In 1974, the Employee Retirement Income Security Act (known as “ERISA”) preempted state laws that “relate to” employer-sponsored benefits,1 the means by which nearly half of Americans now get their health insurance.2 In the last four decades, lamenting the scope of ERISA preemption has become ritual for health law scholarsReference Fuse and McCuskey3 and jurists at all levels.Reference Acker4 The Supreme Court repeatedly has pleaded with Congress to amend the statute.5 State legislators from both parties have urged the same.6
There is no time like the present to seriously consider ERISA preemption reform as integral to the next steps in health reform. Congress passed ERISA in 1974 with a focus on pension benefits, to which the statute's title and comprehensive regulations attest.Reference Wooten7 Inclusion of non-pension benefits such as health insurance in the legislation's reach was at most a peripheral consideration. Reference Bogan8The broad preemption language superseding “any and all” state laws that “relate to any employee benefit plan” resulted from hasty, last-minute drafting, rather than careful consideration.9
The forty-five year experiment with ERISA preemption of state health care regulation has reached a natural point for recalibration. Employer-sponsored health coverage has been on the decline since the 1980s.Reference Enthoven and Fuchs10 In the past decade, the circumstances underlying ERISA preemption's key assumption — that employers need uniform national regulation as an inducement to provide benefitsReference Befort and Kopka11 — have changed significantly. The Affordable Care Act (ACA) now mandates that large employers offer health insurance benefits, and supplies uniform federal standards for group insurance. Normatively, the experiment has not had particularly positive results. Employer-sponsored health insurance has not managed to make strides on promoting “wellness” or controlling health care costs, despite preemption's deregulatory assistance.Reference Altman and Okie12 Further, linking health insurance to employment status magnifies the influence of employment discrimination,Reference Yearby13 and can exacerbate public health crises, as seen in the COVID-19 pandemic.14 Meanwhile, trenchant health care problems demand attention that Congress has been unable or unwilling to give them, leaving states with the urgent responsibility of pursuing further reform, hamstrung by preemption.
These observations and arguments inform the proposed addition of a preemption waiver to ERISA as a feasible, if limited, next step in health reform. The statutory waiver proposal included in the “Waiver for State Health Reform” appendix below would give ERISA's administering agency (the Department of Labor) the authority to suspend preemption for some state laws that relate to health care coverage. By suspending the operation of preemption, the waiver would preserve ERISA's federal baselines while allowing individual states to pursue a variety of additional measures, ranging from discrete to comprehensive. By committing the preemption issue initially to the federal agency, the proposal bypasses the litigation morass that swirls around ERISA preemption. Yet reliance on agency action also means that many state reforms aimed at expanding coverage must wait for an administration that favors them. While these limitations may render an ERISA preemption waiver a less effective reform, they may make it a more feasible one.
There is no time like the present to seriously consider ERISA preemption reform as integral to the next steps in health reform. Congress passed ERISA in 1974 with a focus on pension benefits, to which the statute's title and comprehensive regulations attest. Inclusion of non-pension benefits such as health insurance in the legislation's reach was at most a peripheral consideration. The broad preemption language superseding “any and all” state laws that “relate to any employee benefit plan” resulted from hasty, last-minute drafting, rather than careful consideration.
I. ERISA Preemption Reform as Health Reform
Viewing ERISA preemption reform as health reform begins with the ascendance of employer-sponsored health insurance in the U.S. and ERISA's intervention as a pension statute, not a health insurance statute. Wage freezes during World War II prompted employers to compete for labor by offering retirement and health benefits.15 After the war, demand for these benefits expanded, but employers’ underfunding and reneging on promises led to a pension crisis in the 1960s and 1970s.16 Congress intervened in 1974 with ERISA, the Employee Retirement Income Security Act.
ERISA focused on safeguarding pension plans, but extended some protections to a catchall category of non-pension “welfare” plans, which included health insurance among many other benefits like vacation, child care, apprenticeships, and disability insurance.17 ERISA's origin as a pension reform effort situated the legislation within the Congressional and executive domains concerned with pensions: tax and labor.Reference Wooten18 For this reason, the Departments of Labor and Treasury administer ERISA while other federal health insurance statutes are administered chiefly by the Department of Health and Human Services.
Since ERISA's passage, employer-sponsored health insurance has become entrenched in U.S. health care. Nearly half the U.S. population now gets health care coverage as a benefit provided by an employer — either as an employee or an employee's dependent.19 Employers in the U.S. typically provide those benefits in one of two ways: either the employer buys group health insurance from an insurer (known as a “fullyinsured” plan), or the employer sets aside money to pay for employees’ health care, then hires a third-party administrator to process claims and make payments (known as a “self-funded” plan).20 Roughly 60% of employers who offer coverage now do so through a self-insured plan.21
The broad preemption provision in ERISA § 1144 was not drafted in 1974 with employer-sponsored health insurance in mind. The preemption provision, hastily revised in the final days before passage, offered a concession to business and labor groups in exchange for more demanding regulation of pensions.22 Since then, Congress's ill-conceived statutory language and courts’ tortured interpretations of it have put ERISA preemption squarely in the path of health reform.
