Page 1 GAO-16-637R Affordable Care Act Waivers

441 G St. N.W.

Washington, DC 20548

July 6, 2016

The Honorable Orrin Hatch

Chairman

Committee on Finance

United States Senate

Patient Protection and Affordable Care Act: Information on Approval Process for State 

Innovation Waivers

Dear Mr. Chairman: 

The Patient Protection and Affordable Care Act (PPACA) includes provisions intended to 

increase the number of Americans who have health coverage and outlines a shared role 

between states and the federal government for doing so.1 For example, PPACA required that 

individuals maintain health insurance coverage and required the establishment in every state of 

health insurance exchanges—also known as marketplaces—through which up to 11.4 million 

individuals are estimated to receive coverage in 2016.2 To allow for state innovation in providing 

their residents with access to health insurance while retaining the basic protections of PPACA, 

section 1332 of the statute permits states to seek federal approval to waive certain key

requirements under the law (referred to as state innovation waivers or 1332 waivers).3 Under 

1332 waivers, for example, states may seek approval to waive the requirements that individuals 

maintain health insurance coverage, that exchanges perform certain functions, and that benefits 

of plans offered through the exchanges meet certain standards. States may also seek approval 

to waive PPACA requirements governing federal subsidies to assist qualifying low-income 

individuals in affording coverage purchased through exchanges; these subsidies are estimated 

to total $45 billion in 2016. However, PPACA requires that state 1332 proposals meet four 

approval criteria. Specifically, a state proposal must demonstrate that the waiver will result in 

coverage that is at least as available, comprehensive, and affordable as would have existed 

without the waiver, and that the waiver will not increase the federal deficit. 

The Department of Health and Human Services (HHS) and the Department of Treasury 

(Treasury; hereafter referred to together as the Departments) are jointly responsible for 

 1

Pub. L. No. 111-148, 124 Stat.119 (2010), as amended by the Health Care and Education Reconciliation Act of 2010 

(HCERA), Pub. L. No. 111-152, 124 Stat. 1029 (2010). For the purposes of this report, references to PPACA include 

the amendments made by HCERA.

2

The Department of Health and Human Services commonly refers to the exchanges as marketplaces. Where we 

discuss exchanges in this report, we are referring to the individual exchanges and the small business exchanges 

required under PPACA. For the Department’s estimate on the number of individuals expected to receive coverage 

through the exchanges, see Department of Health and Human Services, Office of the Assistant Secretary for 

Planning and Evaluation, Issue Brief: How Many Individuals Might Have Coverage at the End of 2016? (Washington 

D.C.; October 2015).

3

Pub. L. No. 111-148, § 1332, 124 Stat. 119, 203-206 (2010) (codified at 42 U.S.C. § 18052).
Page 2 GAO-16-637R Affordable Care Act Waivers

reviewing and approving states’ 1332 waiver proposals, which they have discretion to approve 

provided the proposals meet the statutory approval criteria. Approved waivers can take effect for 

coverage beginning as early as January 2017.4 The Departments issued final regulations in 

2012 establishing the 1332 waiver application process and additional guidance in December 

2015 on what states need to provide to demonstrate that a proposed waiver meets the statutory 

criteria and how the proposed waivers will be evaluated.5 According to the Departments, as of 

May 2016, one state had an application pending.

You asked that we provide information on the status of the Departments’ implementation of the 

review and approval process for 1332 waivers. For this report, we provide information on HHS’s 

and Treasury’s approach to: 

(1) applying the statutory approval criteria, and 

(2) coordinating the review and approval of 1332 waiver proposals across HHS, Treasury, 

and their related agencies.

To address our objectives, we reviewed federal regulations and guidance issued in 2012 and 

2015 respectively. To supplement our review of the regulations and guidance, we interviewed 

HHS and Treasury officials about their planned approach for assessing state waiver proposals, 

including the rationale for requirements related to assessing compliance with the statutory 

criteria and procedures for coordinating reviews across the departments and their respective 

agencies. We also inquired about the nature and status of any state applications for 1332 

waivers. We interviewed stakeholder groups—the National Governor’s Association, the National 

Association of Medicaid Directors, and the National Academy for State Health Policy—about 

states’ views of the Departments’ review and approval policies for 1332 waivers.

