Section 1332, Where Are You?

People are starting to get excited about another Obamacare work-around: The section 1332 waiver. This refers to a section of Obamacare that allows states great flexibility in how they deliver Obamacare within their borders. The curious thing about section 1332 waivers is that they can only be issued as of January 1, 2017.

Why? Why not allow states to get section 1332 waivers as of October 2010, when Obamacare’s first regulations took effect? Or January 2014, when the gushers of tax credits began to flow through the exchanges? Who knows? Maybe the administration just thought they needed a few years for the cement around Obamacare to solidify.

Newt Gingrich and Tom Daschle have co-authored a report on how states can use section 1332 waivers to execute policy preferences either to the left or the right of Obamacare. Anne Phelps of Deloitte & Touche LLP has also written a report describing the benefits of using a section 1332 waiver.

Both clarify that section 1332 waivers have their limits: They cannot increase the federal debt, reduce comprehensiveness or affordability from the Obamacare status quo ante, or reduce the number of people covered.

Obviously, the question of “comprehensive” or “affordable” benefits under Obamacare is hotly debated. So, determining the consequences of any section 1332 waiver will surely also be hotly debated. Nevertheless, states which want to reduce the harm of Obamacare should certainly pursue section 1332 waivers, while waiting for federal legislative changes to Obamacare (including repeal).

Two interesting options that every state should consider: privatizing its health insurance exchange, and combining Medicaid and Obamacare tax credits into premium support.

Of course, if a certain senator from Vermont is elected president next November, such waiver applications are unlikely to be approved. Nevertheless, states should invest some effort developing their section 1332 Obamacare escape plans, in case the opportunity to break out arises in 2017.

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For the pivotal alternative to Obamacare, please see Independent Institute’s book, A Better Choice: Healthcare Solutions for America, by John C. Goodman.