<nobr>May 3, 2010</nobr>

ERIC Urges Withdrawal of DoL Proposed Regulation Threatening ERISA Preemption

ERIC on April 29 urged the Office of Management and Budget (OMB) to withdraw a draft proposed regulation that would permit states to set up conflicting health plans that threaten to interfere with the nationally uniform health arrangements of multistate employers that ERIC represents. OMB must approve any regulations by government agencies.

The Department of Labor earlier this year, and prior to the enactment of the Patient Protection and Affordable Care Act (PPACA), submitted to OMB for a 90-day review, a regulatory proposal to change the definition of "employee welfare benefit plan" and "welfare plan" to exempt from ERISA preemption State and local government health plans that included non-governmental employees.

ERISA preemption, considered one the most important issue for major employers in the health reform debate, has been under attack since ERISA was enacted in 1974.

The proposed regulation, by redefining the term "welfare benefit plan" under ERISA, would permit State government health plans, which are now limited to State and local government employees and are therefore not preempted by ERISA, to cover non-governmental employees.

ERIC's letter makes the following arguments:

• The regulation was made unnecessary by the enactment of PPACA and would open up employer-provided health care coverage to the pre-1974 chaotic patchwork of laws and regulations among 50 states and thousands of local governments.



• Since the proposed regulation was drafted before PPACA was enacted, the regulation needs to be reconsidered in light of the new health care reform act. To do otherwise would lead to a "confused and incoherent national health policy."



• Employers may not distinguish the PPACA exchanges from the plans contemplated by the regulation and therefore may view both as threatening the efficient administration of employer-sponsored group health plans.



• ERISA's preemption provision has been the source of many highly contentious disputes, and if the draft regulation is adopted as a final regulation, the regulation will undoubtedly be challenged in the courts. As a result, the proposed regulation will needlessly divert the attention of the Administration, State and local governments, the nation's largest employers, and the courts from the numerous challenges and opportunities presented by the implementation of PPACA.



• The Department of Labor's position in its own amicus brief in the Court of Appeals in Golden Gate Restaurant Association case is "correct and reflects the intent of ERISA's framers and over three decades of consistent policy: that employer-sponsored plans are best encouraged by a uniform nationwide regulatory regime and that ERISA preempts potentially conflicting State and local rules."

Meanwhile, Employee Benefits Security Administration Assistant Secretary Phyllis Borzi recently participated in a live web chat where she was asked about the draft proposed regulation. In response to separate questions from ERIC Counsel John Vine of Covington & Burling and ERIC president Mark Ugoretz about whether EBSA -- in light of enactment of PPACA -- would still issue the proposal, Borzi simply said that EBSA will review all of its health care initiatives relating to PPACA throughout the next several months and "make decisions accordingly."

If you have any questions or comments on this issue, contact either Mark Ugoretz (mugoretz@eric.org) or Gretchen Young (gyoung@eric.org).

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ERIC Letter to OMB

Talking Points on Draft Regulation

Coalition Letter to OMB

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