Wednesday, April 5, 2006
The Massachusetts House and Senate have overwhelmingly approved a bill that would require individuals to have health insurance. The new system would work through a combination of incentives and regulations and, according to the Associated Press:
[R]equires all residents to be insured beginning July 1, 2007, either by purchasing insurance directly or obtaining it through their employer.
The plan hinges in part on two key sections: the $295-per-employee business assessment and a so-called "individual mandate," requiring every citizen who can afford it to obtain health insurance or face increasing tax penalties.
Under the plan, the state would create a fund to provide health insurance to the poorest segments of society and then would require those who are employed to get health insurance through their employer. Employers actually have a choice under this "play or pay system": they can either provide health insurance or pay $295 an employee per year into a state fund which will provide health insurance coverage for those who are employed but whose employers do not provide coverage.
Of course, there is likely to be a legal challenge to this bill once it is signed into law under a theory of ERISA preeemption. Although at one point I opined that I thought whether this state law would be preempted by ERISA would depend on whether a plan was fully insured or self-insured, I now believe that the part of the Masschusetts law dealing with employer payments will be preempted regardless how the insurance plan is established.
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.
Just my two cents and not that I favor this outcome, but this is the way it appears to me the ERISA analysis would come out.