The federal Employee Retirement Income Security Act (ERISA) of 1974 governs the administration of employee benefit plans and is noteworthy in that it includes an extremely broad preemption clause. The preemption clause, which prevents states from regulating these same plans, has often co-existed uneasily with state health care regulation efforts. In 2016, the US Supreme Court allowed the ERISA to be used to shield employer-sponsored health care plans from state health care data transparency efforts. On October 6, 2020 the US Supreme Court heard arguments in a new ERISA case, Rutledge v. Pharmaceutical Care Management, that has the potential to strike directly at states’ ability to regulate their health care markets.
It is increasingly apparent that the scope of ERISA preemption needs to be curtailed to allow states to continue their traditional role as the regulators of health care. Otherwise, we risk creating a significant “blind spot” when it comes to regulating health insurance for the 60 percent of US workers who receive their health care coverage through employer-sponsored plans. If ERISA preemption is not narrowed, the federal government could step up its oversight of employer-sponsored plans to match state efforts, but this is a second-best solution that would split the health insurance market.
A Brief History Of The ERISA
The ERISA is not a health care-specific statute. Instead, it is a federal statute setting minimum standards for voluntarily established pensions and other employee benefit plans. Employer-sponsored health care plans, or insurance plans in which an employer assumes the direct risk for payment of the employees’ claims for benefits, fall into the category of employee benefit plans. The purpose of the ERISA was to protect the interest of employee-beneficiaries by standardizing certain financial disclosure and reporting obligations, such as obligations of fiduciaries of these plans. To achieve national uniformity and standardization, the ERISA includes one of the broadest preemption clauses of any federal statutes.
For decades, perhaps the most significant health care ERISA case was New York State Conference of Blue Cross & Blue Shield v. Travelers Insurance Co. Travelers was a 1995 case concerning a New York state law that required hospitals to collect certain charges from commercially insured patients but not from patients covered by Blue Cross Blue Shield plans. These charges were intended to cover the cost of treating uninsured patients. Travelers was notable because the US Supreme Court curtailed ERISA’s preemptory reach, concluding that the New York law was not preempted by the ERISA. The Travelers Court noted that nothing about the ERISA or its legislative history “indicates that Congress chose to displace general health care regulations, which historically has been a matter of local concern.”
Travelers, together with two other cases from 1997 (California Div. of Labor Standards Enforcement v….
Read More: The Preemption Clause That Swallowed Health Care: How ERISA Litigation Threatens