Obamacare Waivers for States

Imagine a future Congress passing a law that would prohibit citizens from driving any vehicles except motor scooters. Then imagine that within the law there is a waiver provision to give “flexibility” to individuals who want to use other vehicles. With a waiver from the Department of Transportation, you could drive a convertible, a pickup, a sports car, or even a semi. To get this waiver you would have to apply to the Department of Transportation and six months later they would let you know if your request has been granted. Your waiver would only be good for five years and there would be no guarantee that it would be renewed.

Oh, and one more thing—no waiver would be granted if your vehicle is not at least as fuel efficient as a motor scooter.

How excited would you be that the government was offering “flexibility” through these waivers?

You can imagine, then, the response of some state governors at the White House’s announcement that Obamacare allows states "flexibility" if they want to opt-out of certain of Obamacare’s provisions.

In a recent speech to the National Governors Association, President Obama told the governors in attendance that he supported the Wyden-Brown Senate bill which would move up the date states would be eligible for Obamacare’s “State Innovation Waivers” to 2014 from 2017.


State Innovation Waivers would allow states to get exemptions from certain elements of Obamacare. Any part—or all—of the following four sections of Obamacare can be waived:

  1. 42 USC §§ 18021 et seq. – Defines and establishes “qualified health plans.” These are the four tiers of plans that will be available in the state health exchanges:

    1. Platinum: Provides for 90% of health expenses;

    2. Gold: Provides for 80% of health expenses;

    3. Silver: Provides for 70% of health expenses;

    4. Bronze: Provides for 60% of health expenses.

  2. 42 USC §§ 18031 et seq. – Establishes state health exchanges;

  3. 42 USC §§ 18071 et seq. – Reductions in cost-sharing expenses (co-pays, deductibles, etc.) for those under 400% of the poverty line; and

  4. 26 USC §§ 36B, 4980H, and 5000A – Individual mandate, employer mandate, and refundable tax credits.

However, any proposed waiver must meet the following four requirements:

  1. Must have “coverage [benefits] at least as comprehensive” as Obamacare;

  2. Must be as affordable to the consumer as Obamacare;

  3. Must cover at least as many people as Obamacare; and

  4. Must not increase the federal deficit.

Waiving the Individual Mandate

While the individual mandate is in the list of waivable provisions of Obamacare, the restrictions placed on states make it practically impossible to get this waiver. States that want a waiver from the individual mandate would have to cover at least as many people as the federal system which requires everyone to have coverage.

This is like saying, that you can drive any pickup you want as long as it gets mileage as good as a motor scooter.

Under such restrictions, the only possible alternative is the so-called “single-payer” system—i.e. government-run health care.

Confirming this suspicion, the White House has said that these waivers can be used for “Alternatives to the individual responsibility provision — such as automatically enrolling individuals in health plans – that achieve similar outcomes.” This is a thinly-veiled description of a single-payer system.

Behind closed doors the Obama Administration is less guarded. In a recent Politico article, columnist Ben Smith reports:

But a source on a White House conference call with liberal allies this morning says the Administration is presenting it to Democrats as an opportunity to offer more expansive health care plans than the one Congress passed.

Health care advisers Nancy-Ann DeParle and Stephanie Cutter stressed on the off-record call that the rule change would allow states to implement single-payer health care plans -- as Vermont seeks to -- and true government-run plans, like Connecticut's Sustinet.

In terms of our analogy, if you don’t want to drive a motor scooter you can get a waiver to drive a bicycle.

Waivers for Market-Based Solutions?

But can these waivers be used for market-based solutions? The White House issued a fact sheet that listed examples of programs for which State Innovation Waivers might be able to be used. We’ve already mentioned the White House’s single-payer system example. Here are the others:

  • A streamlined system that links tax credits for small businesses with tax credits for low-income families.
  • Alternative health plan options to increase competition and provide consumers with additional choices.
  • An increase in the number of benefit levels to provide more choices for individuals and small businesses.
  • Immediately allowing large businesses interested in doing so to purchase health insurance through the new private marketplace, the State-based health insurance Exchange.

Some of these examples might be attractive to states that have resigned themselves to implementing state exchanges in lieu of the federal government doing so for them.

But don’t get too excited, these options are not much better than the government telling you can customize your motor scooter.

In short, “State Innovations Waivers” provide flexibility to states who want greater government control of healthcare. Any flexibility it offers for market-based solutions is overshadowed by both Obamacare’s remaining restrictions on states and the transfer of control of health care from the states to the federal bureaucracy.