Bloomberg News

U.S. Finishes Rules for States Seeking to Opt Out of Obama’s Health Law

February 22, 2012

States such as Vermont will be able to use an escape clause in U.S. rules issued today to set up their own government-run medical systems and avoid federal mandates in the 2010 health-care law.

The rules allow states to dodge provisions that have sparked debate, such as a mandate that most Americans purchase insurance, if they match or exceed the law’s expansion of health-care coverage and maintain consumer protections.

Vermont’s governor, Peter Shumlin, a Democrat, has said that he plans for the state to insure all of its residents, creating a single-payer system that would put private health plans such as those run by Cigna (CI) Inc. out of business. Oregon’s governor, John Kitzhaber, also a Democrat, has said he wants his state to run a health plan that would compete with private insurers.

The clause “provides states with additional flexibility to improve health care for their citizens in a way that works for them while retaining the basic protections” of the federal law, the U.S. Department of Health and Human Services said in a statement.

The law requires states to set up new marketplaces called exchanges to sell private insurance at subsidized rates beginning in 2014. It allows states opt out of the exchanges in 2017, if they come up with a replacement plan that will cover as many people at no greater cost.

President Barack Obama’s administration proposed rules last March outlining how states would apply to get out of the law. Final rules issued today contain only one significant change, a requirement that states submit time lines for implementation of their proposed replacement plans.

Democratic Senators from Vermont, Oregon and Massachusetts have proposed legislation that would let states opt out of the health law in 2014, when the exchanges are due to open, instead of 2017. The Obama administration supports the change.

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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