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RE: Rudy Care

By David Hogberg on 8.2.07 @ 2:24PM

Jennifer: Could the federal government pre-mept state regulations? Maybe, but I'm not so sure.

You point to ERISA (Employee Retirement and Income Security Act for those who are not policy wonks) but it does not actually pre-empt state mandates. Rather, it prevents state governments from imposing any regulations on employers health care benefit plans. That's why the federal courts threw out Maryland's Wal-Mart Law, for example.

However, ERISA does not prevent states from regulating the policies that health insurance companies sell. Thus, if you are a small employer, the state can't tell you what type of health care benefits, if any, that you decide to offer your employees. However, if you buy your insurance from a carrier like Blue Cross, Assurant, etc., then you will have to buy a policy that covers in-vitro fertilization, alcoholism treatment and whatever else the state legislature, in all its wisdom, has decided it must cover.

The reason people often think ERISA pre-empts state mandates is that employers who self-insure -- i.e., they do not purchase their insurance from a carrier but, instead, run their own health insurance program -- can offer insurance with whatever types of benefits it wants, regardless of state regulations. Of course, only large employers (firms with at least 100 employees) have enough resources to make self-insuring feasible, so if you are a small employer or an individual, you are pretty much at the mercy of the state legislature.

The only surefire way to deal with state mandates is to let people buy insurance out of state. That will encourgate states to reduce their regulations so that in-state insurance carriers do not lose business. Unfortunately, the Giuliani plan only moves in that direction slightly.

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Health Care, Business, Law