Chapter 9.C (or 3.C) -- ERISA Pre-emption; Mandated Benefits

 

Click here to read statutory excerpts from ERISA

 

See generally James A Wooten, The Employee Retirement Income Security Act of 1974: A Political History (2004); Peter Jacobson, The Role of ERISA Preemption in Health REform, 37 J. L. Med. & Ethics 86 (2009).


Somewhat surprising, federal health care reform does not fundamentally rework the basics of ERISA pre-emption; instead, it adds another layer of complexity, in the form of exchange versus non-exchange markets.  States still may regulate insurance sold outside of exchanges, and still may not regulated self-insured employers.  Also, ERISA continues to pre-empt state-law tort or contract suits against employer-sponsored plans, both inside and outside exchanges.  The major change is that federal law now substantially fills in the ERISA regulatory “vacuum” created by ERISA pre-emption, as follows. It appears (but it is not yet 100% certain), that the following federal standards (some new, some existing) apply to self-insured employers as well as to insured plans: 
➢    must cover pre-existing conditions, etc. (sec. 2704, 2712)
➢    may not exclude an entire category of licensed practitioners (sec. 2706)
➢    must cover participation in federally-funded or FDA-qualified clinical trials for life-threatening conditions (2709)
➢    must cover preventive health services (2713), at least 2 days following childbirth, and dependent children until age 26 (2714),
➢    must provide internal and external appeals processes for denied claims (sec. 2719)
➢    may not set lifetime or annual limits on total costs (sec. 2711)
➢    mental health parity (if mental health benefits are included, they may not have more limitations than regular health care)

See Congressional Research Service, Self-Insured Health Insurance Coverage (2010).

 

It remains to be seen whether ERISA pre-emption of state "play-or-pay" laws becomes moot, now that comprehensive federal reform itself imposes a pay or play requirement on employers.  In theory, a state might still want to impose tougher requirements on employers.  See Mary Ann Chirba-Martin, ERISA Preemption of State "Play or Pay" Mandates: How PPACA Clouds an Already Confusing Picture, 13 J. Health Care L. & Policy 393 (2010).

So, at least for academic purposes, it's worth noting that the 9th Circuit issued a major decision upholding the City of San Francisco’s ordinance that requires local employers with more than 20 workers who do not provide health insurance to pay a tax that funds a public health care program that covers lower-income uninsured people.  Golden Gate Restaurant Ass'n v. City and County of San Francisco, 512 F.3d 1112 (9th Cir. 2008).  The court distinguished Fielder (4th Cir.) by noting that the law was more broad-based (covering most employers), and that not purchasing insurance was a realistic economic option.  Also of note is how the court characterized employers’ contributions either to the city program or to employees’ health care benefits.  It held that simply paying money to the city on behalf of uninsured employees does not constitute an ERISA “plan” because this does not involve substantial administrative discretion.  Could this thinking lead other courts to revisit the definition of “plan” along the lines suggested in note 3 in the casebook?

For discussion of the 4th and 9th Circuit decisions, and more on the ERISA pre-emption issues raised by play-or-pay laws such as the one in Massachusetts, see Symposium, 33 Am. J.L. & Med. 663 (2007); Edward A. Zelinsky, The new Massachusetts health law: preemption and experimentation, 49 Wm. & Mary L. Rev. 229-287 (2007); Monahan, Amy B. Pay or play laws, ERISA preemption, and potential lessons from Massachusetts. 55 U. Kan. L. Rev. 1203-1232 (2007); Note, 10 Yale J. Health Pol'y  L. & Ethics 1 (2010); Note, 109 Colum. L. Rev. 1482 (2009).

 

Analyzing the federalism implications of mandated benefit laws and their pre-emption, see Amy B. Monahan, Federalism, federal regulation, or free market? An examination of mandated health benefit reform, 2007 U. Ill. L. Rev. 1361-1416 (2007).  The intricate structure of federal and state responsibilities in the new health care reform law raises a host of federalism issues that scholars will undoubtedly debate for years to come.  For a start, see Sara Rosenbaum, Can States Pick up the Health Reform Torch?, New Eng. J. Med., Feb. 24, 2010; Symposium, 29 Health Aff. 1173 (2010).

The following article addresses yet one more new wrinkle in this regulatory landscape:  if a business acquisition results in maintaining separate insurance plans under common ownership, the owner may inadvertently have created what is known as a MEWA -- a Multiple Employer Welfare Arrangement -- which creates special regulatory obligations under ERISA. Comment,  24 J. Contemp. Health L. & Pol'y 118-148 (2007).

 

Yet another wrinkle is whether ERISA and HIPAA apply to arrangements where employers allow employees to pay for individual insurance through payroll deduction, using what are known as section 125 cafeteria plans._ For analysis, see Amy B. Monahan & Mark A. Hall, Section 125 Plans For Individual Insurance and HIPAA’s Group Insurance Provisions (Oct. 2008).

 

In 2009, Congress moved closer to full mental health parity (as part of one of the financial “bail-out” bills) by prohibiting insurers and employers from imposing on mental health benefits any greater cost-sharing, treatment limits, or out-of-network restrictions than on regular health care.  

 

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