We conducted this performance audit from February 2016 to July 2016 in accordance with 

generally accepted government auditing standards. Those standards require that we plan and 

perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on our audit objectives.

Results in Brief

HHS and Treasury have established a number of controls in the waiver review process that 

seek to ensure approved waivers meet the statutory criteria of preserving health coverage and 

controlling federal costs. For example, in applying the approval criteria included in PPACA that a 

state waiver provide coverage to at least a comparable number of residents and that the 

benefits be at least as comprehensive and affordable as in the absence of the waiver, HHS and 

Treasury required that the state assess the effect not only on the overall population, but also on 

vulnerable subgroups, such as elderly individuals. Furthermore, the Departments established a 

number of controls in assessing whether the proposed waiver is deficit neutral, that is, that it 

does not increase the federal deficit. For example, the Departments will consider not only the 

 4

Exchange coverage generally begins on January 1st of each calendar year. There is an annual open enrollment 

period for exchange coverage, which in 2015 ran from November 1, 2015, through December 15, 2015, for coverage 

effective on January 1, 2016. States implementing 1332 waivers affecting coverage in 2017 may need to implement 

those changes prior to the annual open enrollment period.

5

See 77 Fed. Reg. 11,700 (Feb. 27, 2012) (codified at 31 C.F.R. pt. 33 and 45 C.F.R. pt. 155); 80 Fed. Reg. 78,131 

(Dec. 16, 2015).
Page 3 GAO-16-637R Affordable Care Act Waivers

increases to federal costs for exchange coverage but also whether the proposal will increase 

federal costs for other types of coverage, such as Medicaid, the joint federal-state health care 

financing program for low-income and medically needy individuals. As of May 2016, the 

Departments had not approved any waivers. Consequently, there are no waivers available to 

illustrate the types of approvable proposals or how the Departments applied controls.

HHS and Treasury officials stated that they have been coordinating between and within their 

Departments to help states as they develop the concepts for their waiver proposals prior to 

submitting their applications. In addition, the Departments issued joint regulations and guidance 

establishing the high-level roles of the Departments in the waiver review and approval process. 

As of May 2016, officials told us the Departments were still in the process of developing more 

specific procedures for coordinating. For example, HHS officials reported that the Department is 

developing assessment tools to be used by both Departments during review and approval. 

Officials also told us that the Departments are taking a flexible approach to setting procedures in 

recognition that they may need to evolve as the Departments gain experience with each waiver 

application submitted. 

Background

Starting in January 2014, PPACA required that most U.S. citizens and legal residents maintain 

health coverage with minimum essential benefits or pay tax penalties. The law also required the 

establishment of exchanges in every state so that individuals and small businesses could 

purchase such coverage, referred to as individual exchanges and small business exchanges, 

respectively. States may elect to establish and operate an exchange, known as a state-based 

exchange (SBE), or allow HHS to do so within the state, known as a federally facilitated 

exchange (FFE). As of March 2016, 17 states operated SBEs and 34 states had FFEs for their 

individual exchanges.6 Qualified health plans offered through the exchange are required to meet 

certain benefit design and other standards. For example, plans must cover hospitalization and 

prescription drugs. PPACA also provides federal subsidies to help qualifying individuals afford 

coverage in the form of premium tax credits and cost-sharing reductions. Premium tax credits 

may be paid to issuers of coverage in advance. The reconciliation of advanced payments of the 

tax credit with the amount allowed occurs when qualifying individuals file their annual income 

taxes with the Internal Revenue Service within Treasury.

Section 1332 of PPACA authorizes HHS and Treasury to approve state proposals to waive 

specified PPACA requirements related to, among other things, the maintenance of insurance 

coverage for individuals, exchange functions, and subsides for exchange coverage. See Table 

1. Authority for approving the waivers is divided between HHS and Treasury depending on the 

requirements a state is seeking to waive. Specifically, section 1332 of PPACA authorizes HHS 

to waive specifically identified parts or sections of PPACA and authorizes Treasury to waive 

specifically identified sections of the Internal Revenue Code.7

 6

FFEs use a federal information technology (IT) platform. Certain states with SBEs also use the FFE’s IT platform to 

perform certain exchange functions, such as determining eligibility or for enrollment. As of March 2016, 4 states with 

SBEs relied on the federal exchange platform for certain enrollment functions.

