Last week’s post highlighted encouraging initiatives in several states to implement a single payer system within a single state.

This was always a daunting challenge even before health reform.  The Patient Protection and Affordable Care Act has raised the bar even higher.

Hawaii

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.

According to the Wonk Room:

During the House Education and Labor Committee’s mark-up, Rep Dennis Kucinich (D-OH) introduced an amendment that would authorize and require “the Secretary of Labor, in consultation with the Secretary of Health and Human Services” to waive the ERISA pre-emption (Sec. 514) for states that have enacted a state single payer system. The committee adopted the amendment, but it was left out of the final House bill.

I heard a participant in that hearing describe the White House lobbying efforts, and it was only the support of some Republicans who supported state’s rights that allowed its passage in committee.  The Kucinich amendment would have required the Department of Labor to grant an ERISA preemption to any state single payer system that met certain requirements.

Wait until 2017?

What did survive was an amendment by Senator Bernie Sanders.

This permits states to develop their own “innovative solution” but not until 2017

But they still have to jump through hoops.  Not only do they have to meet some understandable requirements for coverage and affordability, but they now have to request separate waivers from ERISA from the Department of Labor, and from Hthe Department of Health and Human Services (HHS) for Medicare, Medicaid and SCHIP.  The Kucinich amendment would have made the ERISA waiver automatic under the certain conditions. At least the law seems to require that HHS implement a single waiver process for all of the programs – Medicare, Medicaid, SCHIP, IHS – under its authority.

While none of these issues will deter state single payer advocates, they may give some state legislators pause.

Photo Credit:  Maui-Tropica