I have been meaning to come back to some issues concerning the Massachusetts Health Care Reform Act, the state’s potentially groundbreaking attempt to combine individual, employer and government roles to provide health insurance coverage for most of the Commonwealth’s uninsured, and now seems like a good time to do so, with its effective date coming up right around the corner. I have discussed before the question of whether the Act may be preempted by ERISA, and, if challenged, it would not surprise me if the employer obligations under the Act are struck as preempted. At the same time, it is important to bear in mind that the requirements imposed on employers by this particular statute are relatively benign, and this Act is nowhere near being the sort of heavy handed smackdown of particular targeted employers that was the now preempted and not particularly lamented law passed by the Maryland legislature that targeted Wal-Mart.
At the same time, the underlying issue with regard to preemption of state regulation of employer provided health insurance has to do with whether we should insist upon maintaining one consistent overlay of federal law and regulation on the subject, as is the case if state acts of this nature are consistently preempted, or whether we should instead, as the old saying goes, allow “a thousand flowers to bloom,” in the guise of allowing multiple different state experiments to address the problem of the uninsured. If the latter is to be the case, then that is where you really begin to run into problems of the type that underlie the preemption debate. It is one thing to say that the Massachusetts Act imposes only the most benign of record keeping and costs on nationwide employers, so perhaps preemption should not apply to it. But the issue becomes something entirely different when you instead consider having 30 or 40 or 50 states come up with their own experiments that likewise impose only minimal obligations on employers, each one so relatively benign, standing alone, that it is hard to justify declaring it preempted; when you combine all of those different regulatory regimes, however, then you start to get into the kind of conflicting and burdensome web of state actions that can become a real and legitimate burden to a nationwide employer. It is that ultimate result, that web of inconsistent state by state mandates, that the preemption requirement under ERISA is intended to guard against.
And a couple of other points on this question beg to be mentioned, although I don’t feel like I have seen them anywhere with regard to the preemption question. First, if you take away consistent overarching federal control of the question and allow state by state regulation of employer provided health insurance, how quick will we start to see a “race to the bottom” mentality, with at least some states looking to impose the least health care requirements possible on nationwide employers so as to attract businesses to relocate or at least site facilities there? We have seen it in the past with other subject areas that states pitch as competitive advantages over other states; I see no reason why health insurance should be one that is immune from such economic pressures and realities. There are certainly aspects of the Massachusetts Health Care Reform Act that I can think of right off the top of my head that a competing state could leave out, while incorporating in their own statutes all the other aspects of the Massachusetts Act, that might well tilt the balance – in at least a close case – for an employer deciding where to site its business.
Second, the idea of preferring state regulation of a health insurance marketplace that is predominately an employer provided product is premised, at heart, on the assumption that the state approaches will be an improvement over what could be done under the sort of federalized employer provided system we currently have. How confident really are we about this? It is probably fair to say we really won’t know until at least some state – here Massachusetts – is allowed to impose its own regime and we wait and see how well it works out.
And when you consider all of these issues, this is when you start to get an inkling of why solving the uninsured problem on a federal level, rather than on a state by state level, with a consistent overall approach structured on the already existing infrastructure of the employer provided, ERISA governed model, may actually be the better approach.