The provision, known as Section 1332, could allow a Republican president to waive some of the main components of the law in conservative states that want to take a different approach to health policy, experts say. For residents of those states, the next president may even be able to throw out the controversial mandate that most Americans buy health insurance, though some experts say there would be practical obstacles to doing that.
"If there's a Republican administration, then I would imagine there would be a very generous interpretation of that provision to allow a number of states to go in a quite different direction," said Stuart M. Butler, a senior fellow at the Brookings Institution.
Section 1332 gives the executive branch the authority to waive major components of the law in states want to take a different approach in 2017. The components that could be waived include the individual mandate; the mandate that most companies provide their employees with insurance; and the provisions on what insurance must cover and who qualifies for financial assistance to buy it.
In order to qualify, a state would have to have a plan to provide decent, affordable insurance to roughly the same number of people as would be covered under the law otherwise. (Many of the law's provisions, however, cannot be waived, and the provision grants no flexibility when it comes to Medicaid, though some states have already negotiated agreements with the federal government over the program, or the Children's Health Insurance Program. The Center on Budget and Policy Priorities has a good primer here.)
The question in the case decided by the Court today, King v. Burwell, was whether the federal government is authorized under the langugage of the law to provide health insurance subsidies in states that have not set up their own insurance marketplaces. As you can see in the chart below, 34 states have not fully set up their own marketplaces, and instead rely on a federal marketplace established by the Obama administration.
Many of the states that have not set up their own insurance exchanges are led by conservative policymakers who did not want to cooperate with Obama's initiative. Some more liberal states decided it was just easier to use the federal exchange. An estimated 6.4 million people living in the other states would have lost their federal help if the court had sided with the law's opponents
Now that the justices have ruled in favor of the Obama administration, Section 1332 could be the next mechanism that conservative opponents of the law will try to use to weaken it. The most plausible scenario where this would come into play would be if Republicans won the presidential election.
Under such a scenario, state lawmakers and governors would have to come up with proposals that meet the law's requirements on affordability and breadth of coverage. For the most part, GOP policy-making has focused on dismantling the law, so there hasn't been much discussion of alternatives that could meet those requirements.
But if a Republican won and wanted to grant waivers to states, conservative policymakers could focus more squarely on proposals that could meet those requirements. In many states, Brookings's Butler notes, Republican policymakers have refused to accept the federal funding provided by the law to expand Medicaid to more people. If they have the option to experimenting with conservative approaches to health policy, they might be more willing to accept those funds, extending insurance to more people and satisfying Democrats.
"It's going to be clunky, it's going to be inelegant. but this is America," he said. "It’s how we do things."
Still, obstacles would remain. Even if lawmakers found proposals that could receive waivers, they'd take the risk of upsetting millions of Americans are already receiving insurance through today's incarnation of Obamacare
Sarah Lueck, an analyst at the Center on Budget, said the linchpin of the law -- the individual mandate -- would be especially hard to waive.
Without the individual mandate, she noted that younger and healthier Americans might stop buying insurance. These consumers tend to pay more in premiums and are usually inexpensive to treat, so they're the most profitable for insurance companies. In order for insurers to stay in business without them, insurance markets suggest they'd have to raise prices on everyone else.
"The individual mandate is a pretty important component of health reform," Lueck said. "I am skeptical that the individual mandate could be eliminated and you could still cover the same number of people."
Republican health-care proposals typically would not provide insurance for as many people as Obamacare does, said Drew Altman, president of the Kaiser Family Foundation. Ultimately, though, the decision about what states can do will rest with the next president. With a Republican in charge, the federal government could interpret Section 1332 loosely to allow states to pursue conservative goals.
"It will depend a little bit on how much they want to push it," Altman said.