Nevada’s 1332 Waiver and How It Compares to 1332 Waivers in Colorado and Washington
In December 2022, the Nevada Department of Health and Human Services (DHHS) released its Section 1332 innovation waiver application as part of the state’s effort to offer the Nevada Public Option on the individual market, beginning January 1, 2026. The 1332 waiver would allow the Nevada Public Option, established by Senate Bill (SB) 420 in 2021, to implement premium reduction targets and obtain necessary funding to administer the new program and possibly other initiatives to improve consumer affordability on the state’s Exchange. Nevada’s 1332 waiver feature elements that mirror approved 1332 waivers in Colorado and Washington.
Nevada’s Approach to Public Option
Beginning January 1, 2026, the Nevada Public Option will be offered in the state’s individual market as a qualified health plan (QHP) that offers standardized benefits and apply various cost-control measures directly targeting premiums and provider reimbursement rates. Nevada plans to contract with carriers, selected through a competitive bidding process, who will offer public option plans. All Medicaid managed care plans will be required to submit a good faith bid as a condition of participation in the Medicaid program.
Premium Reduction Targets: Premiums for the Nevada Public Option must achieve a four percent reduction relative to the average reference premium in 2026, and must ultimately reach at least a 16 percent reduction by 2029. The “average reference premium” is the premium for the second-lowest cost silver level plan available in the state’s Exchange, adjusted by the percentage change in the Medicare Economic Index (i.e., inflation-adjusted clinician costs). Additionally, premiums for public option plans are prohibited from increasing greater than the increase in the Medicare Economic Index.
Provider Participation and Reimbursement Guardrails: Any provider that participates in the Medicaid program or the Public Employees’ Benefits Program will be required to participate in at least one network established for the public option. SB 420 requires provider reimbursement rates to be comparable to or greater than reimbursement rates under Medicare. Such a requirement will avoid the early issues Washington faced when implementing its public option, which initially did not require providers to participate and which therefore complicated efforts to achieve lower costs.
How the Section 1332 Waiver Supports the Nevada Public Option
Nevada DHHS seeks a federal waiver to the single risk pool requirement of the Affordable Care Act (ACA) in order to implement the premium reduction targets and obtain necessary funding to administer the Nevada Public Option program. A federal waiver would allow an issuer to adjust premiums of Nevada Public Option plans in accordance with savings generated through reduced health care provider payments in order to meet premium reduction targets, which otherwise is not permitted under implementing regulations (see Table 1 for more detail on these requirements). In turn, public option plans offered at lower premiums, due to the waiver of the single risk pool requirement, would reduce the amount of premium tax credits that individuals in Nevada would otherwise receive. These savings are paid by the federal government to the state in the form of federal pass-through funding.
How Federal Pass-Through Funds Would Support the Nevada Public Option
Nevada DHHS plans to use federal-pass through funds received from the innovation waiver to cover the cost of administering Nevada Public Option program, as required by SB 420. These funds would be deposited into the newly established Public Option Trust Fund. Milliman, Inc. estimates that the Nevada Public Option could generate nearly $1 billion in federal pass-through savings in the first 10 years. SB 420 also authorizes Nevada DHHS to use pass-through funds to improve consumer affordability. In the application, Nevada DHHS proposes two options for remaining funds:
State Premium Wrap to Improve Consumer Affordability or Mitigate Impact of the Expiration of Enhanced Federal Premium Subsidies in 2026: Enhanced federal premium subsidies enacted under the American Rescue Plan Act of 2021, and extended by the Inflation Reduction Act of 2022, are set to expire at the end of 2025, which is expected to result in consumers seeing substantial premium increases starting in 2026. Nevada DHHS proposes using federal pass-through funds to fill the affordability gap with state-based subsidies.
Incentive Bonus Payment Program for Public Option Carriers: Nevada DHHS is also considering the establishment of an incentive bonus payment program that would award public option carriers for high performance on state goals and priorities, such as improvements in health care quality metrics, health equity, provider network capacity, and health outcomes in the individual health market. This new program would be similar to the bonus payment programs offered to Medicaid managed care plans.
Next Steps for Nevada’s 1332 Waiver
Nevada DHHS plans to submit the Section 1332 waiver application to the Centers for Medicare and Medicaid Services (CMS) in early-to-mid March 2023, ahead of the statutory deadline on January 1, 2024. The review process for a Section 1332 waiver application is presented in Table 2 below.
CMS appears likely to approve Nevada’s waiver application due to its similarities to Colorado’s approved waiver application as well as its instrumental role in the Nevada Public Option. Nevada’s waiver application meets the four Section 1332 waiver statutory guardrails in the ACA (affordability, scope of coverage, comprehensiveness, and deficit neutrality), according to actuarial analysis conducted by Milliman, Inc. Under the waiver, the Nevada Public Option is expected to provide coverage that is at least as affordable and comprehensive as coverage provided without the waiver. Coverage under the waiver is estimated to be available to at least as many people as would be covered without the waiver. Lastly, the waiver is not expected to increase the federal deficit.
Comparison of Nevada’s 1332 Waiver with Waivers in Colorado and Washington
The overall approach of the Nevada Public Option and the accompanying 1332 waiver application mirror key elements of the Colorado Option and its 1332 waiver approved by CMS. Colorado’s Section 1332 waiver also waives the single risk pool requirement to allow carriers of Colorado Option plans to implement requirement premium reduction targets. Both Colorado and Washington use federal pass-through funds, generated by their 1332 waivers, to offer state-based subsidies to individuals who are ineligible for federal premium subsidies. In Colorado, the OmniSalud Program offers the Colorado Option with “SilverEnhanced Savings” ($0 monthly premium and insurers pay 94 percent of medical expenses) to Colorado residents without federally legal immigration status and income less than 138 percent of the federal poverty level. In Washington, state-based subsidies will become available in 2024 to all state residents, regardless of immigration status, with an income up to 250 percent FPL. See Table 3 below for more.
