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ERISA Preemption of Chapter 58: The Future of the “Pay or Play” Model of Health Care Legislation
Published online by Cambridge University Press: 06 January 2021
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The problem of the uninsured in this country continues to grow. Over the past five years, proportion of uninsured Americans has risen from 14.6% to 15.9% of the population. The statistics show disparities in insurance coverage among the various races, between native-born and non native-born citizens, and between other groups. The Center on Budget and Policy Priorities partially links this change to the continuous decline in employer sponsored health insurance plans. This is a problem that needs to be addressed and addressed quickly.
Further exacerbating this problem is the cost of the uninsured and the government-insured to the taxpayers of the country. It is estimated that Medicare and Medicaid, the two largest government financed health care programs, will cost $301.5 and $176 billion respectively. These costs are projected to increase at a rate above GDP.
Since states are partially responsible for Medicaid costs and have a responsibility for the health of their citizenry, many states have taken it upon themselves to try to correct these problems.
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References
1 Ctr. on Budget & Policy Priorities, The Number of Uninsured Americans Is at an All- Time High 1 (2006), available at http://www.cbpp.org/8-29-06health.pdf.
2 Id. at 2.
3 Ctr. on Budget & Policy Priorities, supra note 1, at 2.
4 Id. at 4 (Over the past five years, the number of employers offering health insurance plans fell from 62.6% to 59.5%.).
5 Congress of the United States Congressional Budget Office, A CBO Study: The Long- Tem Budget Outlook 27-28 (2005), available at http://cbo.gov/ftpdocs/69xx/doc6982/12-15- LongTermOutlook.pdf.
6 Id. at 31.
7 National Conference of State Legislatures, 2006 Bills on Universal Health Care Coverage: Legislatures Fill in the Gaps (2006).
8 Id.
9 Id.
10 An Act Providing Access to Affordable, Quality, Accountable Health Care, Ch. 58 of the Acts of 2006, available at http://www.mass.gov/legis/laws/seslaw06/sl060058.htm.
11 Id. at 65.
12 Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1144(a) (2006).
13 Patricia Butler, National Academy for State Health Policy, Revisiting Pay or Play: How States Could Expand Employer-Based Coverage Within ERISA Constraints (2000), available at http://www.nashp.org/Files/ERISA_pay_or_play.pdf.
14 Retail Indus. Leaders Ass’n v. Fielder, 435 F. Supp. 2d 481 (D. Md. 2006).
15 29 U.S.C. § 1144(a).
16 Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504 (1981).
17 Shaw v. Delta Airlines, 463 U.S. 85 (1983).
18 FMC Corp. v. Holliday, 498 U.S. 52 (1990).
19 Mackey v. Lanier Collection Agency, 486 U.S. 825 (1988).
20 New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995).
21 Alessi, 451 U.S. 504 (1981).
22 Id. at 524. .
23 Id. (“ERISA permits integration of pension funds with other public income maintenance moneys for the purpose of calculating benefits, and the IRS interpretation approves integration with the exact funds addressed by the New Jersey workers' compensation law. New Jersey's effort to ban pension benefit offsets based on workers' compensation applies directly to this calculation technique.”).
24 Id. at 524-25. .
25 Id. at 525..
26 Shaw v. Delta Airlines, 463 U.S. 85, 88 (1983).
27 Id.
28 Id. at 96.
29 Id. at 97.
30 Id.
31 Id. at 98.
32 Mackey v. Lanier Collection Agency, 486 U.S. 825 (1988).
33 Id. at 828 n.2.
34 Id. at 829.
35 Id.
36 Id. at 838.
37 Id. at 833-37.
38 FMC Corp. v. Holliday, 498 U.S. 52 (1990).
39 Id. at 54.
40 Id. at 55.
41 Id. at 58.
42 Id.
43 Id.
44 Id. at 58-61.
45 Id. at 60.
46 New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995).
47 Id. at 645-52.
48 Id. at 652.
49 Id. at 654.
50 Id. at 656 (“In Shaw, we explained that ‘[a] law ‘relates to’ an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan.’ The latter alternative, at least, can be ruled out.”).
