Structuring Health Insurance Markets

Interpreting ERISA

Implications for State Health Policy

Passed by Congress in 1974, the Employee Retirement Income Security Act (ERISA) has had a far reaching impact on the structure and regulation of health insurance markets. Dr. Butler reviewed State jurisdiction over the business of insurance and health care delivery and the application of ERISA to managed care regulation. She noted that ERISA applies to both insured and self-insured private employee pension and other employee benefit plans.

Dr. Butler highlighted key court rulings regarding ERISA's preemption clause that affect the State purview over health maintenance organizations (HMOs) and other managed care plans.

In addressing the main question of whether or not the State law is "saved" (i.e., not preempted by ERISA) because it regulates the business of insurance, courts typically examine several questions:

• Is it directed at the insurance industry?
• Does the practice regulated spread risk?
• Does the practice regulated involve the relationship between the insured and insurer?
• Is the law applied to insuring entities and are HMOs insurers?

Regarding managed care regulation, Dr. Butler used a case-study approach to examine how ERISA might affect specific State efforts to assure access to specialists such as benefit mandates, provider mandates, "any willing provider" laws, point-of-service plan mandates and network adequacy standards.

In summary, Dr. Butler's key points were:

• States cannot directly regulate self-funded plans.
• ERISA allows only limited remedies for coverage denials (i.e., limited to cost of denied care). Consequently, State attempts to provide remedies against HMOs' damages face ERISA challenges.
• States can regulate risk-bearing managed care organizations as long as the regulations do not impose substantial administrative or cost burdens on plans, and /or the standards meet the test of regulating insurance.

References

Butler PA. 1998. State Managed Care Oversight: Policy Implications of Recent ERISA Court Decisions. Washington D.C.: National Governors Association.

Polzer K, Butler PA. Employee Health Plan Protections Under ERISA. Health Affairs 16(5):93-102.

Moran DW. Federal Regulation of Managed Care: AN Impulse in Search of a Theory? Health Affairs 16(6): 7-21.

Enthoven AC, Singer SJ. Perspective: Markets and Collective Action in Regulating Managed Care. Health Affairs 16(6):26-32.

Hellinger FJ. The Expanding Scope of State Legislation. Journal of the American Medical Association 276(13):1065-70.

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