Most states that run reinsurance programs under ACA Section 1332 do not advertise the mechanism to brokers. Premiums are simply lower in the rate filing, and the explanation sits inside a federal waiver approval document that almost no one reads. Brokers quoting in Alaska, Colorado, or New Jersey see lower benchmark premiums without an obvious reason why the math is different from Florida or Ohio.
Key Takeaways
- Section 1332 waivers allow states to modify ACA market rules if coverage remains as broad and benefits as comprehensive as the base law requires
- Reinsurance is the dominant 1332 waiver type: the state reimburses carriers for a portion of claims above an attachment point, lowering gross premiums across the rating area
- Alaska ran the first modern state reinsurance program in 2017; by 2026, more than a dozen states had followed with their own versions
- SLCSP falls when reinsurance lowers gross premiums, which reduces federal APTC and funnels the savings back to the state as pass-through funding
- Non-subsidy-eligible clients in reinsurance states see a direct premium reduction; subsidy-eligible clients see the gross savings mostly offset by a lower credit
What Section 1332 authorizes
ACA Section 1332 gives states a mechanism to modify how their individual and small-group insurance markets work, provided four statutory guardrails hold. The waiver cannot result in fewer residents having coverage, cannot offer less comprehensive benefits, cannot make coverage less affordable for low-income residents, and cannot increase the federal deficit. Both the Department of Health and Human Services and the Treasury Department must approve each application.
Approval typically takes 12 to 24 months from initial application. States submit actuarial analyses, an operational plan, and projections showing how the waiver satisfies each guardrail over the waiver period, usually five to ten years. CMS reviews against the statutory standard and public comment before issuing a decision.
The three main waiver structures that have received approval are state reinsurance programs, essential health benefit benchmark modifications, and coverage expansion schemes that extend eligibility beyond the base ACA parameters.
| Waiver Type | Mechanism | Primary Benefit | APTC Effect | Active Examples |
|---|---|---|---|---|
| State reinsurance | State pool reimburses carriers for high-cost individual market claims above an attachment point | Lower gross premiums market-wide | SLCSP falls, reducing APTC for subsidy clients | Alaska, Colorado, Maine, New Jersey, Pennsylvania |
| EHB benchmark modification | State changes which services count as essential health benefits beyond the federal minimum | Premium adjustment for benefit design differences | Depends on which benefits are added or removed | Georgia, Idaho |
| Coverage expansion | State extends coverage using waiver funding to groups not covered under base ACA rules | Broader coverage population | Pass-through may fund premium assistance beyond APTC | Fewer active examples; typically combined with Medicaid 1115 |
Illustrative. Waiver structures vary by state and approval period. Check the CMS Section 1332 waiver page for current approvals and annual reports.
How state reinsurance works in practice
Reinsurance is the most common 1332 structure because it attacks the core individual market problem: a small number of very high-cost enrollees whose claims distort carrier rate filings upward for everyone else. A state reinsurance program creates a separate pool that reimburses carriers for a defined share of claims that exceed a set attachment point in a calendar year.
Alaska ran the first modern version in 2017. Before the program, the state had one carrier left in its individual market and benchmark Silver premiums that were among the highest in the country. The reinsurance program reduced individual market premiums by roughly 30 percent in its first year of operation by removing the actuarial weight of its highest utilizers from the rate-setting calculation.
Colorado, Pennsylvania, Maine, and New Jersey followed with their own programs between 2019 and 2022. By 2026, more than a dozen additional states had approved programs at various attachment points and coinsurance percentages. Benchmark premium reductions in active reinsurance states have generally run between 10 and 40 percent compared to projections without the program, depending on how the pool is funded and what percentage of claims above the attachment point the state agrees to absorb.
The pass-through funding mechanism
This is the piece most brokers have not seen explained. When a reinsurance program lowers gross premiums, it also lowers the SLCSP in every rating area within the state. APTC is calculated against the second-lowest-cost Silver plan, so when that plan's premium falls, the credit falls with it.
From the federal government's perspective, the lower credit means it would have paid out more APTC under the base ACA rules than it pays under the waiver. That difference is federal savings. Section 1332 requires that those savings flow back to the state as pass-through funding to help finance the reinsurance pool. The federal government essentially converts a portion of what it would have spent on APTC into a direct contribution to the state's reinsurance mechanism.
The calculation is done at the state level each year. If a state's reinsurance program reduces APTC payouts by an estimated $200 million compared to what the base law would have required, $200 million flows to the state's reinsurance fund. Most active programs are structured so that pass-through funding covers a substantial share of total reinsurance payments, with state general revenues or insurer assessments covering the remainder.
What this means for subsidy-eligible clients
Brokers quoting a subsidy-eligible client in a reinsurance state often notice that the net premium after APTC looks similar to what a comparable client in a non-reinsurance state would pay. This is not an accident. The SLCSP adjustment partially offsets the gross premium reduction for clients receiving APTC.
To illustrate: a 45-year-old in Colorado at 250 percent FPL might face a benchmark Silver gross premium of $380 per month because of the state reinsurance program. In a non-reinsurance state with comparable plans, the same client might see a benchmark Silver gross premium of $490 per month. APTC in Colorado is calculated against $380, while APTC in the comparison state is calculated against $490. The gross difference is $110 per month. The net difference after APTC may be $20 to $40 depending on the household contribution percentage.
Illustrative example. Actual premiums, APTC, and cost-sharing depend on rating area, household composition, and the specific plan year.