A. ERISA Preemption and the Regulatory Vacuum
ERISA § 1144 prevents states from regulating employer-sponsored health plans, except indirectly by regulating health care providers or insurance carriers. The Supreme Court's interpretation of ERISA's “deemer” clause further exempts employer selffunded health plans even from state insurance regulation, leaving the dominant type of employer-sponsored health benefits beyond the reach of most state reforms.23 Like many other instances of express federal preemption, ERISA preemption has a deregulatory bent, consolidating authority in a single federal regulatory scheme. Yet for health benefits, ERISA preempts far more regulation than it enacts, leaving something of a regulatory vacuum, particularly for self-insured plans.24
ERISA does not require employers to offer benefits; it provides a unified set of federal rules if they voluntarily offer benefits.25 Once an employer voluntarily offers health care benefits, ERISA rules apply to how the benefit plan operates (administrative rules), and what health care the plan covers (substantive coverage rules). Administrative rules and duties make up the bulk of ERISA's federal regulatory scheme, establishing fiduciary duties over plan assets, requiring information disclosure to participants, and establishing complaint and review processes.26
State law fills in much of the substantive coverage regulations, pursuant to ERISA's savings clause. State laws, for example, mandate that insurance cover particular types of care like maternity and physical therapy, as well as requiring coverage for dependents. But states cannot enforce these coverage mandates against self-funded plans, pursuant to the Supreme Court's interpretation of the deemer clause. This leaves quite a swath of exclusively federal regulatory power over group health plans.
Congress has filled in very little of that space with ERISA regulations, offering some piecemeal statutory amendments over the years,27 while explicitly leaving § 1144 preemption unscathed.28 Congress has made many of these federal coverage rules contingent on an employer's initial choice to cover a particular service. For example, the Mental Health Parity and Addiction Equity Act of 2008 requires that if employers offer mental health or substance abuse coverage, they must cover those service on parity with medical and surgical procedures.29 Similarly, the Women's Health and Cancer Rights Act required that if group plans offer coverage of mastectomy, they must also cover reconstructive surgery.30 ERISA does not require either coverage of mental health services or mastectomies, though some states’ insurance laws do. Implicit from the construction of ERISA's if-then patches is that selffunded plans are exempt from offering the if coverage, even where state law mandates it.31
Under ERISA preemption, states may not directly mandate that employers provide health benefits. While states may raise payroll taxes on employers to help fund public programs and defray costs, Circuits have split over when states may make that tax contingent on an employer's choice to offer benefits or calculated with reference to it.32
When employers do offer health benefits, state law can regulate the coverage offered by health insurers. Thus, if an employer chooses to offer benefits by purchasing them from a health insurer, the employer's benefit plan imports state regulation. But states cannot enforce insurance regulations on employers who choose to self-fund. For example, if state law requires a minimum set of essential benefits in health insurance, an employer's fully-insured plan from an insurer must cover those essential benefits. If the employer chooses to self-fund, the plan does not have to cover those essential benefits, even if the employer purchases stop-loss insurance to limit its risk and hires a third party administrator (TPA) to process its claims.
B. Health Reform Federalism in the ACA Era
The ACA represented a sea-change in federal regulation of health insurance and filled in some of the exclusively federal spaces left by ERISA preemption. Under the ACA, most multistate employers must provide minimum essential coverage to most employees or pay a tax. The ACA thereby diluted one of the main justifications for ERISA's preemption — that compliance with state law would dissuade employers from offering benefits.
Courts and commentators often rationalize ERISA's preemption provisions as creating a nationwide uniformity necessary to encourage employers to provide health benefits.33 This emphasis on national uniformity, however, “is overblown and outdated.”34 The ERISA Congress's choice in 1974 to save state insurance regulation from preemption inevitably embraces a significant level of state-by-state disuniformity, often overlooked in this emphasis.35 And the legislative history does not suggest that Congress intended total national uniformity for health benefit plans.36 Of course, employer incentives with respect to health benefits have also changed significantly in the past 40 years. The ACA's national employer mandate, the sizeable tax-break for employers’ health benefits, and shifting labor market demands “cast doubt on the assumption that employers will abandon health coverage in response to state regulations.”37
The ACA's mandate that employers provide coverage is coupled with comparatively lighter federal baseline coverage regulations for large group plans than for individual and small-group market plans.38 States remain free under the ACA to add requirements to these federal baselines,39 but are preempted under ERISA from applying their insurance regulations to self-funded plans or from regulating in other ways that relate to employer-sponsored health benefits.
