Tuesday, December 30, 2008

Fair Share and ERISA Preemption

Rick Hills started an interesting discussion at PrawfsBlawg on ERISA preemption of state and local "fair share" laws.  In general, these laws require employers to provide medical coverage for their employees, or to pay a tax (that goes into, e.g., a state health insurance fund).  In effect, employers gain a tax credit for providing health insurance to their employees. 

Employers have claimed that ERISA preempts these efforts, because, in the language of ERISA preemption, they "relate to" employers' ERISA plans.  Circuit have split on this argument: The Fourth Circuit ruled that ERISA preempts, while the Ninth Circuit ruled that it doesn't.

Hills's post and comments go beyond the narrow constitutional preemption arguments, though, and touch upon broader federalism and policy concerns.  Hills:

But here is where I am a die-hard lover of federalism: As dumb as employer mandates are, centralizing debate over health care through a broad construction of ERISA preemption is even dumber. Such centralization is an outrage against the democratic process both locally (by suppressing the efforts of those zany San Franciscans) and nationally (by letting Congress off the hook of confronting the relationship between health care and employment). San Francisco hurts no one but itself and its own residents by burdening business and driving away capital to the 'burbs. The claim that national businesses will suffer some external cost outside San Francisco from disuniform regulation is patently baloney: Any business that operates in any city already must uncontroversially incur the costs of researching and complying with local zoning codes, local taxes and fees, local building codes, local safety regulations, etc. The marginal cost of insuring that one's local branch complies with the local complying health care law is close to zero.

For another policy take, see Fisk and Oswalt's Preemption and Civic Democracy in the Battle over Wal-Mart in the Minn. L. Rev. and on ssrn.

Here's an area that begs for the kind of broader analysis that Hills, Fisk, Oswalt, and others bring.  With the failure of the federal government to lead on national health care, state and local governments have sought to fill the void, responding to the increasingly desperate needs of their citizens.  But they're (at least potentially) constrained by federal ERISA preemption.  In short, the federal government refuses itself to step up and address the health care crisis, and also curtails state and local efforts to solve the problem.

This problem is rich with preemption, federalism, distributional, and governance issues, and it makes a great case-study in some of the practical problems with constitutional preemption.



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[a reaction to your prawfs' comment]

"Instead, Wal-Mart employees would go on a spouse's insurance plan or the state Medicaid rolls. Wal-Mart (and its shoppers) thus received a substantial subsidy: It distributed the costs of its employees' health insurance to other employers and to the state itself. (As a result, all Maryland residents paid for Wal-Mart employees' health plans, whether they shopped at Wal-Mart or not.)"


What is the causal relationship between Wal-Mart's busineses and, say, a Wal-Mart employee who has congenital heart disease? I

f Wal-Mart decides to employ people with one leg, and persons with one leg need more support from society (parking spots/ramps/etc.), you would seem to say that the fact that this person has one leg is a cost that Wal-Mart has imposed on society and that Wal-Mart should bear. I don't understand that reasoning; is there a different basis to find that the costs of Wal-Mart employees' illnesses somehow belong to or are created by Wal-Mart?

If Wal-Mart employees are suffering ill effects as a result of their work (falling off of ladders, etc.), and society were forced to pay those costs, I could see how Wal-Mart is receiving a subsidy from society. But the argument that the cost associated with e.g. someone suffering from lung cancer from smoking too much is really created by Wal-Mart -- simply because Wal-Mart employs that person -- is difficult to accept.

In short, I don't see why Wal-Mart must "internalize" these costs if the health of its workers are not internal to it. Universal health care requires universal cooperation (across the board taxes, etc.), not the singling out of a big evil corporation.

Posted by: andy | Jan 2, 2009 8:46:31 PM

Thanks, Andy. Ours is (mostly) a system of employer-subsidized health insurance for the working population; we've made a deliberate decision not to shift this to the government. But Wal-Mart's gambit in essence created a government-provided health program for its employees alone. (To be sure, it shifted some employees' health costs to other employers through their spouses' health plans. But it also shifted some employees' health costs to all of us by leaving them uninsured and unable to pay (because of their low wages).) Wal-Mart did this to achieve an advantage over competitors who, consistent with our system of employer-subsidized health care, subsidized their own employee's health care. Nothing prevents every employer from doing this; the point is, they don't (or at least not to this extent). And moreover were that to happen, we'd have de facto public health care for all--a policy that we seem to have rejected. And it'd be ad hoc. That's no way to design public health policy.


Posted by: ConLawProf initials at end of post | Jan 7, 2009 10:37:10 PM

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