Obama's health care law allows states to get waivers from some divisive requirements come 2017

Republican or Democrat, the next president will have the chance to remake the nation's health care overhaul without fighting Congress.

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The law signed by President Barack Obama includes a waiver that, starting in 2017, would let states take federal dollars now invested in the overhaul and use them to redesign their own health care systems.

States could not repeal some things, such as the requirement that insurance companies cover people with health problems. But they could replace the law's unpopular mandate that virtually everyone in the country has health insurance, provided the alternative worked reasonably well.

A Democrat in the White House probably would use the waiver to build bridges to Republican governors and state legislators opposed to the law. The "state innovation" provision, Section 1332 of the nearly 1,000-page law, has gotten little public attention.

But "you would be hard pressed to find a state that doesn't know what Section 1332 is," said Trish Riley, executive director the National Academy for State Health Policy, a nonpartisan forum for state policymakers. "It provides some opportunity for taking the rough edges" off the Affordable Care Act, as the law is known.

For a Republican president, state waivers could be the fallback option to avoid the political cost of dismantling Obama's law and disrupting or jeopardizing coverage for millions of newly insured people, not to mention the upheaval for insurers, hospitals and doctors.

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"If you were a Republican on record as opposing or wanting to repeal the ACA, but really felt deep down that you couldn't accomplish that even as president, then you could say your second preference would be to use this provision to go down a completely different road," said Stuart Butler, a health policy expert at the nonpartisan Brookings Institution.

Butler, who was with the conservative Heritage Foundation for 35 years, has long been a voice for Republican thinking on health care policy. "The short answer is, this presents a tremendous opportunity for either party," he said.

The state waiver was the idea of Oregon Democratic Sen. Ron Wyden, who has a record of crossing party lines in search of ways to tackle health care costs and coverage.

Waivers would not be a blank check.

In addition to preserving the health care law's protection for people with health problems, states would have to cover about the same number of residents while providing comprehensive benefits and financial safeguards against ruinous costs. States also could not add to the federal deficit.

States meeting those tests could take hundreds of millions of dollars in health insurance subsidies provided under Obama's law and shift them. They could:

— eliminate or change the penalties the federal law imposes on people who remain uninsured, and on larger businesses that don't offer coverage.

— modify benefits and subsidies. For example, states could figure out different ways to subsidize premiums for their residents. The federal health insurance tax credit has been difficult for the government to administer, and for consumers to understand.

— do away with or change online health insurance markets, also called exchanges.

States could combine the innovation waiver with Medicaid and children's health insurance proposals to create a "super waiver." That could be of particular interest to states that are experimenting with different approaches under the health law's Medicaid expansion.

Riley said so far there is interest in the waivers among state officials in Hawaii, New Mexico, Minnesota and Vermont. But the Obama administration has yet to issue regulations that would set the ground rules for granting them.

"This could be a way for states with very different political perspectives to use the resources provided by the ACA and help the country come to a resolution of this whole question," said Stan Dorn, a health policy expert at the nonpartisan Urban Institute. "Whoever is in the White House in 2017 and beyond is going to have a lot of flexibility without having to change the statute."

Not everyone is optimistic.

John McDonough was a senior Democratic Senate aide who helped steer the health overhaul to passage in 2009-2010, and now teaches at the Harvard T.H. Chan School of Public Health.

If the next president is a Republican, McDonough said he does not think state waivers would provide enough leeway to satisfy the party's ideology.

"Chances are if they hold the White House and Congress, they are going to be looking for bigger changes than monkeying around with 1332," McDonough said.