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States May Avoid Health-Law Mandates by Matching Coverage

U.S. states will be able to avoid mandates in the health-care overhaul starting in 2017 by matching or exceeding the law’s expansion of insurance coverage and maintaining its consumer protections.

Under rules to be issued today by the Obama administration, states may dodge provisions that have sparked debate such as a mandate that most Americans purchase insurance. To gain approval, the states also will have to prove their plans won’t add to the deficit.

Vermont’s governor, Democrat Peter Shumlin, has said he seeks to use an escape clause in the law to create a government- run health system that would cover every resident and put private insurers, including Cigna Corp. (CI), out of business in that state.

The “innovation waivers” the government may issue in six years enact that clause and will “empower states to take the lead on implementing” the law, said Kathleen Sebelius, President Barack Obama’s health secretary, in a statement.

The plan still gives the U.S. government final say over what states must do to gain an exemption, said Michelle Dimarob, a spokeswoman for House Ways and Means Committee Chairman Dave Camp, Republican of Michigan. The administration’s offer “is wrought with U-turns that lead back to the same place, the federal government,” she said.

The 2017 effective date is three years after the law’s top insurance provisions kick in, including an expansion of Medicaid and the creation of a network of insurance “exchanges” where Americans can buy subsidized coverage.

2014 Opt-Out

Vermont Senator Bernie Sanders, an independent, has said his state shouldn’t have to comply with two sets of changes and is proposing legislation that would allow states to opt out and gain innovation waivers beginning in 2014.

Oregon Democratic Senator Ron Wyden and Massachusetts Republican Scott Brown are sponsoring a similar proposal. Brown’s state already operates an insurance exchange selling subsidized policies. Less than 5 percent of Massachusetts residents are uninsured, according to the Kaiser Family Foundation in Menlo Park, California.

The Obama administration supports efforts to push the dates up three years, though wants the law to be changed by Congress.

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net.

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net.

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