# Patient Protection and Affordable Care Act/Title I/Subtitle D/Part IV
## PART IV--STATE FLEXIBILITY TO ESTABLISH ALTERNATIVE PROGRAMS
### SEC. 1331. STATE FLEXIBILITY TO ESTABLISH BASIC HEALTH PROGRAMS FOR LOW-INCOME INDIVIDUALS NOT ELIGIBLE FOR MEDICAID.

    (a) Establishment of Program-
       (1) IN GENERAL- The Secretary shall establish a basic health program meeting the requirements of this section under which a State may enter into contracts to offer 1 or more standard health plans providing at least the essential health benefits described in section 1302(b) to eligible individuals in lieu of offering such individuals coverage through an Exchange.
       (2) CERTIFICATIONS AS TO BENEFIT COVERAGE AND COSTS- Such program shall provide that a State may not establish a basic health program under this section unless the State establishes to the satisfaction of the Secretary, and the Secretary certifies, that--
          (A) in the case of an eligible individual enrolled in a standard health plan offered through the program, the State provides--
             (i) that the amount of the monthly premium an eligible individual is required to pay for coverage under the standard health plan for the individual and the individual's dependents does not exceed the amount of the monthly premium that the eligible individual would have been required to pay (in the rating area in which the individual resides) if the individual had enrolled in the applicable second lowest cost silver plan (as defined in section 36B(b)(3)(B) of the Internal Revenue Code of 1986) offered to the individual through an Exchange; and
             (ii) that the cost-sharing an eligible individual is required to pay under the standard health plan does not exceed--
                (I) the cost-sharing required under a platinum plan in the case of an eligible individual with household income not in excess of 150 percent of the poverty line for the size of the family involved; and
                (II) the cost-sharing required under a gold plan in the case of an eligible individual not described in subclause (I); and
          (B) the benefits provided under the standard health plans offered through the program cover at least the essential health benefits described in section 1302(b).
    For purposes of subparagraph (A)(i), the amount of the monthly premium an individual is required to pay under either the standard health plan or the applicable second lowest cost silver plan shall be determined after reduction for any premium tax credits and cost-sharing reductions allowable with respect to either plan.
    (b) Standard Health Plan- In this section, the term `standard heath plan' means a health benefits plan that the State contracts with under this section--
       (1) under which the only individuals eligible to enroll are eligible individuals;
       (2) that provides at least the essential health benefits described in section 1302(b); and
       (3) in the case of a plan that provides health insurance coverage offered by a health insurance issuer, that has a medical loss ratio of at least 85 percent.
    (c) Contracting Process-
       (1) IN GENERAL- A State basic health program shall establish a competitive process for entering into contracts with standard health plans under subsection (a), including negotiation of premiums and cost-sharing and negotiation of benefits in addition to the essential health benefits described in section 1302(b).
       (2) SPECIFIC ITEMS TO BE CONSIDERED- A State shall, as part of its competitive process under paragraph (1), include at least the following:
          (A) INNOVATION- Negotiation with offerors of a standard health plan for the inclusion of innovative features in the plan, including--
             (i) care coordination and care management for enrollees, especially for those with chronic health conditions;
             (ii) incentives for use of preventive services; and
             (iii) the establishment of relationships between providers and patients that maximize patient involvement in health care decision-making, including providing incentives for appropriate utilization under the plan.
          (B) HEALTH AND RESOURCE DIFFERENCES- Consideration of, and the making of suitable allowances for, differences in health care needs of enrollees and differences in local availability of, and access to, health care providers. Nothing in this subparagraph shall be construed as allowing discrimination on the basis of pre-existing conditions or other health status-related factors.
          (C) MANAGED CARE- Contracting with managed care systems, or with systems that offer as many of the attributes of managed care as are feasible in the local health care market.
          (D) PERFORMANCE MEASURES- Establishing specific performance measures and standards for issuers of standard health plans that focus on quality of care and improved health outcomes, requiring such plans to report to the State with respect to the measures and standards, and making the performance and quality information available to enrollees in a useful form.
       (3) ENHANCED AVAILABILITY-
          (A) MULTIPLE PLANS- A State shall, to the maximum extent feasible, seek to make multiple standard health plans available to eligible individuals within a State to ensure individuals have a choice of such plans.
