New Jersey Assembly
State House Annex
Trenton, NJ 08625
On behalf of The ERISA Industry Committee (ERIC), thank you for accepting input from interested stakeholders as you explore ways to stabilize New Jersey’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 New Jersey.
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 New Jersey, 55% of the population receives health insurance coverage through an employer-sponsored plan1. Assessments on carriers that include employer-sponsored insurance, such as the one proposed in Assembly Bill 3379 to fund a reinsurance program, penalize businesses that have been a source of quality, affordable health insurance for decades. The result will be higher costs for employers and workers, reduced stability for some employer-sponsored plans, and administrative burdens that jeopardize the national uniformity of benefits administration for plans governed by the Employee Retirement Income Security Act of 1974 (ERISA).
Under the language of this bill, an assessment would be levied on each carrier (including employer plans) and third-party administrator (TPA) to fund a reinsurance program that benefits only the individual health insurance market. 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. Both cases for preemption apply here: there would be both an administrative and financial burden on ERISA plans to pay for and comply with this assessment.
To comply with this assessment, carriers and TPAs will have to submit to the state information on their plan participants so that an assessment amount can be calculated. This will be an additional requirement added to the litany of compliance burdens that plan sponsors already face, and for multi-state employers, would give rise to a patchwork of varying and conflicting state reporting requirements. In 2016, the Supreme Court of the United States found in Gobeille v. Liberty Mutual that Vermont’s health care claims database law was preempted from placing reporting requirements on ERISA plans. The reporting requirements that will be necessary for New Jersey’s reinsurance program will not be merely incidental, but will be a crucial part of planning and running the reinsurance program, and as such will likely be preempted by ERISA.
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. In fact, using plan funds to pay for a reinsurance program that provides no benefit to plan participants would be a violation of ERISA. This is not actually reinsurance; it is a redistribution of wealth from those with employer-sponsored health benefits to those purchasing health care on the Affordable Care Act exchange in New Jersey. We understand the need for New Jersey to establish and fund its reinsurance program, but we urge you to exempt ERISA plans from the proposed assessment and continue ERISA’s protections of these plans.
Finally, placing an assessment on employer-sponsored health plans will increase costs for employees. This bill does not specify an exact assessment amount, but even a small assessment can quickly add up to a substantial amount, depending on the number of covered lives a plan sponsor has in the state. To offset that impact, many employers will need to increase the amount of an employees’ contributions toward their health insurance premiums. Even a small amount passed on to an employee could have a significant impact on some individuals, and it could cause some current plan beneficiaries to go without coverage or to take up coverage but forego needed care.
So long as the funding mechanism for a reinsurance program includes an assessment on ERISA plans, we will oppose the legislation.
Thank you for accepting our input on this legislation. If you have any questions or if we can be of further assistance, please contact me at agreathouse@ERIC.org or 202-627-1914.
Senior Associate, Health Policy