The meaningful benefit for subsidy-eligible clients is APTC reconciliation exposure. If the client's income rises during the year and they owe back excess APTC on Form 8962, the repayment is based on gross premiums that were already lower because of reinsurance. A client in a reinsurance state who earns more than projected owes back a smaller absolute dollar amount than a client in a non-reinsurance state, even if both clients received a similar net premium.
Non-subsidy clients in reinsurance states
For clients who do not qualify for APTC, whether because their income exceeds the threshold or because employer coverage blocks the subsidy, the reinsurance benefit is direct. There is no SLCSP adjustment to offset the premium reduction. A 52-year-old in New Jersey at 500 percent FPL who buys a Silver plan simply pays less gross premium than they would have without the state program.
This makes reinsurance states particularly relevant for brokers serving early retirees in the 55 to 64 age band, where age rating pushes gross premiums to their highest levels under the 3:1 ratio. A state reinsurance program that reduces benchmark premiums by 20 percent represents a meaningful annual dollar reduction for that population.
EHB benchmark waivers: a separate category
A smaller number of states have used Section 1332 to modify their essential health benefit benchmark. The ACA requires all QHPs to cover the 10 EHB categories, but states have latitude to choose which specific plan serves as their benchmark for benefit design within those categories. A 1332 waiver can extend that flexibility further.
Georgia and Idaho received approval for waivers that adjusted their EHB benchmark, allowing carriers to offer plans with benefit structures that differ from the default state benchmark. Brokers in those states may encounter plans with different cost-sharing on specific services compared to the standard market expectation. The benefit variation does not change the 10 required EHB categories, but it can affect how benefits within those categories are structured and at what cost-sharing level.
The broker workflow for reinsurance states
Quoting tools that pull live CMS Marketplace data will reflect reinsurance adjustments automatically because carriers file reinsured gross rates at annual certification. A broker does not need to manually adjust estimates for reinsurance; the filed premiums account for it.
The workflow implication is that brokers should not estimate APTC for a reinsurance-state client using national average premiums or figures from another state. Inshura and similar quoting platforms that display Marketplace data also pull carrier-filed rates, but they do not always explain to the broker why the SLCSP in a given state is lower than the broker expects.
For clients comparing coverage across state lines, such as a remote worker who recently moved from Ohio to Colorado, the gross premium difference can be significant enough to affect the coverage conversation. Brokers who can explain that the difference reflects a state reinsurance program provide context that prevents the client from assuming the plans are structurally different when they may be equivalent in benefit design.
The other practical broker task is awareness of waiver renewal cycles. Section 1332 waivers are approved for a defined term, usually five to ten years. A state whose waiver expires without renewal reverts to base ACA rules, and gross premiums in that market can rise significantly in the first post-waiver plan year. Brokers monitoring their renewal book in a reinsurance state should note the waiver expiration and watch for CMS announcements about renewal applications.
Frequently asked questions about ACA Section 1332 waivers
These questions come up when brokers first encounter reinsurance state premium differences.
What is an ACA Section 1332 state innovation waiver?
A Section 1332 waiver allows a state to modify how ACA market rules operate within its borders, provided the waiver meets four statutory guardrails: at least as many residents must have coverage, benefits must be at least as comprehensive, coverage must be at least as affordable, and the waiver cannot increase the federal deficit. Both HHS and the Treasury Department must approve the application. States submit a detailed plan showing how the alternative approach meets each guardrail, and CMS reviews it against the statutory and regulatory standards.
How do state reinsurance programs work under Section 1332?
A state reinsurance program creates a separate pool that reimburses carriers for a share of individual market claims that exceed a defined attachment point, typically somewhere between $50,000 and $250,000 per member per year. Carriers' actuarial risk falls because the state absorbs the tail, so carriers file lower gross premiums at annual certification. The benchmark Silver plan's lower premium reduces the SLCSP in the rating area, which automatically lowers federal APTC for all enrollees. The federal savings from lower APTC flow back to the state as pass-through funding to help capitalize the reinsurance pool.
Which states have active Section 1332 waivers?
As of 2026, more than 16 states had active Section 1332 waivers, the majority structured as reinsurance programs. Alaska launched the first in 2017 and saw individual market premiums fall roughly 30 percent in the first year. Maine, New Jersey, Colorado, Pennsylvania, Montana, Oregon, Wisconsin, West Virginia, and several additional states followed with their own programs. A smaller number of states received waivers to modify network standards or benefit design rather than reinsurance. CMS maintains a current list of approved waivers on its website, and the specific attachment points and coinsurance rates differ by state program.
Does state reinsurance actually save subsidy-eligible clients money?
Not directly in the same way as non-subsidy clients. When gross premiums fall because of reinsurance, the SLCSP falls with them, and APTC is calculated against the lower SLCSP. A subsidy-eligible client who would have received a $450 monthly credit in a non-waiver state might receive $320 in a reinsurance state, because the plan premium itself is lower. Net premium out of pocket often looks similar across both states. The real benefit for subsidy clients is reduced APTC reconciliation risk: if their income rises during the year, they owe back APTC based on gross premiums that were already lower, which means the repayment amount is smaller.
How should brokers explain 1332 waivers to clients at enrollment?
Most clients do not need the Section 1332 explanation. What they do need is an accurate picture of gross premium, APTC, and net premium. In a reinsurance state, brokers should note that the gross premium is lower than a comparable plan in a non-reinsurance state, and that the APTC credit is also calibrated to that lower benchmark. The workflow implication is that brokers cannot estimate APTC for a client in a reinsurance state by looking at national average premiums. They need live CMS Marketplace data for the specific rating area. Tools that pull current CMS plan data will reflect reinsurance adjustments automatically because carriers file the reinsured rates at certification.
