The death of ERISA

The Employee Retirement Income Security Act (ERISA) is probably the best health care act ever passed by Congress, and President Obama wants to kill it. If you are employed, and your employer provides health insurance, read on, but, you will not like what you read.

ERISA passed in 1974, unlike the current bills pending before Congress, remodeled employee health insurance for the better.

Let me begin, as they say, at the beginning.  Many companies, both large and small, are self-insured.  In other words, your employer, not an insurance company, pays the costs of any claims submitted by you.  As an employee, you probably would never know that because your employer pays someone to “administer the plan”, typically an insurance company.  So, although you think you have coverage with Aetna, for example, Aetna is simply handling your employer’s money.  Now, on to ERISA.

All states mandate that policies sold in their state cover specific things.  In other words, the state of X may require that a, b, c, and d be covered. The state of Y, may only require that a, b and c be covered. Obviously, the more mandates, the higher the premiums.

New Jersey, for example, requires insurers to cover a wide range of procedures and types of care, including in-vitro fertilization, contraceptives, chiropodists and coverage of children until they reach age 25. Those mandated benefits aren’t cheap. According to a 2007 analysis by the National Center for Policy Analysis, the cost of a standard health insurance policy for a healthy 25-year-old man averaged $5,580 in the state. A standard policy in Kentucky, which has far fewer mandates, would cost the same man only $960 a year.

In the above example, if an employer had employees in both New Jersey and Kentucky, that employer would have to comply with both states’ rules in its group policy.

ERISA simplified that process by allowing companies that are self-insured to offer a standard group plan to all of it’s employees regardless of the state in which they lived. Employers were able to tailor their plans to fit the needs of their employees, and, at the same time, keep premiums lower than they otherwise would have been.

Goodbye to all that. The House bill says that after a five-year grace period all Erisa insurance offerings will have to win government approval—both by the Department of Labor and a new “health choices commissioner” who will set federal standards for what is an acceptable health plan. This commissar—er, commissioner—can fine employers that don’t comply and even has “suspension of enrollment” powers for plans that he or she has vetoed, until “satisfied that the basis for such determination has been corrected and is not likely to recur.”

In other words, you will not be able to keep your employee group insurance, even if you like it.  Government bureaucrats, no doubt propelled by an assortment of lobbyists, will heap all sorts of requirements on group policies, costs will be driven up until your employer can no longer afford to pay for your medical care, and, you will be “dumped” onto the government plan.  And, if the doctor you like doesn’t accept the government plan (much like many doctors who refuse to accept Medicare because reimbursements are too low to even cover their costs) you will not be able to keep your doctor either.

When that happens, you will blame your employer. But, the blame belongs to Obama, Pelosi, Reid, and any other member of Congress who votes for this atrocity. For they are the ones  that will have cost you both the insurance you like, and, the doctor you like.

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The Sound Off Sister was an Assistant United States Attorney for the Southern District of Florida, and special trial attorney for the Department of Justice, Criminal Division; a partner in the Florida law firm of Shutts & Bowen, and an adjunct professor at the University of Miami, School of Law. The Sound Off Sister offers frequent commentary concerning legislation making its way through Congress, including the health reform legislation passed in early 2010.

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