ERIC Submits Comments on Ways to Stabilize Louisiana’s Individual Health Insurance Market

May 7, 2018

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Louisiana Department of Insurance
Attn: State Innovation Waiver
P.O. Box 94214
Baton Rouge, LA  70804-9214

On behalf of The ERISA Industry Committee (ERIC), thank you for accepting input from interested stakeholders as you explore ways to stabilize Louisiana’s individual health insurance market through a reinsurance program. ERIC is the only national association that advocates exclusively for large employers on health, retirement, and compensation public policies at the federal, state, and local levels. We speak in one voice for our members on their benefit and compensation interests, including many members with employees and retirees in Louisiana.

The business community recognizes the importance of a stable individual insurance market and supports state efforts to increase flexibility, lower costs, and ensure that state residents can obtain affordable health insurance. However, employers already provide stable health care benefits to more than 178 million Americans—the largest source of health coverage in the country. In Louisiana, 42% of the population, almost two million people, receives health insurance coverage through an employer-sponsored plan.[1] Assessments on employer-sponsored insurance, either directly or indirectly through a third-party administrator (“TPA”), such as the one proposed in in Louisiana’s State Innovation Waiver Application, penalize businesses that have been a source of quality, affordable health insurance for decades. The result will be higher costs for employers and workers and reduced stability for some employer-sponsored plans.

It is unclear whether ERISA plans are included in the Waiver Application.

Under the authorization legislation for the proposed reinsurance program, House Bill 472 (“H.B. 472”), a newly-created Louisiana Health Reinsurance Association (“Association”) would include in its membership “Every group self-insurer as defined in R.S. 22:452.” In R.S. 22:452, “self-insurer” does not include “plans exempt from the state insurance laws under the provisions of the Employee Retirement Income Security Act of 1974” (“ERISA”). Based on this language, it is clear that an ERISA plan would be exempt from membership in the Association, but the language of the Comprehensive Description: State Innovation Waiver Application (“Waiver Application” [2] is unclear. On page 7, it states that “Louisiana’s 1332 waiver will include the proposal to finance the state-based reinsurance financing with the levying of a fee assessment on all covered lives in the market, both fully insured and self-insured lives.”

We request that the Waiver Application state in clear terms that ERISA plans are, in fact, exempt from membership in the Association, and therefore, from the assessment.

Targeting TPAs will impact ERISA plans.

ERISA preempts state laws that “relate to” employer-sponsored health plans. This preemption is applicable when a state law directly refers to ERISA plans or when it would impact ERISA plans either administratively or financially. In this case, under H.B. 472, ERISA plans are exempt from Association membership; however, targeting TPAs will indirectly have the same effect that ERISA was intended to prevent. Congress created ERISA to keep employee benefit plans strong and to ensure that they are administered for the exclusive purpose of providing benefits to participants and their beneficiaries. Those covered by employer-sponsored insurance would receive no benefit from the proposed reinsurance program and would likely see their premiums increase as a result of an assessment on TPAs.

ERISA also guarantees national uniformity of benefit plans, no matter where a plan beneficiary lives, works, or receives medical care. It is clear that ERISA would not permit 50 different states to design reporting and assessment regimes that would apply to ERISA plans, whether through their TPAs or directly. Many plan sponsors use TPAs to handle the administrative tasks involved in providing health insurance to their employees. Efforts to mandate benefits, levy assessments, or impose new plan requirements upon ERISA plans through their TPAs have repeatedly been found to violate ERISA, thus jeopardizing the entire underlying programs. The state estimates the assessment will be $1.09 per member per month, but there is no way to guarantee that the amount will not be significantly more. Even a small per-member per-month assessment can quickly add up to a substantial dollar amount, depending on the number of covered lives a particular TPA is administering in Louisiana. Worse, if plans were required to comply with 50 different assessment regimes in 50 different states, the administrative burden could be even more dangerous than the burden inherent in the assessments themselves. In order to offset that impact, many TPAs will raise the amount charged to the employer, and in turn, employers will need to increase the amount of employees’ contribution toward their health insurance premiums. A small amount passed on to an employee through increased premiums could have a significant impact on some individuals, and it could cause some current plan beneficiaries to forego coverage or to take up coverage but forego needed care.

An assessment on TPAs that in any way seeks to fund a reinsurance program by including ERISA plan beneficiaries in the funding mechanism will cause employer plans and their participants to pay more for no benefit – a clear violation of ERISA.

This is not actually reinsurance; it would be a redistribution of wealth from those with employer-sponsored insurance to those purchasing health care on the Affordable Care Act exchange in Louisiana. Therefore, regarding the assessment on TPAs, we ask that you explicitly exempt those lives covered by an ERISA plan from the per-member per-month headcount when finalizing the Waiver Application language.

Thank you for accepting our input on this Waiver Application. If you have any questions or if we can be of further assistance, please contact me at agreathouse@eric.org or 202-627-1914.

Sincerely,

Adam Greathouse
Senior Associate, Health Policy

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[1] Health Insurance Coverage of the Total Population, The Henry J. Kaiser Family Foundation, 2016, http://ow.ly/7wY830jRZEV

[2] Note:  The Comprehensive Description: State Innovation Waiver Application was all that was available at the time of the writing of this comment letter.