Massachusetts mandates that every employer in the Bay State employing eleven or more full-time employees must make “a fair and reasonable premium contribution” to “a group health plan” for its employees. If a covered employer fails to make this state-mandated contribution, the employer must instead pay a “fair share employer contribution” to the Commonwealth Care Trust Fund.
Federal law, in particular, the Employee Retirement Income Security Act of 1974 (ERISA) preempts this state-imposed employer mandate and others like it. As a matter of policy, federal law should not preempt in this fashion. But, until Congress changes ERISA, it does.
ERISA Section 514(a) provides that that federal statute “supersede(s) any and all State laws insofar as they may now or hereafter relate to any” employee benefit plan. For ERISA purposes, any employer “program” paying for employees’ medical care is such a benefit plan. The language of Section 514(a) is expansive. Moreover, the U.S. Supreme Court has interpreted Section 514(a) capaciously. As a result, Section 514(a) preempts (“supersedes”) state laws like the Massachusetts statute which regulate employers’ expenditures for their employees’ medical care.
To see the breadth of ERISA’s preemption of state law, consider District of Columbia v. Greater Washington Board of Trade. In that decision, the Supreme Court held that ERISA Section 514(a) preempts state workers’ compensation laws which require that employers provide to injured employees medical coverage equivalent to the health coverage such employers provide to active employees. This decision is typical of the Supreme Court’s ERISA preemption decisions which interpret Section 514(a) as sweeping away state laws which have “a connection with or reference to” employers’ ERISA-regulated fringe benefit plans, including employers’ medical outlays for their employees.
Thus, the case law under ERISA Section 514(a) indicates that state statutes like the Massachusetts employer mandate “relate to” employer-provided medical care and are consequently ERISA-preempted.
Congress can and, in my judgment, should amend ERISA to permit laws like the Massachusetts statute. By implementing different approaches and policies, the states can experiment and thereby generate useful information for the nation as a whole. The states can also respond to local preferences and conditions. However, until Congress changes ERISA, that statute, as a matter of law, effectively ties the states’ hands as to employer-provided medical care. The upshot is that state statutes like the Massachusetts employer mandate contravene federal law and will, when challenged in court, fall.
Edward A. Zelinsky
Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University.
WBUR asked Professor Zelinsky to comment on the threshold the state plans to establish for health plan benefits…and whether that would also make the law vulnerable to an ERISA challenge. He says, “Yes, I think there is a problem under the current interpretation of ERISA with the impact on employers of the Minimum Creditable Coverage rule.”
This is why amending ERISA needs to be part of federal package for health reform – something that will not be easy. I wrote about this here – http://www.healthpolcom.com/blog/2008/09/09/erisa-the-unbridged-chasm-of-health-reform-%E2%80%93-challenges-for-massachusetts-and-federal-action/
And also wrote about some updated some data about how health benefits from large employers (i.e. ERISA exempt benefits) are one of the most stable parts of our health system – although of course costs are going up for both these employers and their employees. (See – http://www.healthpolcom.com/blog/2008/09/25/more-on-employer-based-health-benefits/)