At the same time as the ACA has enhanced national uniformity outside of ERISA, the concerted undermining of the ACA, coupled with Congress's inability to pass interim reforms has rendered state health reform legislation more urgently needed at this moment. Conservative lawmakers and administrators seek to disengage from the ACA and roll back its protections under the cloak of federalism, touting “state empowerment”40 and “flexibility.”41 Yet ERISA preemption obstructs state regulatory efforts to address public health issues, expand health care coverage, to control costs, or even to collect information about health care prices.Reference Fuse and Sarpatwari42
ERISA's broad statutory language and the inscrutable precedent it has engendered invite private litigation against all kinds of state health system reforms. States seeking to establish all-payer claims databases (APCDs) to inform policymaking faced litigation from self-funded plans’ administrators all the way to the Supreme Court. The Court in Gobeille held that states could not require TPAs to contribute to the databases, though of course the Department of Labor remained free to collect this information and share it with states.43 Despite this setback, 18 states have enacted APCD legislation and more than a dozen others have considered it, speaking to the value that an APCD has for state health reform and management and the urgency states find in the absence of federal movement on the issue.44
Inevitable ERISA preemption litigation adds uncertainty and increases the transaction costs for states legislation. States have picked up momentum in regulations aimed at prescription drug prices, which strain state Medicaid and government employee benefit program budgets. These efforts have attracted ERISA preemption challenges.Reference Gudiksen and King45 Similarly, states have tried to regulate pharmacy benefit managers (PBMs), which purport to negotiate better prices from drug manufacturers on behalf of plans, but often require pharmacies to accept less than the plan reimbursement rate and then pocket the difference. PBMs have litigated the ERISA preemption issue into a circuit split, now pending before the Supreme Court.46 In the Supreme Court, the federal government filed an amicus brief supporting the states’ position of non-preemption.47
To deal with the continuing burden of medical costs on consumers, states have passed laws aimed at surprise out-of-network billing.48 There, too, state legislation faces ERISA preemption litigation,Reference Fuse49 while federal proposals have stalled and attracted fierce, shadowy resistance.50 State proposals for more transformative health system reforms, like the 21 states that have introduced bills to establish state-level single- payer systems, must contort to fit within the slim spaces ERISA preemption permits.51 Even those that thoughtfully navigate that space face inevitable litigation with an uncertain outcome.52
ERISA preemption frustrates state policy experimentation, while encouraging private employer-sponsored insurance to experiment with plan design. The results of those private experiments have been mixed. ERISA preemption proponents argue that the deregulatory environment for self-insured plans should decrease the cost of compliance for those employers and reduce the money spent on premiums. That conventional wisdom has not translated into reality, as large employers’ self-funded plans remain just as expensive as fully-insured ones.53 Recent data also question the value of employer-sponsored insurance as compared to public programs.54
Beyond the disappointing performance on costcontrol there exist powerful reasons to question the continued linking of health care coverage to employment — a link ERISA preemption supposedly bolsters. From a health equity perspective, linking health insurance to employment status can amplify the effects of discrimination on health disparities.55 From a public health perspective, as recently experienced in the COVID-19 pandemic, unemployment can exacerbate public health crises.56
The conditions are ripe for a new experiment.
II. ERISA Preemption Waiver — A Proposal
Health law scholars for decades have advocated to alter ERISA preemption, from wholesale repeal of the preemption for group health plans to statutory waivers for certain state efforts.Reference Jensen57 Members of Congress have proposed various forms of preemption exemptions, though none have passed — a reminder that any statutory alteration of ERISA's preemption scheme will face fierce resistance from powerful business interests.58
As it stands, ERISA does not authorize the Department of Labor to waive its preemption. ERISA authorizes the Secretaries of Labor and Treasury to waive certain substantive and administrative requirements on behalf of private parties — employers, plans, and participants.59 But the statute does not expressly provide authority for the federal agencies to waive statutory requirements on behalf of states. ERISA expressly saves a few state laws from its preemption60 and gives the Departments of Labor and Treasury some flexibility to work with states on administering the statute's requirements.61 But ERISA, unlike some other statutes, does not give agencies the authority to waive preemption.62
This article explores the addition of a statutory waiver provision as a feasible step in ERISA preemption reform. Giving the Secretary of Labor authority to waive preemption for state reforms on request offers a compromise position between full repeal of preemption and the status quo. This compromise may make waiver more palatable to the business community and therefore more politically feasible than alteration of the preemption baseline. While adding to a waiver's pragmatic appeal, the mediating influence of agency discretion may dilute the waiver's efficacy at promoting meaningful state reforms. Recent experience with the ACA § 1332 and Medicaid § 1115 waivers illustrates how an administration hostile to the statute's substantive goals may use waiver authority to both discourage state applications that expand protections and encourage state applications that undermine them.Reference Huberfeld63
Agency discretion in a preemption waiver scheme has the same potential to deny state applications that expand on federal protections. But preemption waivers, by contrast, would not also threaten to erode ERISA's existing protections. Granting an ERISA § 1144 preemption waiver would lift a special prohibition on additional state regulation, rather than lifting federal baseline regulations. ERISA's administrative and coverage regulations would remain in effect and, pursuant to the Supremacy Clause, would continue to preempt state laws that directly conflict with them. States wishing to further de-regulate employer-sponsored insurance would still be prohibited from doing so.
The proposed statutory text in Appendix A aims to incorporate the lessons from failed waiver attempts before the ACA and the experiences with statutory waiver in the ACA area.
C. