Centers for Medicare & Medicaid Services,
Department of Health and Human Services
P.O. Box 8010
Baltimore, MD 21244-1810
The ERISA Industry Committee (ERIC) is pleased to submit these comments in response to the Centers for Medicare & Medicaid Services (CMS), the Department of Health and Human Services (HHS), and the Department of the Treasury (Treasury) guidance related to section 1332 of the Patient Protection and Affordable Care Act (ACA) and its implementing regulations, published in the Federal Register on October 24, 2018 (83 FR 53575).
ERIC’S INTEREST IN ACA SECTION 1332 WAIVERS
ERIC is the only national trade association that advocates exclusively on behalf of large employers on health, retirement, and compensation public policies on the federal, state, and local levels. ERIC supports the ability of its large employer members to tailor health, retirement, and compensation benefits to meet the unique needs of their workforce, providing benefits to millions of workers, retirees, and their families across the country.
ERIC’s member companies offer comprehensive group health benefits to their employees in compliance with the myriad federal requirements placed upon group health plans subject to the Employee Retirement Income Security Act (ERISA), and other federal laws. As such, ERIC members are keenly interested in the ongoing promulgation and enforcement of rules relating to these laws, in order to maximize compliance, minimize unnecessary costs and burdens, and ensure optimal health outcomes for the millions of beneficiaries ERIC companies insure.
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 181 million Americans—the largest source of health coverage in the country. We believe that state waiver applications need to be evaluated for compliance with the Employee Retirement Income Security Act (ERISA), which preempts state laws that “relate to” employer-sponsored health plans.
We have reviewed the guidance and offer our general comments below.
I. If state authorization legislation is no longer required to apply for a Section 1332 Waiver, evaluation of waiver applications for compliance with ERISA will be of utmost importance.
In Section 8 of the proposed guidance, it provides that, “states may use existing legislation if it provides statutory authority to enforce [ACA] provisions and/or the state plan, combined with a duly-enacted state regulation or executive order,” to meet the requirement of state authorization legislation. If states are no longer required to introduce and pass authorizing legislation to apply for a waiver, impacted stakeholders will have less notice of, and much less opportunity to weigh in on, a state’s proposal. While this will have the effect of speeding up waivers, it will also reduce stakeholders’ due process, and in the case of a waiver that proposes to unlawfully divert funds from an employee benefit plan into a state individual market, it will serve to raise health insurance costs for plan beneficiaries.
In the past, when states introduced authorizing legislation, that acted as a first alert to potentially affected parties that a waiver proposal was being initiated. This provided an opportunity to review the bill, evaluate the proposed waiver, and determine how it would impact stakeholders such as ERIC member companies. Even in cases when the authorizing legislation deferred most details of a proposed waiver up to the state’s insurance commissioner, the notice it provided was highly valuable to spur engagement and collaboration between stakeholders and legislators. This enabled organizations like ERIC to go on alert that the state was developing a waiver proposal and to better prepare for when the proposal was made available for public comment.
Now that states may no longer need to pass authorizing legislation, stakeholders will be more reliant upon CMS to thoroughly evaluate waiver proposals’ impact on all stakeholders. Evaluation for ERISA compliance – and subsequent disapproval of any waiver that is likely to be preempted by ERISA – is extremely important to the employer community, the largest source of health insurance coverage in America. We believe that the Department of Labor’s Employee Benefits Security Administration should play a role in this process.
