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1 (March 6, 2003)

handle is hein.crs/crsmthaaztq0001 and id is 1 raw text is: Order Code RS20315 Updated March 6, 2003 CRS Report for Congress Received through the CRS Web ERISA Regulation of Health Plans: Fact Sheet Hinda Ripps Chaikind Specialist in Social Legislation Domestic Social Policy Division The Employee Retirement Income Security Act of 1974 (ERISA, P.L. 93-406) places the regulation of employee benefit plans (including health plans) primarily under federal jurisdiction for about 131 million people. ERISA's treatment of health plans is both complicated and confusing. ERISA has been interpreted as dividing health plans into two groups regulated differently under the law: about 67 million people are covered by self-insured plans for which the employer, rather than an insurer, assumes the risk for paying for covered services and about 64 million people are covered by purchased insurance (according to 2001 information from the Census Bureau and the Department of Labor). ERISA also distinguishes between the regulation of health plans and the business of insurance, for purposes of determining federal and state regulatory authority. As these distinctions are not clear cut, ERISA has been the subject of many court cases. How does ERISA distinguish between federal and state authority? In short, only ERISA applies to self-insured health plans, while both ERISA and state authority (for the business of insurance) apply to insured health plans. Three sections of ERISA are key in defining the federal and state roles. First, §514(a) states that federal law preempts, or overrides, state laws as they relate to employee benefit plans. This portion of ERISA was designed to ensure that plans would be subject to the same benefit laws across all states. However, the wording relates to is not precise, and as a result, the courts continue to define this term, case by case. Second, §514(b)(2)(A), the savings clause, retains state authority over the business of insurance. The business of insurance typically refers to the regulation of plan solvency, marketing, information disclosure, consumer grievances and may also include mandating benefits, taxing insurance premiums, and mandating participation in state risk pools and uncompensated care plans. Finally §514(b)(2)(B), the deemer clause, does not allow states to deem an employee benefit plan to be in the business of insurance. The effect of this clause is that self-insured plans are not subject to state rules governing the business of insurance. Why is the distinction between federal and state roles important? The distinction is important because federal and state laws governing health plans are different in areas such as compensation in courts, access to care, and mandated coverage. Whether a plan falls under federal or state authority has very different implications for health plans and beneficiaries. Generally, individuals wrongfully denied service under ERISA-covered plans may only sue under federal law exclusively for the cost of the denied benefits and Congressional Research Service **o The Library of Congress

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