State Health Waivers Date in Play

The recent news that President Barack Obama is willing to move forward the date on which states can apply for a federal waiver to implement their own version of healthcare reform raises new concerns for employers. If some states do put in place separate healthcare reform measures, big companies fear that might mean more regulations for them.

Currently, employers that have self-insured health plans are subject only to ERISA, the federal law regarding employee benefit plans, and not to state laws.

Even if the federal government lets states go with their own versions of health reforms, "they really should have no reach to a self-insured group health plan," says Paul Dennett, senior vice president of healthcare reform at the American Benefits Council. "But we'll only know that as we see actual waivers."

"You can't underestimate the importance of ERISA and the fact that it allows large multistate employers to basically operate under federal law alone," says Joanne Hustead, senior health compliance specialist in the national compliance practice at consultancy Segal. "Having to figure out if you have to comply with lots of different state laws is a challenge and definitely a downside."

The healthcare reform law enacted last year, the Affordable Care Act, allowed states to apply for a waiver in 2017. But two senators, Republican Scott Brown of Massachusetts and Democrat Ron Wyden of Oregon, introduced a bill late last year that would change that timing, giving states the right to seek a waiver starting in 2014. Brown and Wyden argue that it makes little sense to force states to go through the effort of implementing the federal plan for three years if they are going to put in place a different plan of their own, especially if states have already begun reforms.

Obama's endorsement would seem to give the Brown-Wyden proposal a boost. But it's far from clear how popular such waivers would be.

"There's a fairly high standard that the states have to meet," Dennett says. The healthcare reform law says that to qualify for a waiver, a state's health coverage has to be as comprehensive as what is available under the federal program, has to cover as many people as would be covered under the federal plan, and cannot add to the federal deficit.

"I wouldn't view it as a simple process for the states at all," Dennett says. "I suspect that's one of the reasons many states are looking at it and saying, 'Is this going to provide the flexibility we had had in mind?'"

Two states that are expected to have an interest are Vermont, where Democratic Gov. Peter Shumlin wants to implement a single-payer health system, and Oregon, where Democratic Gov. John Kitzhaber wants to reform the way healthcare services are delivered.

"The big unknown of course is what would the states do," says Segal's Hustead. "There's nothing in the waiver legislation that directs them how to accomplish these goals, they just have to accomplish them, and they have to do it in a way that's budget-neutral to the federal government."

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