7

The Secretary of HHS is authorized to waive section 1402 and Parts I and II of subtitle D of PPACA. The Secretary 

of Treasury is authorized to waive sections 36B, 4980H, and 5000A of the Internal Revenue Code of 1986. The 

Departments may not waive a requirement that does not appear in one of listed parts or sections, such as PPACA’s 

prohibition against the use of an individual’s health status to determine premium rates for insurance offered on an 

exchange, which appears in title I, subtitle C, part I of the Act.. See 42 U.S.C. § 18052(a)(2), (a)(6), (c)(2) and 42 

U.S.C. § 300gg(a)(1).
Page 4 GAO-16-637R Affordable Care Act Waivers

Table 1: Types of Requirements That May Be Waived under Section 1332 of the Patient 

Protection and Affordable Care Act 

Type of Requirements Description

Individual mandate Requires most citizens and legal residents of the United States to maintain health 

insurance that qualifies as minimum essential coverage for themselves and their 

dependents or pay a tax penalty. Certain individuals—for example, those with 

qualifying religious exemptions—are exempt from the mandate and penalties.

Employer penalties Imposes tax penalties on large employers if they fail to offer health insurance to 

their full-time employees or if they offer coverage that does not meet certain 

standards for benefits covered or affordability. Moreover, a tax penalty is imposed 

if at least one full-time employee obtains a premium tax credit.

a

Exchanges Requires that exchanges be established in every state through which individuals 

and small employers can purchase coverage and contains requirements for 

exchange functions, such as maintaining web portals for individuals and small 

businesses to access the exchange and call-centers to provide customer service.

Covered benefits Requires that plans offered on the exchange cover an array of essential health 

benefits including emergency services, maternal and newborn care, and mental 

health care, among others.

Premium tax credits Establishes premium tax credits available to eligible individuals with household 

incomes between 100 and 400 percent of the federal poverty level. Individuals 

eligible for Medicaid or other minimum essential coverage, such as qualifying 

employer-sponsored coverage, are not eligible for the premium tax credit. 

Cost-sharing reductions Provides for cost-sharing reductions to reduce out-of-pocket costs, such as 

deductibles and copayments, for eligible individuals with household incomes 

between 100 and 250 percent of the federal poverty level.

Source: GAO statutory analysis. I GAO-16-637R

a

26 U.S.C. § 4980H. Federal law defines a large employer as having an average of 51 or more employees during the 

preceding calendar year; however, states may apply this definition based on an average of 101 or more employees. 

See 42 U.S.C. §§ 18024(b), 300gg-91(e). 

The Departments play a shared role in helping states develop 1332 waiver proposals during the 

conceptual phase of the waiver process and reviewing and approving proposals. Once a state 

has developed a proposal, the state is required to seek public comment before submitting an 

application to the federal government. According to their 2012 regulations, upon submission, 

HHS and Treasury will perform a preliminary review to assess the completeness of the 

application. Upon determining that the application is complete, the Departments will seek public 

input during a federal public notice and comment period. HHS and Treasury will then assess the 

proposal against the statutory criteria during the federal decision making period. See figure 1. 
Page 5 GAO-16-637R Affordable Care Act Waivers

Figure 1: Departments of Health and Human Services’ (HHS) and Treasury’s (Treasury) 

Section 1332 Waiver Approval Process

The federal decision making period is the critical part of the review process in which HHS and 

Treasury assess whether a state’s waiver proposal meets the statutory criteria. PPACA 

established four criteria that state proposals for 1332 waivers must meet in preserving the 

coverage and affordability goals of the statute. 

1. Coverage of a comparable number of people: the state’s proposal must provide 

coverage to at least a comparable number of the state’s residents as would be receiving 

coverage absent the waiver. 
Page 6 GAO-16-637R Affordable Care Act Waivers

2. Comprehensiveness of benefits: the scope of health benefits under the waiver must 

be at least as comprehensive as qualified health plans, which are required under 

PPACA to cover certain benefits, including hospitalization, laboratory, and mental health 

services.8

3. Affordability: coverage and out-of-pocket spending for state residents is at least as 

affordable as it would have been absent the waiver. 

