Though the state revisits those amounts annually, the have not changed. New Hampshire’s coinsurance (percentage of claims in eligibility corridor) has changed most years and is finalized to match the funding available and has ranged from just over 48% in 2024 to just over 84% in 2021. Over the initial waiver period, the average premium savings in the state were 12.8%. Additionally, Kaiser Family Foundation conducts yearly rankings to compare statewide premium costs. Prior to the implementation of the waiver in 2020, New Hampshire ranked 15th; after just one year of the waiver, the rank was down to 7th. Now, in 2025, New Hampshire has the lowest average benchmark Silver premium across the country at $325.  

Reinsurance based on Region 

Like New Hampshire, Colorado’s model is also a traditional, attachment point model. However, instead of maintaining the same coinsurance across the state, Colorado has split the state into three regional tiers. Each tier has the same attachment point and maximum cap, but the coinsurance rate varies depending on tier. According to Colorado, this promotes equity across the state and encourages private carriers to enter regions with less carrier participation. In more rural and mountainous areas, claims costs will be most reduced with the highest coinsurance rate. In 2026, the attachment point will be $60,000 with a cap of $400,000 across the state. Tier 1 will have a coinsurance rate of 39%, tier 2 will be at 50%, and tier 3 will be at 71%. In the first two years of its program, Colorado reported a 20% average reduction of premium costs statewide, for those who purchase in the individual market.  

Future of Section 1332 Funding 

Each of the above-mentioned Reinsurance 1332 Waivers demonstrated success in stabilizing the individual health insurance markets in their respective states as well as reducing annual premiums for individual consumers.  

Looking forward to the future of these sorts of Section 1332 Waivers, all eyes are on the current federal debate over the government shutdown – in which the future of enhanced APTCs have become entangled. The “pass-through funding” (from federal savings resulting from the waiver) that states rely on to help fund these reinsurance programs is savings based on APTCs, which grew significantly in every state as eligibility and subsidy level increased under the enhanced APTCs initially authorized through the American Rescue Plan Act (ARPA) and extended under the Inflation Reduction Act (IRA).  If those enhanced APTCs are not extended, they will expire at the end of this year and funding available for the state-based reinsurance programs authorized through Section 1332 Waivers will decrease significantly. While many of these programs existed prior to the enhanced APTCs and can continue to exist if the APTCs reduce, their impact will undoubtedly decrease unless states choose to fund the difference. 

Keep an eye out for next article in the series, where we will explore ways that states have leveraged Section 1332 Waivers for innovations beyond Reinsurance Programs.