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Massachusetts plan not preempted by ERISA
April 06, 2006 by Ross Runkel at LawMemo

I take issue with Paul Secunda's prediction that part of Massachusetts' new health care statute will be preempted by ERISA. Workplace Prof Blog - Massachusetts Universal Health Care and ERISA Preemption.

Paul's focus is on the "pay-or-play" provision. As I understand the new law, employers will be required to either provide health care for their employees, or contribute to its cost, or pay a fee of $295 per year per employee to the state. Paul's point is this:

"This is because such a law that requires employers to play or pay is related to an employee benefit plan under Section 514(a) of ERISA in that it will impact how employers will administrate and operate their health plans and will potentially lead to the uniformity interests served by ERISA to be undermined. Thereafter, the law is not saved under the Savings Clause because the law is not specifically directed against entitles engaged in insurance as that language has been defined by the Supreme Court in Miller. Consequently, the Massachusetts law will probably not be saved from ERISA preemption."

I think not. ERISA preemption applies when a state law "relates to" an ERISA plan. The US Supreme Court has made it quite clear that "relates to" does not include every possible relationship you can think of. Indeed, it could be that the Massachusetts plan has nothing at all to do with ERISA plans. This part of the statute is pointed at employers, not at ERISA plans or insurers. It may turn out that some employers are plans or are insurers, but that will be merely an accidental (and incidental) byproduct.

Paul says the pay-or-play rule will relate to an employee benefit plan because "it will impact how employers will administrate and operate their health plans." I think the opposite is true. Massachusetts is not going to tell any plan how it should be administered or operated. (It may require that "players" provide specified benefits, but that's not the same thing.) As I understand it, the plans can continue operating, and continue being administered, as they have in the past.

I agree with Paul that the statute will not be saved under the Saving Clause because it's not directed at insurance companies. However, no "saving" is necessary because it does not "relate to" in the first place.

I suppose someone will argue that employers are being coerced into having an ERISA plan. That won't fly. The facts just aren't there. The $295 per year is not a penalty. It's way less than what anybody would pay for insurance. It's the state's estimate of its own costs to treat uninsured individuals (such as those who use emergency rooms for doctor visits). There may be some good questions about the wisdom of this, but it won't result in preemption.

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