4. Deficit Neutrality: the waiver must not increase the federal deficit. 

The Departments’ 2012 regulations and 2015 guidance outline a state’s responsibility in 

demonstrating that their waiver proposal meets these four criteria, including the data and 

analysis required.9

For some waiver proposals, another component of the federal decision making period is 

determining the amount of federal funds available to states to implement the waiver. If an 

approved section 1332 proposal waives premium tax credits and cost-sharing reductions, then 

federal funds in the amount that the federal government would have spent on cost-sharing 

reductions, premium tax credits, and small business tax credits for eligible individuals and small 

employers in the absence of the waiver may pass through to the state for purposes of 

implementing the waiver. These funds are referred to as federal pass-through funding.10 HHS 

and Treasury are required to annually determine the aggregate amount of pass-through funding.

When a state submits a 1332 waiver application, it can submit it concurrently with proposals for 

other types of waivers, as required by PPACA. For example, if a state proposes changes to both 

its exchange coverage and its Medicaid program, it may submit a coordinated application for the 

1332 and Medicaid waivers.11 Among other types, Medicaid waivers include waivers referred to 

as 1115 demonstrations, which allows HHS to waive certain Medicaid requirements for 

purposes of allowing states to test and evaluate new approaches to delivering and financing 

care.

 8

PPACA requires that qualified health plans offered on the exchange provide 10 essential health benefits, which are 

(1) ambulatory patient services, (2) emergency services, (3) hospitalization, (4) maternity and newborn care, (5) 

mental health and substance use disorder services (including behavioral health treatment), (6) prescribed drugs, (7) 

rehabilitative and habilitative services and devices, (8) laboratory services, (9) preventive and wellness services and 

chronic disease management, and (10) pediatric services, including oral and vision care. See 42 U.S.C. § 18022(b).

PPACA requires that the Office of the Actuary within the Centers for Medicare & Medicaid Services certify that 

proposed coverage under a 1332 waiver is at least as comprehensive as coverage offered through exchanges.

9

77 Fed. Reg. 11,700 (Feb. 27, 2012) (codified at 31 C.F.R. pt. 33 and 45 C.F.R. pt. 155); 80 Fed. Reg. 78,131 (Dec. 

16, 2015). In April 2016, HHS issued additional guidance on the use of 1332 waivers in meeting the requirements for 

small business exchanges. 

10In developing an estimate of the federal pass-through funds, HHS and Treasury will take into account experience in 

the relevant state as well as similar states. Although the Departments will develop the estimate, states must provide 

analysis and supporting data, subject to the Departments’ standards for state data, to inform the estimate.

11Medicaid is a joint federal-state health care financing program, administered largely by the states within broad 

federal parameters, for certain low-income and medically needy individuals. States can apply for a variety of Medicaid 

waivers to test new approaches to delivering and financing health care, such as waivers that allow states to cover a 

broader range of home and community-based services for certain populations. States must apply to HHS for approval 

for their Medicaid demonstrations, each requiring a separate approval process. States can also apply for other types 

of waivers, for example, ones that allow them to test models of care to improve the quality of care for individuals who 

are dually eligible for both Medicaid and Medicare, the federal health insurance program serving individuals aged 65 

and older, individuals under 65 with certain disabilities, and individuals diagnosed with end-stage renal disease. 
Page 7 GAO-16-637R Affordable Care Act Waivers

The 1332 waivers can be approved for up to five years, after which, they may be renewed 

subject to federal approval. States with approved waivers are required to submit regular reports, 

including annual reports on the waivers’ ongoing compliance with the statutory criteria, and are 

subject to periodic evaluations by the Departments.

HHS and Treasury Established Waiver Controls That Seek to Ensure State Proposals 

Meet Statutory Criteria

HHS and Treasury established controls in the review and approval process for state 1332 

waiver proposals. These controls seek to ensure waivers satisfy the statutory criteria related to

preserving health coverage and controlling federal costs. The effectiveness of the controls as 

established by HHS and Treasury will depend on how they are implemented. Examples of such 

controls are as follows:

• Waiver Proposals Must Consider the Impact on Vulnerable Populations: In applying the 

three coverage criteria, HHS and Treasury require the state to consider impacts of its 

proposed waiver on both the overall state population and on different subgroups of 

vulnerable state residents. As part of its application, the Departments require a state to 

demonstrate the waiver’s effect on the low-income, elderly, and the chronically ill. 