51 Id.
52 Id.
53 Id. at 656-57. Further, “Senator Williams made the same point, that ‘with the narrow exceptions specified in the bill, the substantive and enforcement provisions . . . are intended to preempt the field for Federal regulations, thus eliminating the threat of conflicting or inconsistent State and local regulation of employee benefit plans.’ The basic thrust of the pre-emption clause, then, was to avoid a multiplicity of regulation in order to permit the nationally uniform administration of employee benefit plans.” Id.
54 Id. at 658.
55 Id. at 659.
56 Id. at 659-60.
57 Id. at 660.
58 Id. at 662.
59 Id.
60 Id.
61 Id. at 664.
62 Id. at 664-67. The National Health Planning and Resources Development Act of 1974 calls upon states to set up a regulatory scheme similar to the New York statute challenged here.
63 Id. at 668.
64 Id.
65 Id. at 656.
66 Kentucky Ass’n of Health Plans v. Miller, 538 U.S. 329 (2003).
67 Ky. Rev. Stat. Ann. §§ 304.17A-171(2), 304.17A-270 (2006).
68 29 U.S.C. § 1144(b)(2)(A) (2006).
69 Kentucky Ass’n of Health Plans, Inc., 538 U.S. at 332-34.
70 Id. at 334.
71 Id.
72 Id. at 342.
73 Id.
74 Cal. Health & Safety Code § 1340 et seq. (2000).
75 Hewlett-Packard Co. v. Barnes, 571 F.2d 502 (9th Cir. 1978).
76 Hewlett-Packard Co. v. Barnes, 425 F. Supp. 1294, 1297 (N.D. Cal. 1977).
77 Id.
78 Id.
79 Id.
80 Hewlett-Packard Co. v. Barnes, 571 F.2d 502 (9th Cir. 1978).
81 Id. at 504.
82 Id.
83 Hawaii Prepaid Health Care Act, Haw. Rev. Stat. ch. 393 (2004).
84 Standard Oil Co. of Cal. v. Agsalud, 633 F.2d 760 (9th Cir. 1980).
85 Id.
86 Id. at 763.
87 Id.
88 Id. at 766.
89 29 U.S.C. § 1144 (2006) (“(5)(A) Except as provided in subparagraph (B), subsection (a) of this section shall not apply to the Hawaii Prepaid Health Care Act (Haw. Rev. Stat. §§ 393- 1 through 393-51).”).
90 O'Reilly, Rebecca A.D., Is ERISA Ready For A New Generation of State Health Care Reform? Preemption, Innovation, and Expanding Access to Health Care Coverage, 8 U. Pa. J. Lab. & Emp. L. 387, 394 (2006)Google Scholar.
91 Id.
92 Id.
93 Id.
94 An Act to Make Health Security Available to all Citizens of the Commonwealth and to Improve Hospital Financing, 1988 Mass. Acts 85.
95 Id. at 142.
96 Id.
97 Id.
98 O'Reilly, supra note 90, at 407-08.
99 An Act Providing For Improved Access to Health Care, 1996 Mass. Acts 203. Although this act does not expressly repeal the Massachusetts Health Security Act, supra note 94, the Act did substantially rewrite it to eliminate the ‘pay or play’ provision.
100 Id.
101 2003 Cal. Legis. Serv. 4088 (West).
102 Id. at 4088-89.
103 Id.
104 Id.
105 California HealthCare Foundation, HealthVote.org, available at http://www.healthvote.org/index.php/site/prop_home/C29/. 106 Retail Indus. Leaders Ass’n v. Fielder, 435 F. Supp. 2d 481 (D. Md. 2006).
