The States Are Fed Up With Diddling On Health CareSusan B. Garland
For many governors, looking to Washington for help in overhauling the health care system is like acting in a new version of Waiting for Godot. Frustrated by gridlock in the capital, several states are pushing their own reforms. The initiatives range from new taxes to help cover the uninsured to requirements that companies provide benefits to workers (table).
But the state reform drive has hit a brick wall--a federal law called the Employee Retirement Income Security Act of 1974, or ERISA. State officials contend that they can't move forward unless they can regulate all benefit plans, including those of companies that pay employee health bills from their own funds rather than buying private insurance. But ERISA exempts these self-insured plans from state insurance laws. "The states are being told to be laboratories of democracy, but we're not being given the equipment," says Robert Rogan, deputy director of Florida's Washington office.
LOBBYING BLITZ. Now, the states want ERISA waivers from Congress. By mid-August, lawmakers from both parties plan to introduce bills to give states some control over self-insured plans, which account for 60% of group insurance claims.
But passage this year is far from certain. The bills have unleashed a lobbying blitz from employer groups worried that corporations operating in many states would be subject to an expensive patchwork of benefits requirements. It's also unfair, they contend, for states to tax self-insured plans to pay for the uninsured, because private health plans already are picking up this tab through higher rates from doctors and hospitals.
The White House shares business' concerns. Despite an oft-claimed devotion to states' rights, it isn't likely to side with the states this time. "We're getting into an area that makes us extremely uneasy," says White House aide Gail R. Wilensky. President Bush recently dealt a setback to state experiments in health care by rejecting Oregon's request to reform its medicaid system.
Leading the states' charge are Florida, Vermont, and Minnesota, which enacted reforms this year. Under Florida's law, the state in 1995 could require all employers to cover workers. The state would need an ERISA waiver to force companies to offer a specified package of minimum benefits. Minnesota also is seeking a waiver to pay for its new HealthRight plan, which would be financed in part by a 2% tax on the gross revenues of doctors and hospitals. But Minnesota officials worry that the law is open to an ERISA challenge because hospitals could pass on their liability to self-insured plans.
State reformers argue that ERISA prevents them from requiring something as simple as a uniform claims form. States that want far-reaching changes, such as reinsurance pools for catastrophic cases, cannot tax self-insured plans to raise revenues. Without waivers, says Senator Patrick J. Leahy (D-Vt.), "The states will cobble something together, and it will not be anywhere near as good."
A recent court ruling also jeopardizes some plans already in operation. In May, a federal court struck down New Jersey's surcharge on all hospital bills to pay for treating the uninsured. The court agreed with a union-run health plan that the law indirectly regulated self-insured plans, which ERISA prohibits. If the ruling is upheld, it could affect plans in Maryland and New York.
EMOTIONAL ISSUE. Another pending case, though, could prove troublesome to employers. The Supreme Court is deciding whether to review a U.S. Appeals Court decision last November that Houston-based H&H Music Co. didn't violate ERISA after it switched to self-insurance and reduced lifetime benefits for AIDS from $1 million to $5,000. The case is so emotionally charged that regardless of the outcome, it's likely to draw congressional attention to the freedom from state regulation self-insured plans now enjoy.
Ironically, the threat of state interference could galvanize business to back national health reform. Some of the proposals being bandied about in Washington may seem like castor oil for Corporate America. But business lobbyists just might decide they taste better than what the states are prescribing.
NOT WAITING FOR WASHINGTON CALIFORNIA Voters will consider a November ballot proposal that would require employers to cover full-time workers FLORIDA New law sets a Dec. 31, 1994, goal for employers to provide universal access to minimum benefits HAWAII State already requires employers to cover workers. Now it wants to expand minimum benefits MINNESOTA HealthRight plan would cover low- and moderate-income families, to be financed by tax on doctors and hospitals OREGON Wants to require employers to provide coverage or pay a tax into a state insurance pool