          (B) REGIONAL COMPACTS- A State may negotiate a regional compact with other States to include coverage of eligible individuals in all such States in agreements with issuers of standard health plans.
       (4) COORDINATION WITH OTHER STATE PROGRAMS- A State shall seek to coordinate the administration of, and provision of benefits under, its program under this section with the State medicaid program under title XIX of the Social Security Act, the State child health plan under title XXI of such Act, and other State-administered health programs to maximize the efficiency of such programs and to improve the continuity of care.
    (d) Transfer of Funds to States-
       (1) IN GENERAL- If the Secretary determines that a State electing the application of this section meets the requirements of the program established under subsection (a), the Secretary shall transfer to the State for each fiscal year for which 1 or more standard health plans are operating within the State the amount determined under paragraph (3).
       (2) USE OF FUNDS- A State shall establish a trust for the deposit of the amounts received under paragraph (1) and amounts in the trust fund shall only be used to reduce the premiums and cost-sharing of, or to provide additional benefits for, eligible individuals enrolled in standard health plans within the State. Amounts in the trust fund, and expenditures of such amounts, shall not be included in determining the amount of any non-Federal funds for purposes of meeting any matching or expenditure requirement of any federally-funded program.
       (3) AMOUNT OF PAYMENT-
          (A) SECRETARIAL DETERMINATION-
             (i) IN GENERAL- The amount determined under this paragraph for any fiscal year is the amount the Secretary determines is equal to 85 percent of the premium tax credits under section 36B of the Internal Revenue Code of 1986, and the cost-sharing reductions under section 1402, that would have been provided for the fiscal year to eligible individuals enrolled in standard health plans in the State if such eligible individuals were allowed to enroll in qualified health plans through an Exchange established under this subtitle.
             (ii) SPECIFIC REQUIREMENTS- The Secretary shall make the determination under clause (i) on a per enrollee basis and shall take into account all relevant factors necessary to determine the value of the premium tax credits and cost-sharing reductions that would have been provided to eligible individuals described in clause (i), including the age and income of the enrollee, whether the enrollment is for self-only or family coverage, geographic differences in average spending for health care across rating areas, the health status of the enrollee for purposes of determining risk adjustment payments and reinsurance payments that would have been made if the enrollee had enrolled in a qualified health plan through an Exchange, and whether any reconciliation of the credit or cost-sharing reductions would have occurred if the enrollee had been so enrolled. This determination shall take into consideration the experience of other States with respect to participation in an Exchange and such credits and reductions provided to residents of the other States, with a special focus on enrollees with income below 200 percent of poverty.
             (iii) CERTIFICATION- The Chief Actuary of the Centers for Medicare & Medicaid Services, in consultation with the Office of Tax Analysis of the Department of the Treasury, shall certify whether the methodology used to make determinations under this subparagraph, and such determinations, meet the requirements of clause (ii). Such certifications shall be based on sufficient data from the State and from comparable States about their experience with programs created by this Act.
          (B) CORRECTIONS- The Secretary shall adjust the payment for any fiscal year to reflect any error in the determinations under subparagraph (A) for any preceding fiscal year.
       (4) APPLICATION OF SPECIAL RULES- The provisions of section 1303 shall apply to a State basic health program, and to standard health plans offered through such program, in the same manner as such rules apply to qualified health plans.
    (e) Eligible Individual-
       (1) IN GENERAL- In this section, the term `eligible individual' means, with respect to any State, an individual--
          (A) who a resident of the State who is not eligible to enroll in the State's medicaid program under title XIX of the Social Security Act for benefits that at a minimum consist of the essential health benefits described in section 1302(b);
          (B) whose household income exceeds 133 percent but does not exceed 200 percent of the poverty line for the size of the family involved;
          (C) who is not eligible for minimum essential coverage (as defined in section 5000A(f) of the Internal Revenue Code of 1986) or is eligible for an employer-sponsored plan that is not affordable coverage (as determined under section 5000A(e)(2) of such Code); and
          (D) who has not attained age 65 as of the beginning of the plan year.
    Such term shall not include any individual who is not a qualified individual under section 1312 who is eligible to be covered by a qualified health plan offered through an Exchange.
