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ERISA Preemption and Health Reform: Should the Department of Justice Switch Sides?

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In my article on ERISA preemption for the O’Neill Institute’s Legal Solutions in Health Reform, I argued that pay-or-play initiatives, such as those enacted in Maryland, San Francisco, and Massachusetts, are vulnerable to an ERISA preemption challenge.  Two Circuit Court opinions present the issue directly.  The 4th Circuit overturned the Maryland law based on ERISA preemption, but the 9th Circuit upheld the San Francisco ordinance.  After the plaintiff in the San Francisco case, Golden Gate Restaurant Association, filed a writ of certiorari to the U.S. Supreme Court requesting review of the 9th Circuit’s opinion, the Court asked the Department of Justice (DOJ) for its views.

Under previous administrations (both Democratic and Republican), DOJ has defended the Department of Labor’s (DOL) consistent willingness to support ERISA preemption.  (DOL is the federal agency responsible for administering ERISA.)  The time has come for DOJ to announce that it is switching sides and will support the 9th Circuit’s decision.  At a minimum, DOJ should change its position in support of ERISA preemption to one of neutrality.  There are several reasons why DOJ should switch sides.

First, ERISA preemption was never designed to be a straight jacket prohibiting states from enacting health reform initiatives.  From a policy perspective, DOJ needs to recognize that ERISA preemption is not the appropriate vehicle for blocking legitimate reforms that the political system desires.  Instead, federalism should permit flexibility in state experimentation.  Regardless of whether one believes that states have the capacity to implement meaningful health reforms, ERISA preemption is a poor mechanism for denying the opportunity.

Second, the courts have mangled ERISA preemption doctrine into a convoluted, impenetrable labyrinth of untenable distinctions and unsustainable doctrine.  Since the Court seems either unwilling or unable to correct its doctrinal missteps, direction from DOJ toward a more sustainable approach would be a welcome change.

Third, nothing prevents the administration from switching sides.  Certainly, the Reagan Justice Department switched sides in several pending and important constitutional cases from the Carter administration’s positions.

Fourth, switching sides will send an unmistakable signal to DOL that it is time to get off the sidelines and start using its regulatory authority to correct some of the current deficiencies with ERISA preemption.  As I noted in the O’Neill paper, DOL could issue a regulation setting the contours of how far states could proceed before implicating ERISA preemption.  The mechanism for this would be through an interpretation of the savings clause.  As an alternative, DOL could develop a safe harbor within which state level health reform would be acceptable to the agency.  (Administrative agencies use rulemaking authority to provide guidance on what policies will meet federal law, i.e., safe harbors, and those that might violate the law.)  If states go beyond the safe harbor, they could seek a waiver from DOL to continue the experiment.

Whatever DOJ decides to do, the larger failure is that of health policy.  A rational health policy system would have fixed ERISA’s deficiencies long ago.  Better late than never, DOJ has the opportunity to devise a new approach—one that facilitates reform instead of impeding it.  The strange career of ERISA preemption can’t end soon enough.

Peter D. Jacobson, JD, MPH
Professor of Health Law and Policy
Director, Center for Law, Ethics, and Health
University of Michigan School of Public Health

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  • Anonymous says:

    it’s “straitjacket”. I wouldn’t quibble, but it’s a health care technology, & this is a health care topic….

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