The president made the announcement at the White House on Monday before a gathering of the states' chief executives, including many with presidential aspirations who say his health care policy will envelop cash-strapped states in a sea of red ink.
"If you have a better way of doing it, help yourself, go ahead, take that route," Obama said. "I will go to bat for whatever works, no matter who or where it comes from."
Obama announced his support for a bill co-sponsored by Sens. Ron Wyden, D-Ore., Scott Brown, R-Mass., and Mary Landrieu, D-La., that would allow states to receive waivers to pursue their own health care plans beginning in 2014, the same year the federal mandate to buy insurance goes into effect.
Under the health care law passed last year, that option would not be available until 2017. However, Obama said the state plans would be approved only if they make coverage as affordable as it is under current law, cover the same amount of people and don't increase the deficit.
Obama's shift -- his first major proposed alteration to the Affordable Care Act -- comes amid rising public discontent with health care reform. A recent Kaiser Family Foundation poll found that two-thirds of Americans want to repeal the requirement that everyone hold insurance. Meanwhile, more than half of all states have pending lawsuits against the overhaul.
Senior administration officials said Monday that the waivers might persuade states to set up a mechanism for residents to obtain insurance rather than being forced to purchase coverage. And in more progressive states, it could open the door for a single-payer system.
"We think the states will be and are interested in this kind of approach," said White House press secretary Jay Carney, adding that it gives states "additional flexibility."
But Republican governors offered little support for the proposal Monday and some analysts countered that it would be impossible to meet Obama's requirements without a government mandate.
"This isn't Obama retreating," said Michael Cannon, director of health policy studies at the libertarian Cato Institute. "He's trying to frame it as compromise when really, it's more audacious than the previous version [of health care reform]. President Obama's move is not about giving states more flexibility. It's about moving toward a single-payer health care system."
Though Obama focused primarily on health care policy, politics seeped into his speech as he warned governors not to turn unions into scapegoats for widespread fiscal problems.
"I don't think it does anybody any good when public employees are denigrated or vilified or their rights are infringed upon," he said, alluding to governors in the Midwest attempting to strip bargaining rights from unions.
He also reminded governors that his health care policy reflects that of Mitt Romney, a potential Republican presidential candidate whose health reforms while Massachusetts governor could be an albatross for him in Republican primaries.