Cost and Coverage: The Impact of Implementing Various State Health Care Reform Proposals Nationally. ERISA Preemption


The Employee Retirement Income Security Act of 1974 (ERISA) is a federal statute that regulates employer benefit plans, including health insurance benefits.  It does not require that employers provide a health insurance benefit, but for those that do it standardizes the treatment and administration of the benefit.  ERISA preempts all state laws that “relate to” an employee benefit plan, including health insurance benefits.  Thus, when a state mandates that an employer administer a health benefit plan, it is considered to be in violation of ERISA because it “relates to” an employee benefit plan.  However, until the state law is legally challenged in a court of law and the preemption is upheld, employers are obligated to comply with the state mandate.  For example, in 2006 Maryland passed the “Fair Share Health Care Fund Act” that required all non-governmental employers with 10,000 or more employees to allocate 8% of the company’s payroll to health care benefits.  If they did not spend the required 8%, the firms would be required to pay into a fund the difference between what they did spend for their health insurance benefit and 8% of employee wages (in Maryland).  The law was challenged in federal court, and it was found to be in violation of ERISA.  As a result, it is not enforceable.

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