       (2) ELIGIBLE INDIVIDUALS MAY NOT USE EXCHANGE- An eligible individual shall not be treated as a qualified individual under section 1312 eligible for enrollment in a qualified health plan offered through an Exchange established under section 1311.
    (f) Secretarial Oversight- The Secretary shall each year conduct a review of each State program to ensure compliance with the requirements of this section, including ensuring that the State program meets--
       (1) eligibility verification requirements for participation in the program;
       (2) the requirements for use of Federal funds received by the program; and
       (3) the quality and performance standards under this section.
    (g) Standard Health Plan Offerors- A State may provide that persons eligible to offer standard health plans under a basic health program established under this section may include a licensed health maintenance organization, a licensed health insurance insurer, or a network of health care providers established to offer services under the program.
    (h) Definitions- Any term used in this section which is also used in section 36B of the Internal Revenue Code of 1986 shall have the meaning given such term by such section.

### SEC. 1332. WAIVER FOR STATE INNOVATION.

    (a) Application-
       (1) IN GENERAL- A State may apply to the Secretary for the waiver of all or any requirements described in paragraph (2) with respect to health insurance coverage within that State for plan years beginning on or after January 1, 2017. Such application shall--
          (A) be filed at such time and in such manner as the Secretary may require;
          (B) contain such information as the Secretary may require, including--
             (i) a comprehensive description of the State legislation and program to implement a plan meeting the requirements for a waiver under this section; and
             (ii) a 10-year budget plan for such plan that is budget neutral for the Federal Government; and
          (C) provide an assurance that the State has enacted the law described in subsection (b)(2).
       (2) REQUIREMENTS- The requirements described in this paragraph with respect to health insurance coverage within the State for plan years beginning on or after January 1, 2014, are as follows:
          (A) Part I of subtitle D.
          (B) Part II of subtitle D.
          (C) Section 1402.
          (D) Sections 36B, 4980H, and 5000A of the Internal Revenue Code of 1986.
       (3) PASS THROUGH OF FUNDING- With respect to a State waiver under paragraph (1), under which, due to the structure of the State plan, individuals and small employers in the State would not qualify for the premium tax credits, cost-sharing reductions, or small business credits under sections 36B of the Internal Revenue Code of 1986 or under part I of subtitle E for which they would otherwise be eligible, the Secretary shall provide for an alternative means by which the aggregate amount of such credits or reductions that would have been paid on behalf of participants in the Exchanges established under this title had the State not received such waiver, shall be paid to the State for purposes of implementing the State plan under the waiver. Such amount shall be determined annually by the Secretary, taking into consideration the experience of other States with respect to participation in an Exchange and credits and reductions provided under such provisions to residents of the other States.
       (4) WAIVER CONSIDERATION AND TRANSPARENCY-
          (A) IN GENERAL- An application for a waiver under this section shall be considered by the Secretary in accordance with the regulations described in subparagraph (B).
          (B) REGULATIONS- Not later than 180 days after the date of enactment of this Act, the Secretary shall promulgate regulations relating to waivers under this section that provide--
             (i) a process for public notice and comment at the State level, including public hearings, sufficient to ensure a meaningful level of public input;
             (ii) a process for the submission of an application that ensures the disclosure of--
                (I) the provisions of law that the State involved seeks to waive; and
                (II) the specific plans of the State to ensure that the waiver will be in compliance with subsection (b);
             (iii) a process for providing public notice and comment after the application is received by the Secretary, that is sufficient to ensure a meaningful level of public input and that does not impose requirements that are in addition to, or duplicative of, requirements imposed under the Administrative Procedures Act, or requirements that are unreasonable or unnecessarily burdensome with respect to State compliance;
             (iv) a process for the submission to the Secretary of periodic reports by the State concerning the implementation of the program under the waiver; and
             (v) a process for the periodic evaluation by the Secretary of the program under the waiver.
          (C) REPORT- The Secretary shall annually report to Congress concerning actions taken by the Secretary with respect to applications for waivers under this section.
       (5) COORDINATED WAIVER PROCESS- The Secretary shall develop a process for coordinating and consolidating the State waiver processes applicable under the provisions of this section, and the existing waiver processes applicable under titles XVIII, XIX, and XXI of the Social Security Act, and any other Federal law relating to the provision of health care items or services. Such process shall permit a State to submit a single application for a waiver under any or all of such provisions.
