ERIC: Health Reform Proposals Could Harm Employer-Sponsored System

At a hearing on the Tri-Committee Draft Proposal for Health Care Reform (see House Dems Roll Out Health Care Proposal ), he cautioned that employers “should not be required under any circumstance to provide financial resources to employees to purchase insurance through an insurance exchange when the employer has chosen to offer a plan. To allow this would create systematic adverse selection problems that could ultimately result in the demise of the employer-based system.” 

Stapley also testified that ERIC has serious concerns with limiting the ability of an employee to exclude from income the value of employer-provided health insurance (see Baucus Reportedly Considering Ways to Tax Health Benefits ). “If this exclusion were curtailed, many large employers would follow one of two approaches.  Some would redesign their plans to meet the new cost standard in the legislation, below which taxation would not be imposed. . . . Other employers would choose to keep their existing plans; if the value of the plan exceeded the standard in the legislation, employees would face taxation on the ‘excess’ value.  If this were to occur, employment-based insurance would suffer,” he said.

In addition, Stapley said ERIC has serious concerns with a public plan modeled after Medicare that would compete with the current private marketplace (see Pomeroy Puts Out Health Reform Bill ).  He said ERIC’s “most fundamental concern with a public plan based on Medicare is the potential for even greater cost-shifting than exists today,” and that right now ERIC members subsidize the cost of Medicare, including both administrative and claim costs.  Thus, as presently envisioned, the public plan is unsustainable.

Moreover, Stapley explains the concern about the adverse selection that would be experienced if individual participants in employer-sponsored plans were permitted to opt out of the employer plan and into a public plan.  “If permitted, an opt-out would undermine the demographic fairness of a large risk pool that is a feature of employer plans.  Over time, young, healthy employees would seek cheaper coverage outside of the employer’s plan, and older, sicker employees would remain in the plan,” he commented.

Stapley concluded testimony by saying that any health care system reform proposal must provide for national uniformity as well as the inviolability of ERISA preemption. 

"Without the national uniformity made possible by ERISA's preemption doctrine, large multistate employers simply could not offer quality health care coverage to their employees.  Its importance was recognized by the original sponsors of ERISA as critical to ensuring that employers provided sound and secure benefits.  Any future legislation must continue to accord preemption and national uniformity of regulation a similar priority," he said. 

He pointed out that employees, who are often moved to various locales during their careers, or live, work, and receive medical care in multiple jurisdictions depend on the national uniformity of ERISA's preemption provisions.

In 2007, ERIC released its New Benefits Platform for Life Security that laid out a framework for overhauling the country's national approach to providing health and retirement security, and included support of the establishment of a health insurance exchange or gateway that provides a fair and equitable method for the distribution of insurance products (see ERIC Issues Proposal for New Benefits Platform for Lifetime Security ). 

Stapley's testimony is here .