Since the passage of President Obama’s unpopular Patient Protection and Affordable Care Act, many states have pushed back against the federal government’s intrusion into the nation’s health care system. This includes challenging the constitutionality of the law’s insurance mandate and calling for repeal and replacement of the law.

Now states confront a simple but crucial question: What should be done further while litigation and repeal efforts run their course? One example which could serve as a guide for other states is found in Utah, where leaders are forging ahead with their own health care reforms.

Utah’s Example

Utah’s health care reform effort, begun in 2005, produced a health insurance exchange which is scheduled to be fully functional for small-business employees in January 2011 and for all employees the following year. Workers have several plan options in a market where insurers must compete for business. As more employers participate in the exchange, employees will enroll in plans that are portable from job to job.

Utah’s reforms will free up employers to focus on their core business because they will no longer have to administer health benefits. Additionally, thanks to rating system reforms, employers will know exactly how much health benefits cost each year.

Other states could follow Utah’s example by implementing customized state-level reforms aimed at empowering consumers rather than federal bureaucrats. Utah’s efforts have not depleted the state’s treasury—the exchange runs on an annual budget of roughly $600,000. That’s a small amount when compared with the costs of most government-run health care programs, and it should be affordable even for cash-strapped states. In addition, Utah is continuing efforts to develop market-based reforms that give consumers choice and value.

Proactive or Inactive

States need not reform their health systems exactly as Utah has done, but they can resist the federal takeover of the health care system by working toward customized state-level reforms.

Indiana provides another good example. The Hoosier state has increased coverage to the poor through high-deductible health plans coupled with health savings accounts. This state innovation, known as the Healthy Indiana Plan, applies consumer-oriented ideals to increase value for patients while pushing costs down.

There are now two clear paths for states: A proactive one, creating reform measures ahead of the PPACA deadlines which preserve value for consumers, or one where state officials sit on their hands and do what the federal Department of Health and Human Services tells them to do. The latter path abdicates state authority, however, and eats up some of the limited time states need to implement their own reforms.

Awaiting Interpretation

Some states have chosen to wait and see what happens, counting on successful litigation or future repeal, the prospects for which are unpredictable. These strategies have a good chance to bear fruit, but in the meantime states can work together on other ways to push back against the Obama administration’s unprecedented takeover of health care.

A better approach is to move forward with consumer-based health reform, customized to the needs of residents.

Understandably, states are apprehensive about acting now, because they are unsure how the Secretary of Health and Human Services will interpret and issue regulations for provisions in the law. For example, section 1321 of the PPACA gives states the option to form their own health insurance exchanges, but the HHS secretary has yet to issue regulations to meet the standards the law envisions.

Laboratories of Democracy

As seedbeds of experimentation, states can define federalism as the Founders intended—beyond the specifically enumerated powers given to Congress by the Constitution, the states are best-equipped to deal with problems that are clearly regional in nature.

Resistance to encroachment by the national government will have little effect, however, if it comes from just one or two reform-minded states. By working together, states stand a better chance of forcing HHS to accept their market-based designs.

Most provisions of the PPACA are not the law of the land yet. By banding together cooperatively and adopting pro-consumer reforms, the states can send a message to Washington that centralized control of the nation’s health care system is not the answer to expanding health coverage and value.

Gregg Girvan is a graduate health policy fellow at the Heritage Foundation.