Bipartisan Senate Bill Would Let States Opt Out of Obamacare, But Only If Their Own Programs Are As Stringent

By Chris Neefus | November 24, 2010 | 11:12am EST

Sen. Scott Brown, R-Mass., talks to reporters after voting for cloture on the Democrats’ jobs bill on Capitol Hill on Monday, Feb. 22, 2010. (AP Photo/Harry Hamburg)

( - Sen. Scott Brown (R-Mass.), who campaigned on a promise to stop President Obama’s health care reform bill from becoming law, has introduced a bill that would let states opt out of many of its provisions before they are enacted, including the individual mandate.

However, getting a waiver would require states to create their own new health care systems with standards that are at least as stringent as the ones that will be applied at the federal level.

Brown introduced the bill with Sen. Ron Wyden (D-Ore.), who voted in favor of health care reform originally, and who successfully added an amendment allowing a waiver process for states to begin in 2017.

The new bill, however, allows that waiver process to begin sooner, in 2014, so states will have the opportunity to get a waiver before beginning the costly and time-consuming process of complying with the federal health care law.

Called the Empowering States to Innovate Act (S. 3958), the two-page bill simply strikes Wyden’s original start date for waivers, making it January 1, 2014 instead of January 1, 2017.

“Why should Massachusetts be delayed in obtaining a waiver from the federal reform bill when it may already have met or exceeded, in many cases, the provisions of the act?” Brown asked during a floor speech in support of his bill.

All of the other stipulations that might allow a state to receive a waiver are contained in Wyden’s original amendment, which is now Section 1332 of the Patient Protection and Affordable Care Act.

According to those guidelines, once a state passes a law to provide its citizens with health insurance, the Secretary of Health and Human Services and the Secretary of Treasury can review the law and determine if it meets several criteria.

The state law must provide for coverage that is “at least as comprehensive” as what would have been available under Obamacare; it must hold cost-sharing and out-of-pocket spending to levels comparable with that of the federal law; it must cover as many people as the federal plan would; and it must not add to the federal deficit.

If all of those conditions are met, a state would then be able to obtain a waiver as soon as 2014, when most of the key Obamacare provisions take effect. A waiver would allow the states to avoid ever having to implement the individual mandate requiring all citizens to purchase insurance.

The “waiver” states also would be exempt from federal penalties on employers who do not provide coverage to their workers through their firms and the federally regulated health insurance exchanges.

All the federal dollars that would have flowed into a “waiver” state could still be collected into one large pot and used to implement their own improved reform program. The subsidies for individuals who make less than 400 percent of the poverty level and the small business tax credits available through Obamacare would be collected by the state, which would “put the money into financing coverage for individuals in its own way.”

While this system allows states some flexibility, they are still obligated to meet the stringent federal benchmarks, and the bill does not save money because all the payouts a state would normally receive still come to them under the waiver system.

New York Times conservative columnist Ross Douthat recently noted that requiring the state plans to be as comprehensive as those created by HHS could make it tough for states to come up with meaningfully different reform plans.

“In theory, it’s an excellent idea, but the devil is in the details — and particularly the requirement that a state plan would need to subsidize insurance that’s ‘as comprehensive’ as the kind of coverage mandated under Obamacare. This seems to stack the deck against precisely the sort of consumer-directed, market-friendly systems that more conservative states would try to build,” he said.

On the Senate floor, Brown said, “States shouldn’t be forced by the federal government to adopt a one-size-fits all health care plan. Each state’s health care needs are different,” he said. “Our bill provides flexibility, and allows states like Massachusetts to opt out of portions of the health care law.”

Under former Governor Mitt Romney, a Republican, Massachusetts created a health care system at the state level that resembles the federal bill passed in March. Brown, however, continues to support full repeal of the federal law.

Wyden, who spoke after Brown did, explained why their state-based approach was better.

“Some of the most innovative approaches to health policy have originated at the local level, where lawmakers have a unique insight into their constituents’ lives, and the state waiver simply gives states the bandwidth to pursue those kinds of approaches,” Wyden said. 

“That said, it doesn’t make sense – especially given the current budget environment – to force states to put off or abandon health care innovations in order to fully implement the federal law.  Bumping up the start date (for waivers) means that states can focus on ways to make the new health law work at its best from day one.”

The Wyden-Brown bill has been referred to the Senate Finance Committee, led by chairman Sen. Max Baucus (D-Mont.) and ranking member Sen. Chuck Grassley (R-Iowa). They have yet to schedule a hearing to consider the bill.

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