       (6) DEFINITION- In this section, the term `Secretary' means--
          (A) the Secretary of Health and Human Services with respect to waivers relating to the provisions described in subparagraph (A) through (C) of paragraph (2); and
          (B) the Secretary of the Treasury with respect to waivers relating to the provisions described in paragraph (2)(D).
    (b) Granting of Waivers-
       (1) IN GENERAL- The Secretary may grant a request for a waiver under subsection (a)(1) only if the Secretary determines that the State plan--
          (A) will provide coverage that is at least as comprehensive as the coverage defined in section 1302(b) and offered through Exchanges established under this title as certified by Office of the Actuary of the Centers for Medicare & Medicaid Services based on sufficient data from the State and from comparable States about their experience with programs created by this Act and the provisions of this Act that would be waived;
          (B) will provide coverage and cost sharing protections against excessive out-of-pocket spending that are at least as affordable as the provisions of this title would provide;
          (C) will provide coverage to at least a comparable number of its residents as the provisions of this title would provide; and
          (D) will not increase the Federal deficit.
       (2) REQUIREMENT TO ENACT A LAW-
          (A) IN GENERAL- A law described in this paragraph is a State law that provides for State actions under a waiver under this section, including the implementation of the State plan under subsection (a)(1)(B).
          (B) TERMINATION OF OPT OUT- A State may repeal a law described in subparagraph (A) and terminate the authority provided under the waiver with respect to the State.
    (c) Scope of Waiver-
       (1) IN GENERAL- The Secretary shall determine the scope of a waiver of a requirement described in subsection (a)(2) granted to a State under subsection (a)(1).
       (2) LIMITATION- The Secretary may not waive under this section any Federal law or requirement that is not within the authority of the Secretary.
    (d) Determinations by Secretary-
       (1) TIME FOR DETERMINATION- The Secretary shall make a determination under subsection (a)(1) not later than 180 days after the receipt of an application from a State under such subsection.
       (2) EFFECT OF DETERMINATION-
          (A) GRANTING OF WAIVERS- If the Secretary determines to grant a waiver under subsection (a)(1), the Secretary shall notify the State involved of such determination and the terms and effectiveness of such waiver.
          (B) DENIAL OF WAIVER- If the Secretary determines a waiver should not be granted under subsection (a)(1), the Secretary shall notify the State involved, and the appropriate committees of Congress of such determination and the reasons therefore.
    (e) Term of Waiver- No waiver under this section may extend over a period of longer than 5 years unless the State requests continuation of such waiver, and such request shall be deemed granted unless the Secretary, within 90 days after the date of its submission to the Secretary, either denies such request in writing or informs the State in writing with respect to any additional information which is needed in order to make a final determination with respect to the request.

### SEC. 1333. PROVISIONS RELATING TO OFFERING OF PLANS IN MORE THAN ONE STATE.

    (a) Health Care Choice Compacts-
       (1) IN GENERAL- Not later than July 1, 2013, the Secretary shall, in consultation with the National Association of Insurance Commissioners, issue regulations for the creation of health care choice compacts under which 2 or more States may enter into an agreement under which--
          (A) 1 or more qualified health plans could be offered in the individual markets in all such States but, except as provided in subparagraph (B), only be subject to the laws and regulations of the State in which the plan was written or issued;
          (B) the issuer of any qualified health plan to which the compact applies--
             (i) would continue to be subject to market conduct, unfair trade practices, network adequacy, and consumer protection standards (including standards relating to rating), including addressing disputes as to the performance of the contract, of the State in which the purchaser resides;
             (ii) would be required to be licensed in each State in which it offers the plan under the compact or to submit to the jurisdiction of each such State with regard to the standards described in clause (i) (including allowing access to records as if the insurer were licensed in the State); and
             (iii) must clearly notify consumers that the policy may not be subject to all the laws and regulations of the State in which the purchaser resides.
       (2) STATE AUTHORITY- A State may not enter into an agreement under this subsection unless the State enacts a law after the date of the enactment of this title that specifically authorizes the State to enter into such agreements.