107 See Butler, supra note 13, at 1; O'Reilly, supra note 90, at 394.
108 See Butler, supra note 13, at 1.
109 Id. at 6.
110 Id. at 7.
111 Id.
112 Id.
113 Id. at 7-8.
114 Id. at 6.
115 O'Reilly, supra note 90, at 408-09.
116 Id. at 401. O’Reilly organizes the information into a succinct flowchart.
117 Id.
118 Id.
119 Id.
120 Id.
121 Id.
122 Id.
123 Id.
124 Id.; Butler, supra note 13, at 6-8.
125 Butler, supra note 13, at 6-8; O'Reilly, supra note 90, at 401.
126 New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 668 (1995).
127 National Conference of State Legislatures, 2006 Bills on Universal Health Care Coverage Legislatures Fill in the Gaps (2006), available at http://www.ncsl.org/programs/health/universalhealth2006.htm; State Coverage Initiative, available at http://www.statecoverage.net/programsinprogress/index.htm. This website lists and details the various states pending legislation regarding health care coverage. It charts where in the legislative process it currently is or where in the process it has died.
128 Id.
129 See generally Retail Indus. Leaders Ass’n v. Fielder, 435 F. Supp. 2d 481 (D. Md. 2006).
130 Md. Code Ann., Lab. & Empl. § 8.5-101 et seq. (2006).
131 Id. § 8.5-102.
132 Id. § 8.5-104(b).
133 Id. § 8.5-101(d)(1).
134 Fielder, 435 F. Supp. 2d at 481-83.
135 29 U.S.C. § 1001 et. seq. (2006).
136 U.S. Const. amend. XIV.
137 Retail Indus. Leaders Ass’n v. Fielder, 435 F. Supp. 2d at 485-90.
138 28 U.S.C. § 1341 (“The district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.”).
139 Fielder, 435 F. Supp. 2d at 490-93.
140 A challenge to a district court’s jurisdiction under the TIA typically raises two questions: “First, do the state courts provide a ‘plain, speedy and efficient’ remedy? Second, is the state or local law a ‘tax,’ or is it a regulatory fee that falls outside the restrictions of the [TIA]?” Collins Holding Corp. v. Jasper County, 123 F.3d 797, 799 (4th Cir. 1997); Fielder, 435 F. Supp. 2d at 490.
141 Fielder, 435 F. Supp. 2d at 490.
142 Id.
143 Id.
144 Id. at 491.
145 Id. The court states that this and similar analyses have been espoused in the First, Ninth, and Fourth Circuits.
146 Id.
147 Id. at 491-92.
148 Id. at 492-93.
149 Id. at 493-98.
150 Id. at 494.
151 Id. (citing Shaw v. Delta Airlines, Inc., 463 U.S. 85, 96-97 (1983)).
152 Id. (citing Egelhoff v. Egelhoff, 532 U.S. 141, 147 (2001)).
153 Id. (citing New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 657 (1995)).
154 Id. at 494-95.
155 Id. at 494 (citing Egelhoff, 532 U.S. at 147).
156 Id. at 495. The court found that the act is not unconstitutional because it applies solely to Wal-mart. In fact, the court finds that there is a rational basis for Maryland to pass a law that affects only Wal-mart.
157 Id. at 496 (“The Act is not merely tangentially related to ERISA plans but is focused upon them. Indeed, as the legislative history makes clear, the Fair Share Act is targeted directly at the ERISA plan of a particular employer. Moreover, the economic effect of the Fair Share Act upon Wal-Mart’s ERISA plan could not be more direct: it would require Wal-Mart to increase its health care benefits for Maryland employees and to administer its plan in such a fashion as to ensure that the statutory spending required by the Act is met. Thus, the Act violates ERISA’s fundamental purpose of permitting multi-state employers to maintain nationwide health and welfare plans, providing uniform nationwide benefits and permitting uniform national administration.”).
