Vermont House Passes Single Payer Bill: Why It Can’t Opt-Out Of Federal Health Reform To Implement It

Last Friday, the Vermont House approved “its own version of legislation passed earlier by the Senate” that would allow the state to design “a single-payer system, in which a government agency would administer and make all payments for health care” or a public option. California passed similar legislation earlier this year, and theoretically, under a provision added to the new health care law by Sen. Ron Wyden (D-OR), both states could opt-out of the requirements of federal health care reform and establish a single-payer structure.

But there are at least two problems that could deter states from leaving national reform and developing their own initiatives. First, sates can’t implement their own “innovative solutions” until 2017, after they’ve already spent time and energy establishing the new state-based exchanges and regulating insurers. Democrats may have moved back the date to allow for a smoother and more uniform implementation process, but delaying the opt-out date will only discourage states from establishing their own systems. States that still chose to pursue their own plan, will have to reconcile their programs with the federal requirements for Medicare, Medicaid, FEHBP, Indian Health Service and, most importantly ERISA — a 1974 law that, among other things, preempts states from enacting legislation that is “related to” employee benefit plans. Under Wyden’s provision, states could easily obtain a waiver from participating in the new federal exchanges if their innovative reform meets certain requirements, but states will have to go to Congress if their reform affects the health insurance offered by large employers.

As the Center for Policy Analysis’ Ellen Shaffer suggests, this is a major set back for single-payer advocates:

Section 1332 [see text below] provides that they can apply to the Secretary of HHS to opt out of the Exchanges beginning in 2017, if they have a plan to provide comparable benefits to at least as many people as the Exchange would have been estimated to cover, at no greater cost. At that point, if the Secretary grants the waiver, the states are guaranteed the transfer of federal funds that would have gone to pay for premium subsidies through the Exchanges. However, states have to apply to coordinate funds and programs with all the other federal programs. The bill offers each state a streamlined process to coordinate its waiver requests, but the Secretary can only grant funds for those programs where she has existing authority. For example, HHS does not have jurisdiction over ERISA, which is administered by the Department of Labor, so an ERISA waiver is not possible under this legislation. Within HHS, the Secretary already has waiver authority for some programs, but not all.

During the House Education and Labor Committee’s mark-up, Rep Dennis Kucinich (D-OH) introduced an amendment that would authorize and require “the Secretary of Labor, in consultation with the Secretary of Health and Human Services” to waive the ERISA pre-emption (Sec. 514) for states that have enacted a state single payer system. The committee adopted the amendment, but it was left out of the final House bill.


Kucinich characterized health care reform as a “detour” from the single-payer cause when he publicly announced that he would support the bill; Vermont and California will soon learn that it’s certainly of no great help.