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You are here: Home / Anderson On Health Insurance / ERISA explains it all

ERISA explains it all

by | 17 Comments

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The most important health policy law that is not the Social Security Act or its amendments is one that operates in the background. The 1974 Employee Retirement Income Security Act is the 800 pound gorilla that controls employer plans that are organized on a self-payment basis. Self-insured plans cover roughly 60% of all people who get their insurance via work. ERISA has a legal concept of pre-emption where ERISA overrules all state laws regarding regulation on self-insured employer plans. This ranges from benefit requirements to whether or not a self-insured plan has to send a claims file to a state all-payer claims database.

It is the 800 pound gorilla that lurks in the back ground ready to smash barrels and throw bananas at state based reforms.

Jon Walker at Shadowproof has a series of posts that is trying to lay out a path to single payer. He is grappling with complexity and faces the scope of the problem that ERISA has:

State-based health care reform would be fairly easy if the state could simply require every employer to buy their employees the state-based, Medicare-like insurance policy or pay a large tax.

Back in 1974, Hawaii adopted a strong employer mandate law that required good private coverage before Congress adopted ERISA so it is exempt from the federal law. The Hawaii plan was fairly straightforward and worked well. ERISA prevents anything like that from happening now.

Unable to directly regulate most employer-sponsored health plans, state based reform plans tie themselves in knots trying to work around it. Most state single-player plans would indirectly but strongly encourage companies to drop insurance benefits and increase wages to make up for it.

ERISA is a straitjacket on state level reforms. Jon looks at options that are viable work-arounds ranging from a comprehensive national ERISA waiver system to incremental improvements.

ERISA can also be used as a measure of how big of a change a proposal wants to be. If there are two reasonably well thought out proposals on the table and one opens up ERISA and one does not, the proposal that touches ERISA is far more likely to be a big system transformation bill. The bill that does not touch ERISA is more likely to be an incrementalist bill.

Reader Interactions

17Comments

  2. 2.

    Steeplejack (phone)

    @Mayhew:

    Excellent work, as usual.

    “Straight jacket” should be “straitjacket.”

  7. 7.

    Steeplejack (phone)

    @Lalophobia:

    Mmm, Melissa Joan Hart. Oh, wait—the restraining order! Forget I said anything.

    Didn’t she grow up to become an RWNJ?

  9. 9.

    lizzie

    I could be wrong here, but I thought ERISA covered all employer-based plans, whether self-insured or not.

  11. 11.

    Betty

    If the Dems can get the majorities in Congress, it does seem that a review of ERISA is due. That could include more than just health care but pension systems as well.

  12. 12.

    MomSense

    Any word on what is happening with SCHIP? Killing the funding is going to be devastating for so many families. I remember when I couldn’t afford insurance, I was at least comforted that I could keep two of my children safe.

    The Republicans are monsters. Sen. Bennet is right. There are too many sociopaths in Congress.

  15. 15.

    Burnspbesq

    The Employee Retirement Income Security Act is only incidentally about self-insured health benefis. Its primary purpose was to ensure that private retirement plans were operated for the benefit of employees. In that regard, it is as close to fully successful as any Federal statute of the last century.

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