James L. McGee, CEBS--On Health Care Reform
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This was always a daunting challenge even before health reform. The Patient Protection and Affordable Care Act has raised the bar even higher.
ERISA and its preemption
Before PPACA a legal hurdle called the ERISA preemption severely hamstrung state health reform efforts. For those of us in the employee benefits profession, ERISA, including its preemption clause, is our bible or at least our Deuteronomy.
ERISA was passed by Congress in 1974 to regulate employee benefit plans. The preemption clause precludes states from regulating employee benefit plans. There were two exceptions to that preemption and both are instructive.
Insurance and not insurance
Under the McCarran Ferguson Act of 1945 states have the authority to regulate insurance plans. Under ERISA states still retain the right to regulate insured health plans.
After the law was passed, Congress figured out that the state of Hawaii had already established a law requiring employers to provide health insurance to their employees. I guess news travels slowly from Hawaii. Congress passed the first of many subsequent amendments to ERISA making an exception to the general preemption for Hawaii.
One reason for the preemption clause was the belief that Congress would tackle national health care reform soon and they wanted to protect that right at the national level, a theme that would reappear in PPACA.
The consequence of allowing states to only regulate “insured” health plans was the movement by many larger employers to “self-insured” plans. By taking on the risk of health insurance themselves, employers escaped the mandates imposed by state insurance departments. Companies operated in multiple states could establish uniform benefit designs for all of their employees. At least one source estimates about 43% or 53 million people with health care coverage are regulated by ERISA and not by state insurance departments.
Hawaii
When Congress exempted Hawaii from the preemption clause they only exempted the Hawaii law as it existed in 1974. Employers have since discovered the loopholes in Hawaii law for part time employees and contract employees. Now, even though Hawaii has always had the lowest rate of uninsured in the country, that number is increasing as more and more employers exploit that loophole.
The ERISA preemption prevents efforts by state to expand coverage by requiring employers to offer health insurance. Instead they are confined to a hodgepodge of confusing and complicated programs to expand state Medicaid insurance programs or offer subsidies to small employers.
Obama blocks states?
The PPACA does not make it easier for state single payer advocates. The Obama Administration vigorously opposed bipartisan efforts in the House Education and Labor Committee to give states more latitude as laboratories for reform.
Photo Credit: Maui-Tropica
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