Consequently, even if a state can demonstrate that a waiver meets the criteria for its overall 

population, if the waiver reduces coverage, comprehensiveness, or affordability for any of 

these subgroups the waiver would fail to meet the criteria, and HHS and Treasury would not 

approve the waiver proposal. HHS and Treasury told us that this approach avoids the 

potential of their approving waivers that redistribute coverage away from these vulnerable 

populations, which could result from only considering the effects on the overall population. 

• Waiver Proposals Must Conform to Certain Standards in Demonstrating Deficit 

Neutrality: In assessing whether a section 1332 waiver proposal does not increase the 

federal deficit, HHS and Treasury have instituted various controls. For example: 

o States must consider and include in their proposals how the proposed waiver will affect 

federal costs for other types of health coverage, such as Medicaid and the State 

Children’s Health Insurance Program, and the effect on federal administrative costs. By 

including the effect of the proposed waiver on other federal costs, this control may 

prevent states from shifting costs to other federal health care programs. 

o HHS and Treasury will only consider the effects of changes to state policy that can be

made under existing state law. HHS and Treasury will not consider effects of policy 

changes that are contingent on future state action such as, for example, proposed state 

legislation that has not yet been enacted. HHS and Treasury officials told us that this 

control will provide more reliable estimates of federal spending on coverage absent the

waiver, an essential step in the state’s analysis to demonstrate that the proposed 

waiver is deficit neutral. 

o HHS and Treasury will not allow states to use savings from another federal waiver, 

whether proposed or current, to meet the deficit neutrality criteria for a 1332 waiver. For 

example, if a state proposed a change to its Medicaid program under a section 1115 

waiver that the state estimates will save $1 billion in federal spending, the state cannot 

use that $1 billion in estimated savings to meet the deficit neutrality criteria for the 1332 
Page 8 GAO-16-637R Affordable Care Act Waivers

waiver, even if submitting a coordinated application.12 HHS and Treasury officials told 

us that section 1332 waivers and Medicaid waivers are separate programs with 

separate approval processes and approval criteria, and, as such, these waivers will be 

assessed independently. 

• Waiver Proposal Methods and Data Must Conform to Certain Standards: HHS and 

Treasury established standards for the data that states must provide and the analytical 

methods that they must use to demonstrate compliance with the statutory criteria in their 

waiver proposals. For example, the Departments require that states have an actuary certify 

the analysis demonstrating the number of individuals covered, comprehensiveness of 

benefits, and affordability of coverage. The Departments also require the state to use federal 

estimates of population growth, economic growth, and health care cost growth—statespecific data and assumptions are allowed only in cases where the state is expected to 

experience substantially different trends from the nation. The Departments require states to 

document their rationale for any deviation from federal estimates.

In addition, HHS and Treasury have identified operational considerations that will limit the types 

of waiver proposals the Departments will approve. Specifically, due to operational limitations 

related to the federal exchange IT platform and to the administrative processes of the IRS, 

certain types of waiver proposals will not be feasible to implement, as follows: 

• Any waiver that requires changes to the federal exchange IT platform would not be feasible 

to implement because the platform cannot accommodate different rules for different states

at this time. Changes to the calculation of premium tax credits, as well as applying statespecific enrollment periods, are examples of changes that cannot be accommodated for this 

reason.

13 Therefore, for states using the federal exchange platform—as of March 2016, this 

included 38 states using the federal platform for their individual exchanges—it is not 

currently feasible to approve waivers that include those changes.14 

• A waiver that requires the IRS to administer a different set of eligibility rules—for example,

for premium tax credits across states—would not be feasible to implement as the IRS is 

generally unable to customize eligibility requirements for different states. The Departments 

advised that if a state wants to modify one of the tax provisions, it should consider proposing 

waiving the provisions entirely and relying on a state-administered tax program to implement 

its modified eligibility requirements. However, the 2015 guidance also noted that waiving 

 12By excluding estimated savings from a Medicaid waiver, any control weaknesses underlying these estimated 

savings would not affect the deficit neutrality determination under a 1332 waiver.

