Monday, July 09, 2007

Coverage & Access

ERISA Could Hurt States' Efforts To Expand Health Coverage of Uninsured Residents

      The Employee Retirement Income Security Act might have the potential to "derail" state efforts to reduce the number of uninsured residents, the Wall Street Journal reports. Enacted in 1974, ERISA limits the authority of states to impose certain rules on employers regarding health coverage so that firms can "avoid a patchwork of state regulations and offer uniform benefits, helping keep down costs," the Journal reports.

Lawmakers in California, Illinois, Pennsylvania and other states are debating "pay or play" proposals that would give employers a choice between providing insurance to their workers or paying into state funds to subsidize health coverage. In California, the National Federation of Independent Business and other groups are preparing a possible lawsuit challenging the legality of such a proposal under ERISA provisions.

Massachusetts and Vermont have enacted laws requiring employers that do not offer insurance to pay into state pools, although the payments are substantially less than the amounts under consideration in California, Pennsylvania and other states. The Massachusetts and Vermont laws have not faced challenges in court, "possibly reflecting the small size" of their respective penalties, according to the Journal.

Meanwhile, Pennsylvania and Illinois "are trying to avoid colliding with ERISA" by considering "broad-based" taxes on employers coupled with tax credits for those that already spend a certain amount on health coverage, the Journal reports. However, the Journal notes that under ERISA, states have no authority to examine the quality of health insurance offered.

Congressional Action Possible
Lawmakers in Congress are considering whether to grant ERISA waivers "or otherwise help states that want to include employer requirements as part of a comprehensive health reform," the Journal reports. House Education and Labor Subcommittee on Health, Employment, Labor, and Pensions Chair Rob Andrews (D-N.J.) said, "It appears to me our status quo has hit a brick wall, or maybe it's gone backward." Andrews said he supports giving states the authority to pressure employers who can afford to provide coverage.

Employers' capacity to fund coverage could be determined by calculating net profits per employee. Andrews said he would consider waiving ERISA for certain state plans or creating new standards that would allow any state to qualify for a waiver. Patricia Butler -- an ERISA specialist who is advising California and other states -- and other experts said that it is possible to enact employer mandates as part of state universal coverage laws that would not be reversed in courts under current ERISA provisions.

Industry Reaction
Mark Ugoretz, president of the ERISA Industry Committee, said, " ERISA pre-emption (of state laws) is the crown jewel of health care coverage by employers. Without it, health coverage would be next to impossible." Ugoretz added that state fines break ERISA provisions if they are so costly that they require employers to offer insurance.

Kevin Covert, a representative of the American Benefits Council, recently testified before Andrews' subcommittee that waivers would be difficult to design and administer because they would create new questions about how far states could go. Covert said, "We think the best approach is a federal solution that builds on ERISA and promotes uniformity and cost containment" (Meckler, Wall Street Journal, 7/7).