158 Id. at 497-98.
159 Id. at 497.
160 Random House Dictionary of the English Language 909 (2d ed., Random House, Inc. 1987).
161 Retail Indus. Leaders Ass’n v. Fielder, 435 F. Supp. 2d 481, 497-98 (D. Md. 2006) (“Not only is this proposition self-evident,” but the court also finds support for its conclusion that “any employer would give additional benefits to its own employees rather than paying money to the State” from the “Amicus Curiae Brief of the Maryland Citizens Health Care Initiative Education Fund,” “a statement made by Senator Miller, one of the Act’s sponsors,” and testimony before the Senate Finance Committee of a representative of Giant Foods, which lobbied in favor of the bill.”).
162 Id. at 498-501.
163 See Retail Indus. Leader Ass‘n v. Fielder, 475 F.3d 180 (4th Cir. 2007).
164 Ch. 58 of the Acts of 2006, § 47 (2006).
165 Id.
166 Id.
167 Id.
168 Formula Set For ‘Fair Share’ Assessment: No Decision on ‘Free Rider’ Surcharge or Disclosure Forms, available at http://www.mass.gov/?pageID=pressreleases&agId=Eeohhs2 &prModName=eohhspressrelease&prFile=pr_060908_fair_share.xml.
169 Id.
170 Ch. 58 of the Acts of 2006, § 47.
171 Id. § 8 (“[T]he trust fund shall be expended without further appropriation for programs designed to increase health coverage, including a program of subsidized health insurance provided to low-income residents of the commonwealth under chapter 118H and rate increases to certain Medicaid providers and supplemental payments to certain publicly operated or public-service hospital entities, as determined by law. Money from the trust fund may be transferred to the Uncompensated Care Trust Fund.”).
172 Ch. 58 of the Acts of 2006 § 44.
173 Formula Set For ‘Fair Share’ Assessment, supra note 168.
174 Ch. 58 of the Acts of 2006.
175 Mitt Romney, April 12, 2006: To the Honorable Senate and House of Representatives, available at http://www.ncsl.org/print/health/vetoletter.pdf (“I am vetoing this section because it is not necessary to implement or finance health care reform.”).
176 Id.
177 See generally Ch. 58 of the Acts of 2006; Md. Code Ann., Lab. & Empl. § 8.5-101 et seq. (2006).
178 See generally Id.
179 See generally Id.
180 See generally Id.
181 Shaw v. Delta Airlines, 463 U.S. 85, 97 (1983).
182 Retail Indus. Leaders Ass’n v. Fielder, 435 F. Supp. 2d 481, 494 (D. Md. 2006).
183 Id.
184 Id. at 497.
185 Id.
186 New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 668 (1995).
187 Fielder, 435 F. Supp. 2d at 497-98 (“Not only is this proposition self-evident,” but the court also finds support for its conclusion that “any employer would give additional benefits to its own employees rather than paying money to the State” from the “Amicus Curiae Brief of the Maryland Citizens Health Care Initiative Education Fund,” “a statement made by Senator Miller, one of the Act’s sponsors,” and testimony before the Senate Finance Committee of a representative of Giant Foods, which lobbied in favor of the bill.).
188 Md. Code Ann., Lab. & Empl. § 8.5-104(b) (2006).
189 Ch. 58 of the Acts of 2006, § 47.
190 Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits: 2005 Annual Survey 16 (2005), available at http://www.kff.org/insurance/7315/sections/upload/7315Section1.pdf.
191 Formula Set For ‘Fair Share’ Assessment, supra note 168.
192 Id.
193 This number comes from taking one third of the average cost of a single person’s health insurance in the Northeast.
194 New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 668 (1995).
195 Retail Indus. Leaders Ass’n v. Fielder, 435 F. Supp. 2d 481, 498 (D. Md. 2006).
196 Travelers, 514 U.S. at 662.
197 Fielder, 435 F. Supp. 2d at 494-95.
198 Supra section IV.
199 Butler, supra note 13, at 6-8; O'Reilly, supra note 90, at 401.
200 See Fielder, 435 F. Supp. 2d at 481-501.