       (3) APPROVAL OF COMPACTS- The Secretary may approve interstate health care choice compacts under paragraph (1) only if the Secretary determines that such health care choice compact--
          (A) will provide coverage that is at least as comprehensive as the coverage defined in section 1302(b) and offered through Exchanges established under this title;
          (B) will provide coverage and cost sharing protections against excessive out-of-pocket spending that are at least as affordable as the provisions of this title would provide;
          (C) will provide coverage to at least a comparable number of its residents as the provisions of this title would provide;
          (D) will not increase the Federal deficit; and
          (E) will not weaken enforcement of laws and regulations described in paragraph (1)(B)(i) in any State that is included in such compact.
       (4) EFFECTIVE DATE- A health care choice compact described in paragraph (1) shall not take effect before January 1, 2016.
    (b) Authority for Nationwide Plans-
       (1) IN GENERAL- Except as provided in paragraph (2), if an issuer (including a group of health insurance issuers affiliated either by common ownership and control or by the common use of a nationally licensed service mark) of a qualified health plan in the individual or small group market meets the requirements of this subsection (in this subsection a `nationwide qualified health plan')--
          (A) the issuer of the plan may offer the nationwide qualified health plan in the individual or small group market in more than 1 State; and
          (B) with respect to State laws mandating benefit coverage by a health plan, only the State laws of the State in which such plan is written or issued shall apply to the nationwide qualified health plan.
       (2) STATE OPT-OUT- A State may, by specific reference in a law enacted after the date of enactment of this title, provide that this subsection shall not apply to that State. Such opt-out shall be effective until such time as the State by law revokes it.
       (3) PLAN REQUIREMENTS- An issuer meets the requirements of this subsection with respect to a nationwide qualified health plan if, in the determination of the Secretary--
          (A) the plan offers a benefits package that is uniform in each State in which the plan is offered and meets the requirements set forth in paragraphs (4) through (6);
          (B) the issuer is licensed in each State in which it offers the plan and is subject to all requirements of State law not inconsistent with this section, including but not limited to, the standards and requirements that a State imposes that do not prevent the application of a requirement of part A of title XXVII of the Public Health Service Act or a requirement of this title;
          (C) the issuer meets all requirements of this title with respect to a qualified health plan, including the requirement to offer the silver and gold levels of the plan in each Exchange in the State for the market in which the plan is offered;
          (D) the issuer determines the premiums for the plan in any State on the basis of the rating rules in effect in that State for the rating areas in which it is offered;
          (E) the issuer offers the nationwide qualified health plan in at least 60 percent of the participating States in the first year in which the plan is offered, 65 percent of such States in the second year, 70 percent of such States in the third year, 75 percent of such States in the fourth year, and 80 percent of such States in the fifth and subsequent years;
          (F) the issuer shall offer the plan in participating States across the country, in all geographic regions, and in all States that have adopted adjusted community rating before the date of enactment of this Act; and
          (G) the issuer clearly notifies consumers that the policy may not contain some benefits otherwise mandated for plans in the State in which the purchaser resides and provides a detailed statement of the benefits offered and the benefit differences in that State, in accordance with rules promulgated by the Secretary.
       (4) FORM REVIEW FOR NATIONWIDE PLANS- Notwithstanding any contrary provision of State law, at least 3 months before any nationwide qualified health plan is offered, the issuer shall file all nationwide qualified health plan forms with the regulator in each participating State in which the plan will be offered. An issuer may appeal the disapproval of a nationwide qualified health plan form to the Secretary.
       (5) APPLICABLE RULES- The Secretary shall, in consultation with the National Association of Insurance Commissioners, issue rules for the offering of nationwide qualified health plans under this subsection. Nationwide qualified health plans may be offered only after such rules have taken effect.
       (6) COVERAGE- The Secretary shall provide that the health benefits coverage provided to an individual through a nationwide qualified health plan under this subsection shall include at least the essential benefits package described in section 1302.
       (7) STATE LAW MANDATING BENEFIT COVERAGE BY A HEALTH BENEFITS PLAN- For the purposes of this subsection, a State law mandating benefit coverage by a health plan is a law that mandates health insurance coverage or the offer of health insurance coverage for specific health services or specific diseases. A law that mandates health insurance coverage or reimbursement for services provided by certain classes of providers of health care services, or a law that mandates that certain classes of individuals must be covered as a group or as dependents, is not a State law mandating benefit coverage by a health benefits plan.