Empowering States to Innovate

As a former Governor, state legislator, and insurance commissioner, I know the ingenuity of state leaders to shape policies that fit the individual characteristics of their people, their industries, and their economies.  The Affordable Care Act, signed by President Obama almost a year ago, provides states with the flexibility, resources and tools they need to improve the health of their residents, reduce the growth of health care costs, and invest in the prevention strategies that will make our nation healthier and more productive. Many of the ideas contained in the Act were modeled on reforms initiated by states like my home state of Kansas. And you can read a report on the resources and flexibility available to states here.

Today, President Obama announced his support for another crucial step in empowering states to lead – the bipartisan “Empowering States to Innovate Act,” sponsored by Senators Ron Wyden (D-Oregon), Scott Brown (R-Massachusetts), and Mary Landrieu (D-Louisiana). The President said:

"This recognition – that states need flexibility to tailor their approach to their unique needs – is why part of the law says that, beginning in 2017, if you can come up with a better system for your state to provide coverage of the same quality and affordability as the Affordable Care Act, you can take that route instead…

A few weeks ago, Oregon Senator Ron Wyden, a Democrat, Massachusetts Senator Scott Brown, a Republican, and Louisiana Senator Mary Landrieu, they proposed legislation that would accelerate that provision,  so it would allow states to apply for such a waiver by 2014 instead of 2017. I think that’s a very reasonable proposal.  I support it.  It will give you flexibility more quickly, while still guaranteeing the American people reform.  If your state can create a plan that covers as many people as affordably and comprehensively as the Affordable Care Act does – without increasing the deficit – you can implement that plan, and we’ll work with you to do it.  I’ve said before, I don’t believe that either party holds a monopoly on good ideas.  And I will go to bat for whatever works, no matter who or where it comes from." 

In the last ten months, the Department of Health and Human Services (HHS) has already made $2.8 billion available to states to help them begin to reform the disjointed and often dysfunctional health care systems serving their populations. Those funds allow state leaders to invest in improvements even at a time of record state deficits. These investments have begun to bear fruit with tougher oversight of insurance premium increases, new rights and protections for consumers, more choices for people living with medical conditions like cancer, and the elimination of many of the worst insurance industry practices.

Every state has begun working on implementing the key provisions of the Affordable Care Act, from enforcing the ban on lifetime coverage limits to running the new high-risk pool program.  This includes the development of state-based health insurance Exchanges, a new, competitive marketplace that would allow health insurance plans to compete for customers based on the quality of their products and the competitiveness of their prices. Governors of both political parties have shown true leadership in applying the expertise of their states in devising approaches that best fit their own market conditions.

The proposal President Obama discussed today would allow states that choose to do so to develop health reform models for their states as soon as 2014 so long as they meet certain criteria, including certifying that their proposals would cover at least as many of their residents as the policies in the Affordable Care Act.  The Affordable Care Act will let states make these type of reforms starting in 2017; the legislation endorsed today by the President accelerates that schedule to 2014, the same year that the Exchanges and other key reforms take effect.

Under this legislation, governors will be able to apply for State Innovation Waivers to implement reforms that:

• Provide coverage that is at least as comprehensive as the coverage offered through the Exchanges – a new competitive, private health insurance marketplace.
• Make coverage at least as affordable as it would have been through the Exchanges.
• Provide coverage to at least as many residents as the Affordable Care Act would have provided.
• Do not increase the Federal deficit.

State reforms could take many forms. Among the models states could adopt are:

• Linking tax credits for small businesses with tax credits for low-income families;
• Automatically enrolling people in health plans;
• Alternative health plan options to increase competition and provide consumers with additional choices;
• A broader choice of benefit packages to provide more choices for individuals and small businesses; and
• Allowing large businesses to purchase health insurance through the Exchanges.

The law also allows states to submit a single application that includes Medicaid waiver requests which could, for example, seek to give people eligible for Medicaid the choice of enrolling in Exchange health plans.

Those models represent innovations that have been advanced by Democrats and Republicans in states and here in Washington. And these models give residents of these states at least as much assistance and protection as the provisions of the Affordable Care Act.

And no matter where you live or what innovations your state pursues, all Americans will be protected from the worst insurance company abuses. The law includes important protections already in place to make sure insurance companies:

• Don’t impose lifetime limits on the dollar amount they will spend on health benefits or drop your coverage just because you get sick;
• Offer young adults without access to job-based coverage the option of remaining on their parent’s plan until their 26th birthday;
• Cover all recommended preventive services without cost sharing;
• Allow patients to choose their own doctor in their network; and
• Spend at least 80 percent of premium dollars on health care, rather than executive salaries and administrative costs.

By maintaining these important basic protections for all Americans – no matter which state is their home – we will combine the benefits of a national movement to improve health and health care with the local innovations that have always made our nation great. I look forward to working with my colleagues in the states to make these reforms work for the American people.

Kathleen Sebelius is Secretary of Health and Human Services.