In submitting a Medicaid demonstration waiver proposal under Section 1115 of the Social Security Act, states are 

required to estimate the effects of the waiver on federal spending. HHS has controls in place to limit federal costs 

under such waivers. However, our past work has found that HHS’s review of states’ spending estimates in their 

Medicaid waiver proposals lacked assurance that these waivers would not increase federal costs. See Medicaid 

Demonstration Waivers: Approval Process Raises Cost Concerns and Lacks Transparency, GAO-13-384

(Washington, D.C.: June 25, 2013), and Medicaid Demonstrations: HHS’s Approval Process for Arkansas’s Medicaid 

Expansion Waiver Raises Cost Concerns, GAO-14-689R (Washington, D.C.: Aug. 8, 2014).

13The annual open enrollment period for exchange coverage is the same for all states with an FFE or that use the 

FFE platform for enrollment. Individuals cannot enroll for exchange coverage at other times unless they experience a 

change that qualifies them for a special enrollment period. 

14These 38 states include 34 states that have FFEs and 4 states whose SBEs rely on the federal IT platform. 
Page 9 GAO-16-637R Affordable Care Act Waivers

provisions entirely may still create administrative costs to the IRS. Those costs would be 

taken into account in determining whether or not the waiver application is deficit neutral.

Stakeholder groups representing state Medicaid and exchange officials told us that, while some 

states continue to explore options under 1332 waivers, they believe HHS’s and Treasury’s 

application review controls and their operational considerations may considerably limit state 

waiver proposals. As a result, they anticipated few states would pursue 1332 waivers in 2016.

For example, representatives from these stakeholders told us:

• Given that the December 2015 guidance precludes states from using savings from another 

federal waiver to meet the deficit neutrality criteria for a 1332 waiver, states may decide not 

to pursue waiver proposals that seek to combine section 1332 and Medicaid waivers to 

expand coverage to low-income individuals. Representatives told us that states may be 

concerned that such proposals may not be able to meet the deficit neutrality criteria for the 

1332 waiver independently of the Medicaid waiver. 

• Operational considerations, particularly the inability of the federal exchange IT platform to 

accommodate certain changes, may preclude a majority of states with an FFE from applying 

for a waiver. HHS explained that those states may develop their own systems to make 

changes to eligibility and enrollment; however, stakeholders questioned whether those 

states would have the resources to develop their own systems.15

The types of state waiver proposals that HHS and Treasury will approve are not yet known. As 

of May 2016, only one state had submitted an application, and the Departments had not 

completed their review of the proposal. Consequently, there are no waivers available to 

illustrate the types of approvable proposals or how the Departments applied their controls. The 

two states that HHS and Treasury characterized as being furthest along in developing 

proposals—Vermont, which submitted an application in April 2016, and Hawaii, which had 

posted its proposal for public comment—were seeking approval for relatively targeted reforms.16

Neither state is requesting a waiver with implications for its exchange coverage for the individual 

market. Rather, both states seek to waive requirements for a small business exchange and, 

instead, propose to allow small business employers to continue to buy coverage for employees

directly from insurers. Both states have cited concerns about the financial viability and 

operational complexities of a small business exchange, given their relatively small markets.

HHS and Treasury Are Developing Procedures to Coordinate During Review and 

Approval 

HHS and Treasury officials told us that they have been coordinating between and within their 

departments to help states in the conceptual phase of the 1332 waiver proposal process. As of 

May 2016, HHS and Treasury told us that the Departments have had joint conceptual 

discussions with two states—Vermont, which submitted a proposal for a review, and Hawaii. 

They also told us that HHS is in regular contact with states, including those with SBEs, and has 

had informal discussions with states regarding section 1332 waivers. According to these 

officials, the Departments coordinated the conceptual discussions by assuring that relevant 

 15Federal funding that was previously available to states to establish exchanges, including developing exchange IT 

systems, is no longer available for new grants and any unused funds that have been awarded will expire no later than 

the end of 2017.

16HHS and Treasury officials told us Vermont initially submitted a waiver application in March, but subsequently 

rescinded it and resubmitted it in April.
Page 10 GAO-16-637R Affordable Care Act Waivers

agencies within each Department were involved in the consultation. For example, officials from 

the IRS told us that when Vermont was considering a potential waiver proposal, Treasury asked 

IRS to participate in the conceptual phase conference calls involving the state, HHS, and 

Treasury. 

