ERIC Expresses Concern Over Proposals that Could Undermine Employer-Based Health System

June 8, 2009

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Washington, D.C. -- In a letter sent today to Members of the five congressional committees with jurisdiction over health care reform, The ERISA Industry Committee (ERIC), a Washington, D.C.-based trade association representing America's major employers, expressed concern over proposals that could weaken the current employment-based health system.

ERIC specifically refers to five different proposals that have the potential to undermine the current employment-based health system: taxation of health care benefits, the creation of a public plan, employer mandates, employee opt-outs, and national uniformity/ERISA (Employee Retirement Income Security Act) preemption. The letter was sent to: Senate Committee on Finance; Senate Committee on Health, Education, Labor, and Pensions; House Ways & Means Committee; House Energy and Commerce Committee; and House Education and Labor Committee.

Noting that ERIC supports reforms to the nation's health care system that will increase its efficiency, reduce costs, and extend health care coverage to the uninsured, and in 2007 proposed a comprehensive reform plan, ERIC President Mark Ugoretz wrote that, "ERIC is concerned that some reform proposals could compromise the successful employer based system that currently provides health care to 170 million Americans who strongly support its continued viability."

Ugoretz said that the "employer-based system has been the source of more innovation and efficiency and enjoys greater support among its beneficiaries than any other delivery system. The mechanisms and principles that make it successful should be extended to those businesses, workers, and individuals who currently cannot take full advantage of it."

Concerning the taxation of benefits, Ugoretz wrote that, "ERIC has serious concerns with limiting the ability of an employee to exclude from income the value of employer-provided health insurance. If this exclusion were curtailed, employment-based insurance would suffer. Young, healthy employees would exit their employers plans in search of cheaper coverage rather than pay taxes on a more expensive plan." The resulting adverse selection would leave employer plans with an older and sicker population, especially as workers who left the plan returned as they got older or suffered from chronic illness.

Ugoretz further writes that, "[o]ur concerns with employer mandates center on costs, flexibility, and appropriate design. Employer mandates by definition will restrict the ability of employers to devise and operate health care plans that best meet the needs of employees. The imposition, for instance, of a minimum plan actuarial value would in many cases either increase costs for employers or force the realignment of health care dollars to pay for government-required benefits to the detriment of compensation and other benefits also highly valued by employees."

Ugoretz adds that ERIC is "especially concerned that employer 'pay-or-play' mandates would permit employees to opt out of their employer's plan and opt in to a public plan or another plan offered through an exchange mechanism. . . . Allowing employees to opt out of employer-provided coverage will likely result in adverse selection. Young, healthy employees who are looking for cheaper alternatives to employer-based coverage will be the first to opt out if the public plan rates are held artificially lower and thus have an unfair competitive advantage with employer plans."

ERIC also warned against curtailing the national uniformity on which employer plans depend under ERISA preemption. Without preemption "the vast majority of employer health plans simply could not exist because of the administrative and other costs necessary to comply with multiple sets of rules and the consequences of having to offer different benefits to employees performing the same work but not living in the same location," Ugoretz says. Workers, particularly those who were transferred numerous times in their careers would also suffer from changes in health care coverage from state to state.

Finally, ERIC notes that it submitted the comments "in the spirit of trying to play a constructive role in health care reform," and points to ERIC's 2007 proposed "New Benefit Platform for Life Security" as an option for extending the advantages of its members' success to all employers, the self employed, and individuals, including those who have not been able to afford coverage.

A link to ERIC's letter appears below.

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For more information:
Ted Godbout
Manager, Communications
The ERISA Industry Committee
1400 L Street, NW, Suite 350
Washington, DC 20005
Phone: (202) 789-1400
Fax: (202) 789-1120
tgodbout@eric.org
www.eric.org

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The ERISA Industry Committee (ERIC) is a non-profit association committed to representing the advancement of the employee retirement, health, and compensation plans of America's largest employers. ERIC's members provide benchmark retirement, health care coverage, compensation, and other economic security benefits directly to tens of millions of active and retired workers and their families. ERIC has a strong interest in proposals affecting its members' ability to deliver those benefits, their cost and their effectiveness, as well as the role of those benefits in the American economy.