Section 1144(a) of ERISA states that “the provisions of [ERISA] . . . shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in [29 U.S.C.] section 1003(a) and not exempt under section 1003(b).” . Over the years, the Supreme Court has further distilled the preemption provision’s “relate to” language to include any state law that makes a “‘reference to’” or has a “‘connection with’” ERISA plans. Since Section 1332 waivers became available in 2017, some applications sought to place assessments on employer-sponsored health plans in order to finance reinsurance programs for the state’s individual health insurance market. For example, in 2017, Oklahoma applied for a waiver that would have placed a per-member-per-month assessment on insurers and reinsurers to fund a reinsurance program in the state. Under the Oklahoma Waiver Application, ERISA preemption would have applied. The waiver application explicitly referenced ERISA plans that purchase stop-loss coverage, and it would have placed administrative and financial burdens on these plans in the form of paying for and complying with a new assessment (Oklahoma’s waiver application was withdrawn on September 29, 2017). Other states have considered similar schemes, attempting to divert ERISA plan funds by assessing their reinsurers, their third-party administrators (TPAs), and the like. We believe each of these schemes would have been preempted if challenged.
Placing an assessment on employer-sponsored plans adopts flawed policy from the ACA. In order to stabilize individual markets for health insurance in the early years of ACA implementation, the law included a temporary national reinsurance program that included fees assessed on self-insured plan sponsors. This 3-year program transferred funds from self-insured employer-sponsored plans into the individual market, providing no benefit to those employers or their plan beneficiaries. The result was higher costs to individuals and families enrolled in employer-sponsored plans to artificially lower costs for those on the individual market. State-level reinsurance schemes that include assessments on ERISA plans follow the same template, raising costs for those with employer-sponsored coverage to artificially prop up individual market plans.
Fortunately, self-insured plan sponsors are no longer subject to this fundamentally unfair assessment on the national level. It makes little sense now to authorize or encourage states to engage in the same flawed exercise, which has resulted in increased costs for significantly more consumers than those who benefitted from the program. We encourage states to seek alternate funding mechanisms. As an example, in 2018, New Jersey applied and was approved for a waiver that uses funds gained from an individual insurance mandate (in addition to federal pass-through funds and state general funds) rather than an assessment on employer-sponsored plans to pay for its reinsurance plan. It is important to note that New Jersey’s plan originally included an assessment that would have impacted employer-sponsored plans, but because of the notice the authorizing legislation provided to ERIC and other stakeholders, the State legislature was fully informed about the risks of preemption and the increased costs for many beneficiaries. They ultimately moved to the individual mandate fine as an alternative source of funding.
In other instances, states have proposed assessments on TPAs rather than directly on employer-sponsored plans. Many plan sponsors use TPAs to handle the administrative tasks involved in providing health insurance coverage to their employees, such as building a provider network and administering claims. 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. In 2018, Louisiana proposed an estimated assessment of $1.09 per-member per-month on TPAs (the legislation was not passed by the Legislature). 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 a state. 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. Assessments upon TPAs would be directly passed on to plan sponsors, and subsequently to plan beneficiaries, by way of increasing 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. Louisiana is another example of authorizing legislation providing notice to the stakeholder community and allowing lawmakers to be fully informed on their proposal’s effect.
Uniformity in the regulation and administration of ERISA plans was paramount to Congress when it passed ERISA. “‘Requiring ERISA administrators to master the relevant laws of 50 States and to contend with litigation would undermine the Congressional goal of “minimiz[ing] the administrative and financial burden[s]” on plan administrators – burdens ultimately borne by the beneficiaries.’” We understand the need for states to fund their reinsurance programs, but we urge CMS, HHS, and Treasury to wall off ERISA plans (and by extension the TPAs, reinsurers, and other service providers they need in order to operate) from Section 1332 Waivers and continue ERISA’s protections of these plans.
ERIC appreciates the opportunity to provide feedback at this time. We believe the comments laid out above will assist CMS, HHS, and Treasury in providing guidance to states that are applying for Section 1332 waivers. If you have questions concerning our comments, or if we can be of further assistance, please contact us at (202) 789-1400.
Annette Guarisco Fildes
President & CEO
- Gobeille v. Liberty Mut. Ins. Co., 136 U.S. 936, 944 (2016) (quoting Egelhoff v. Egelhoff, 532 U.S. 141, 149-50 (2001), quoting Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142 (1990)).
- Egelhoff v. Egelhoff, 532 U.S. 141, 147 (2001).
- Gobeille, 136 U.S. 936 at 944.