In a recent post, Mark Hall raises an interesting issue regarding ERISA preemption and the proposal in HR 3962, the recently enacted House of Representatives’ health reform bill. Mark suggests that: “1) for insurance sold outside of the exchange, ERISA law and its preemption remains the same; 2) for insurance sold inside the exchange, ERISA preemption is rolled back, and state law applies – even if the coverage might be employer-sponsored in some fashion.”
In response, attorney Richard Johnston counters that “HR 3962 preserves ERISA’s malignant scheme.” As Mr. Johnston notes, he is a plaintiff’s attorney and can be expected to characterize ERISA as malignant. (As my previous post on ERISA preemption suggests, I largely agree with Mr. Johnston’s depiction.) But Mr. Johnston goes further and seems to suggest that Mark’s second point is not correct and that ERISA preemption remains in force.
Who’s right? As Mark correctly notes, “one can’t be sure.” This is, after all, ERISA preemption where nothing is what it appears to be—sort of the Alice in Wonderland of health law! My own take is closer to Mr. Johnston’s.
Before examining why, I would like to compliment the House bill for one particular achievement. The convoluted language brilliantly upholds the tradition of the original ERISA legislation in defying rational and straightforward analysis. That we’re already trying to parse whether ERISA preemption is being relaxed is an indication that Congress isn’t sure what to do. (Worse, it suggests that much in the bill will be subject to similar difficult parsing of the language.)
That said, I read the provision somewhat differently than Mark does. I agree that for individual insurance sold within the exchange, state remedies apply. But for employer-sponsored plans, I don’t think the provision rolls back ERISA preemption. The first sentence in Section 251(a)(1) states that “in the case of employment-based health plans, the requirements do not supercede [sic] ERISA.” Section 251(a)(2) states that “nothing in paragraphs (1) or (2) shall be construed as affecting the application of section 514 of the Employee Retirement Income Security Act of 1974).”
Then the final sentence in Section 251 reverts to suggesting that ERISA still applies within the exchange as applied to “arrangements which are treated as group health plans under section 802(a)(1) of the Employee Retirement Income Security Act of 1974.” Equally importantly, as Mr. Johnston notes, HR 3962 defines an employment-based health plan in Section 100(c)(6) as “a group health plan (as defined in section 733(a)(1) of the Employee Retirement Income Security Act of 1974).”
It is certainly possible to read ambiguity into several of the other phrases in Section 251 that would support Mark’s second proposition. If so, a court could say that Congress intended to permit state regulation over all health insurance purchases within the exchange. But everything we know about the judicial interpretation of ERISA preemption suggests that courts will want explicit congressional language that ERISA preemption does not apply before reading ambiguity into the provisions.
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