Members of state legislatures are looking for a way to regulate self-funded employer plans.
The National Council of Insurance Legislators held a general session on the impact of the Employee Retirement Income Security Act of 1974 on state health insurance regulation last month in San Antonio, during NCOIL’s annual meeting.
Federal law leaves regulation of the business of insurance to the states, but Congress tried to reduce the cost of offering multistate benefit plans when it drafted ERISA by including a section that preempts state efforts to regulate self-funded employer benefit plans. At the time, most self-funded plan sponsors were large employers. ERISA drafters included health and welfare plans in the law, but their main concern was keeping pension plan managers from looting the pension plans.
Now, many relatively small employers are using stop-loss insurance, or insurance for health plans, with relatively low “attachment point,” or stop-loss deductibles to provide health benefits, and state representatives, assembly members and senators are frustrated.
At the NCOIL session on ERISA, members considered a draft resolution that calls for Congress to change ERISA to let state policymakers “enact more meaningful state healthcare reforms.”
The drafters of the resolution — New York state Assemblymember Kevin Cahill, a Democrat, and Utah state Rep. Jim Dunnigan, a Republican — contend in the resolution draft that “ERISA has grown far beyond its original intent of establishing uniform federal standards to protect private employee pension plans from fraud and mismanagement, and has transformed into a critical barrier for states seeking to enact meaningful healthcare reforms.”
The drafters want Congress to give state leigslatures and regulators some ability to regulate health coverage provisions at self-insured health plans sponsored by single-state employers.
The Supreme Court’s support for preemption: The NCOIL meeting attendees also heard a presentation by Carmel Shachar, faculty director of the Health Law and Policy and Clinic at Harvard’s law school, with the title “ERISA as a roadblock for states implementing health policy.”
The U.S. Supreme Court backed ERISA preemption in three 1990s rulings and a 2016 ruling, on Gobeille v. Liberty Mutual, but it then let Arkansas regulate pharmacy benefit managers, in spite of ERISA preemption, in a 2020 ruling on Rutledge v. Pharmaceutical Care Management, Shachar said.
Shachar argued that the Supreme Court ERISA rulings cripple states’ ability to regulate group health insurance, by eliminating their ability to make self-funded employer health plans submit claims data or other data.
Shachar suggested that Congress or the two departments that oversee group health plans, the U.S. Labor Department and the U.S. Department of Health and Human Services, could help state policymakers by creating exceptions to ERISA preemption, Shachar said.
The Rutledge effect: Dr. Randall Markarian, an American Dental Association trustee, told NCOIL members that the association supports ERISA preemption but is working with groups like the American Optometric to promote “appropriate narrowing” of the preemption in ways that will help the patients covered by employers’ plans and the health care providers who treat the patients.
The association believes the Rutledge decision already empowers states to enforce dental insurance laws, as long as the laws apply to all benefit plans equally and avoid dictating plan benefits, determining who can be a plan beneficiary or setting rules in areas that ERISA regulates, Markarian said.
Self-insured employers’ perspective: NCOIL members’ interest in narrowing ERISA preemption could set at least some states against employee benefits groups like the American Benefits Council and the ERISA Industry Committee.
In June, for example, the ERISA Industry Committee asked Texas state legislators to respect ERISA preemption when they try to regulate pharmacy benefit managers.
“While we share the goal of reducing health care costs, policies that stand to erode ERISA preemption and national uniformity threaten to do more harm than good,” Dillon Clair, ERIC’s director state advocacy, wrote in a comment letter on two Texas state legislature bills.