Obama: States Should Have Flexibility To Opt Out Of Individual Mandate

The New York Times’ Kevin Sack is reporting that President Obama is ready to endorse Sens. Ron Wyden’s (D-OR) and Scott Brown’s (R-MA) ‘state flexibility’ amendment, which would move up the date for when states can opt out of certain requirements of the Affordable Care Act and pursue innovative methods for expanding access and reducing costs. Under the measure, states can opt-out of the law’s individual mandate provision, the employer penalty for not providing coverage, standard benefit package design and the structure of the health insurance exchange beginning in 2014 so long as their alternative solutions cover as many beneficiaries with comprehensive coverage as the existing health law. Currently, states are not able to receive the waivers until 2017:

Senior administration officials said Mr. Obama would reveal to the National Governors Association in a speech on Monday morning that he backs legislation that would enable states to request federal permission to withdraw from the law’s mandates in 2014 rather than in 2017. The earlier date is when many of the act’s central provisions take effect, including requirements that most individuals obtain health insurance and that employers of a certain size offer coverage to workers or pay a penalty.

The announcement is the first time Mr. Obama has called for changing a central component of his signature health care law, although he has backed removing a specific tax provision that both parties regard as onerous on business. The shift comes as the law is under fierce attack in the courts and from Republicans on Capitol Hill and in statehouses around the country.

The bipartisan amendment that Mr. Obama is now embracing was first proposed in November, eight months after enactment of the Affordable Care Act, by Senators Ron Wyden, Democrat of Oregon, and Scott Brown, Republican of Massachusetts. Senator Mary L. Landrieu of Louisiana, a Democrat, is now a co-sponsor.

Obama’s endorsement is a boon for a state like Vermont — which is considering pursuing a single-payer health care system — and other states considering more progressive policy solutions, but it also serves an important political purpose. By allowing states to opt out of the individual mandate on the day that it goes into effect, the administration is giving states that are now challenging the policy an exit lever without sacrificing coverage or affordability standards. The amendment even allows the administration to adopt a more offensive tact as it moves into the 2012 election cycle, telling states that they need to focus on developing workable alternatives that can help bring down health care costs and expand coverage rather than filing lawsuits over the provision.

Still, it’s unclear how many states would be able to meet the requirements of the waiver. While Wyden has championed the “innovation” concept throughout the health debate, some progressive health policy analysts have questioned if states that adopt less drastic initiatives will be able to reform the health insurance market without implementing the individual mandate. Under the law, states would still have to abide by the popular insurance market reforms like prohibiting insurers from excluding coverage for pre-existing conditions based on health statue, guaranteeing the availability of coverage for all those who apply, and charging applicants a “community” premium.

January Angeles, a health policy analyst at the Center on Policy and Budget Priorities, for instance, argues that states would have a hard time implementing the guaranteed issue and community rating reforms if it does not compel younger and healthier individuals to enroll in coverage. “There is no way to implement those market reforms” without a mandate, she told me during an interview last year. “There is just no way to make it work and have the popular elements of reform.”

But Wyden’s office argues that “if a state can’t come up with a solution that meets those reforms and all of the other cost and coverage requirements then it won’t qualify for a waiver.” “Senator Wyden wrote the state waiver provision to be purposefully unspecific so that states would be free to innovate new ideas that none of us may have thought of yet,” Wyden’s communications director Jennifer Hoelzer wrote me in email.

Earlier this month, Sens. Lindsey Graham (R-SC) and John Barrasso (R-WY) introduced a more extreme measure would allow states to “opt out” of the individual mandate, Medicaid expansion, and employer requirements, but would exempt states from having to offer other coverage alternatives.