The regulations and guidance issued jointly by HHS and Treasury established high-level roles of 

the Departments in the review and approval process, and officials told us that the Departments 

will closely coordinate during reviews. Department officials told us that they also coordinated 

with other federal partners, for example the Department of Labor and the Office of Management 

and Budget, to develop these joint policies.17 As of May 2016, HHS and Treasury officials told 

us that they will jointly assess all waiver applications’ compliance with all approval criteria, 

acknowledging that a collaborative approach is necessary because of the inter-related 

requirements states may be seeking to waive. For example, although a proposal to waive 

premium tax credits falls under Treasury’s purview, the proposal could nonetheless have 

implications for other health care programs and, therefore, Treasury would need to consult HHS 

on the review of the proposal. Officials also noted that the extent of the collaboration needed 

may vary depending on the proposal. 

As of May 2016, the Departments were in the process of developing more specific procedures 

for coordinating review and approval of waiver proposals across Departments. According to 

officials, HHS was in the process of developing resources, including tools and protocols, that will 

be used as part of the application review process; for example, those that will be used to assess 

whether applications are complete. Officials told us that the Departments will share the same 

tools to assess state proposals. HHS plans for these tools to be reviewed by the Departments 

and other federal partners and to be refined as necessary. As of May 2016, the Departments did 

not have other examples of procedures that might be developed, and the Departments did not 

have target timeframes for having procedures in place. Officials told us that they are taking a 

flexible approach to setting procedures, recognizing that they will need to be responsive to the 

needs of each state, and that the protocols and procedures will evolve as HHS and Treasury 

gain expertise with each application. 

HHS was also in the process of developing procedures to coordinate within its agencies for 

reviewing 1332 waivers, including with its Medicare and Medicaid divisions. HHS officials told us 

that HHS staff with Medicaid and Medicare expertise will be included in the assessment of 

whether a waiver proposal has implications for the beneficiaries or the federal costs of those 

programs. According to officials, as of May 2016, HHS was in the process of developing 

procedures to ensure those divisions are included in the review. In addition, for 1332 waiver 

proposals submitted in conjunction with a Medicaid waiver application, HHS officials said that 

they have not developed any procedures to align the timing of the reviews or coordinate 

communication with the state beyond those which were established in the 2012 regulations. The 

regulations indicate that coordinated applications should be submitted through HHS and that 

HHS will coordinate the 1332 review as necessary with Treasury, but do not include procedures 

for coordinating the 1332 review with other waiver reviews. Officials reiterated that although 

states can submit a coordinated application, reviews of 1332 waiver proposals will be 

independent of the review of other waiver proposals, as separate approval processes apply 

 17Officials reported that they have consulted with the Department of Labor (DOL) and will continue to do so about 

issues related to employer-based coverage. Specifically, they will coordinate with the DOL about whether waiver 

proposals may require waivers of or preempt provisions of the Employee Retirement Income Security Act of 1974,

which is enforced by DOL.
Page 11 GAO-16-637R Affordable Care Act Waivers

under different waiver authorities. Stakeholder representatives told us they believe that 

communication within HHS will be important for efficient review of coordinated applications.

Agency Comments

We provided HHS and Treasury with a draft of this report. HHS and Treasury provided technical 

comments, which we incorporated as appropriate.

--------------------------------------

As agreed with your offices, unless you publicly announce the contents of this report earlier, we 

plan no further distribution until 30 days from the report date. At that time, we will send copies of 

this report to the Secretary of Health and Human Services and the Secretary of Treasury, 

appropriate congressional committees, and other interested parties. The report will also be

available at no charge on the GAO website at http://www.gao.gov. 

If you or your staff members have any questions about this report, please contact me at 

(202) 512-7114 or iritanik@gao.gov. Contact points for our Offices of Congressional Relations 

and Public Affairs may be found on the last page of this correspondence. Other key contributors 

to this correspondence included Susan Barnidge, Assistant Director; Shamonda Braithwaite, 

Jasleen Modi, Laurie Pachter, Vikki Porter, and Emily Wilson. 

Sincerely yours,

Katherine M. Iritani

Director, Health Care

(100621)
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