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Employers leery of change to opt-out provision

Proposal could give states more power over health plans

Employers leery of change to opt-out provision

WASHINGTON—Employers are concerned about legislation, which President Barack Obama endorsed last week, that would accelerate when states could seek approval to opt out of key provisions in the health care reform law in favor of their own reform measures.

Specifically, employers worry that the legislation could be amended to give states the authority to impose benefit requirements on employers with self-funded health care plans, a right that states, under a pre-emption provision in the Employee Retirement Income Security Act, now lack.

States already have the authority to regulate insured health care plans.

“We are very wary of this proposal. We don't know how it could be amended. Perhaps all sorts of requirements could be imposed,” said Helen Darling, president of the National Business Group on Health in Washington.

“I have a visceral concern that this could add to administrative complexity,” said Gretchen Young, senior vp-health care with the ERISA Industry Committee in Washington. Self-insured “multistate employers cannot offer health care plans efficiently if they have to track and comply with a multitude of different state rules.”

The legislation, introduced late last year and then reintroduced last month by Sen. Ron Wyden, D-Ore., deals with a provision in the Patient Protection and Affordable Care Act that allows states, starting in 2017, to seek waivers from certain provisions, such as the mandates that employers provide and individuals procure health care coverage.

To receive a waiver from the secretaries of the Departments of Treasury and Health and Human Services, a state, among other things, would have to prove that its health care reform approach would result in at least as many state residents receiving affordable coverage as would be achieved under the federal law.

Such a waiver is especially important to Massachusetts, which has achieved near-universal coverage under its 2006 law, but whose law doesn't mirror PPACA and would have to be changed without a waiver.

The Senate waiver bill, S. 248, simply would move up to 2014 when states could obtain waivers. That is the same year in which many of the key provisions, such as the employer and individual mandates, go into effect.

That would, among other things, eliminate the need for Massachusetts to amend its law for three years and then seek a waiver in 2017 and, if approved, change its law back again.

Without moving the waiver provision up several years, states would be discouraged from taking their own reform approaches before 2017, said Chantel Sheaks, a principal with Buck Consultants L.L.C. in Washington.

The waiver acceleration proposal received relatively little attention until last week, when President Obama endorsed the idea during a Washington meeting of the National Governors Assn.

Moving up the waiver date, President Obama told the governors, would give states more flexibility in designing health care reform plans, while “still guaranteeing the American people reform.”

Whether states could design programs that assure coverage of as many residents as the federal law—without incorporating key elements, such as the employer and individual mandates—is far from certain.

“I don't know how much momentum this would actually get,” said Michael Thompson, a principal with PricewaterhouseCoopers L.L.P. in New York.

“It is hard to see how Republican governors who have been challenging the constitutionality of the law would embrace a waiver program. They want to start with a clean slate,” said Paul Dennett senior-vp health care reform with the American Benefits Council in Washington.

“The real bugaboo for the states right now is the budget goblin, and spending money on a state initiative that must satisfy federal objectives for universal or near-universal coverage doesn't seem to strike at the heart of the states' concerns,” said Ed Fensholt, senior vp and director of compliance services with Lockton Benefit Group in Kansas City, Mo.

But elected officials in at least one state support speeding up the waiver process, starting with Vermont's congressional delegation.

“While some in Washington want to turn the clock back and repeal the new health reform law, Vermont and other states want to move ahead. Vermont has already been working hard to improve the state's system of health care, and passage of the delegation's waiver bill will move our state one step closer to that goal,” Sen. Pat Leahy, D-Vt., said at a Montpelier, Vt., news conference that coincided with the president's endorsement of the waiver bill.

Vermont Gov. Peter Shumlin is an enthusiastic supporter of a single-payer system for the state, an approach, if backed by Vermont legislators, would require a federal waiver.

Aside from backing repeal of a health care reform provision that requires employers to furnish Form 1099 statements anytime they do more than $600 in business with a corporate vendor starting in 2012, President Obama's support of moving up the effective date of the waiver provision is the first time he has backed a change in the health care reform law, (see related story).

Observers say they have detected, in their conversations with administration officials and through practical actions, a much greater interest to discuss and consider changes.

“This is following a pattern of the last few months,” the NBGH's Ms. Darling said.

For example, responding to many critical comments, regulators last year reversed course and said employers could change insurers and still retain “grandfathered” status for their health care plans. Grandfathered plans do not have to comply with all the requirements of the health care law.

In addition, Obama regulators delayed by one year the effective date of a provision requiring employers to report the cost of coverage on employees' W-2 wage and income statements.

“We see definite flexibility, not just window dressing,” Ms. Darling said.