For example, a House
tri-committee draft “appears to establish two different penalty regimes within
the insurance exchanges” intended to make health plan comparison shopping
easier, American Benefits Council President Jim Klein testified before the House
Education and Labor Committee last week. “Inasmuch as employers will be
permitted to obtain coverage through the exchanges, this will subject employers
to expansive new liabilities,” Klein said.
Outside the exchange
employers could self-insure their coverage under the ERISA framework. But inside
the exchange coverage would be fully insured and subject to state law, opening
up what some predict could be a Pandora’s
box of litigation.
“The House bill changes the
liability regime for plans inside the exchange and for the public plan option,”
says ACM’s Senior Vice President of Health Care Reform Paul Dennett. “For
coverage obtained inside the exchange, state law, private rights of action, and
damages would apply. Outside of the exchange coverage would continue to be
subject to ERISA’s federal law remedy scheme, and the public plan option that
would be offered inside the exchange would be under a third body of law that
applies to Medicare.”
The concern is that the
scheme would create a crazy-quilt or regulation, most likely leading to uneven
enforcement. Denied ERISA protection, a multi-state employer could face a rash
of new compliance costs that might lead them to drop coverage.
“We think that many employers
will choose to provide coverage outside the exchange, but one of the major
concerns we have overall with the legislation is that it could become
increasingly burdensome on employers to provide health coverage in the way that
they traditionally have,” says Dennett. “Because the legislation significantly
increases the requirements on employers that provide coverage to employees, in
the future some employers may reach the conclusion that it’s both easier and
lower cost to simply have the coverage provided to their employees through the
exchange rather than attempt to do it themselves,” he adds.
Life without the ERISA shield
might also lead to a host of new lawsuits, according to industry analysts.
“Because the liability in
state courts is usually unlimited in punitive damages and compensatory damages,
litigation costs would be significantly higher than what are typical under
federal law. The overall cost to the health care system will increase because
of the increased burden of higher liability, which is really going in the wrong
direction. Health care reform should be trying to reign in costs due to
excessive liability rather than expanding it,” says Dennett.
In its testimony, ABC urged
lawmakers to steer clear of a public plan option that would destabilize the
insurance market, instead ensuring protection of the employer-based system.
“The best reform options are
those that preserve and strengthen the voluntary role employers play as the
largest source of health coverage for most Americans. By keeping employers
engaged as sponsors of health coverage, we also keep the innovation, expertise
and commitment that employers bring to the table in the collective effort to
achieve broad-based, practical health system reform,” Klein testified.
