Let ERISA prevail in employer self-funded health plans, benefits group rep tells House panel

Congress should help employers fight state efforts to weaken the Employee Retirement Income Security Act provisions that help keep the rules for employers’ self-funded health plans uniform, a witness from the American Benefits Council told House members earlier this week.

The 1974 law left the business of insurance to the states but preempted state efforts to govern employers’ own self-funded benefit plans, in an effort to hold down multistate employers’ benefits administration costs and regulatory complexity.

“ERISA preemption is under assault as states seek to impose their own requirements on self-funded group health plans,” Ilyse Schuman, a vice president at the council, testified Tuesday at a hearing on ERISA’s 50th birthday anniversary that was organized by the House Education and the Workforce Committee.

Related: Self-funded employer plan group asks Texas to respect ERISA 

“Without ERISA uniformity, these plans would be extraordinarily difficult to administer, forcing employers to offer different benefits to their employees based on their location,” Schuman added.

Traditionally, even in jurisdictions like California, the federal courts have used ERISA to shield self-funded employer health plans against states’ efforts to regulate matters such as pharmacy benefits and disability insurance.

The U.S. Supreme Court has repeatedly ruled in favor of employer plans and against states in cases involving ERISA.

But the Supreme Court ruled in favor of efforts by Arkansas to regulate pharmacy benefit managers in 2020.

Schuman also spoke up in defense of the current group health tax rules, which let employers deduct health insurance premiums from taxable income. The U.S. Treasury has  estimated the exclusion costs the federal government about $345 billion in tax revenue per year.

Employers pay more than $5 in benefits for every dollar of tax savings they record, Schuman said.