President Obama for the first time today backed a truly substantive change to PPACA by endorsing a bipartisan bill that allows states to obtain waivers from PPACA requirements – including the individual mandate – starting January 1, 2014. This is as soon as the requirements were to go into effect, and three years earlier than originally was possible under PPACA.

In a speech to the National Governor’s Association at the White House, President Obama endorsed Senate Bill 248, the “Empowering States to Innovate Act.” The bill, now sponsored by Senators Ron Wyden (D-Ore.), Mary Landrieu (D-La.) and Scott Brown (R-Mass.), initially was proposed by Senators Wyden and Brown in November 2010, and amends PPACA Section 1332. That provision, titled “Waiver for State Innovation,” allows states to seek waivers starting January 1, 2017 from certain aspects of PPACA compliance including: 1) state exchanges and the prerequisites for “qualified health plans” that may be offered through an exchange; 2) employer “pay-or-play” provisions; 3) cost-sharing reductions and tax credits for exchange participants; and 4) the individual mandate.

A waiver, if granted, may last for up to 5 years, subject to extension by the Secretary of HHS. In order to qualify for a waiver, a state must design an alternative health care reform program and demonstrate that it will do all of the following: 1) provide coverage that is at least as comprehensive as that which would be offered under the PPACA exchanges and is at least as affordable; 2) cover a comparable number of residents as would qualify under the PPACA exchanges, and 3) not add to the Federal deficit.

The President called the bill a “reasonable proposal” that provides flexibility while still guaranteeing reform (in the form of the “equivalency” demonstrations that states must make in order to obtain a waiver), and openly invited states to pursue self-help methods of reform.

Punting significant reform components to the states in this fashion is an interesting strategic development as it could defuse, for instance, the federal court challenges to the individual mandate, as well as some aspects of general Republican opposition to federal reform. As one commentor notes, however, many states are more concerned about subsidizing the costs of Medicaid expansion under the PPACA than they are about implementing the exchanges. The same commentator notes that other states, such as Vermont, could use the waiver as an opportunity to put single-payer systems in place. Ultimately, if SB 248 is enacted as an amendment to PPACA, health care reform in 2014 and beyond may be less a federal phenomenon than a state-by-state experiment.

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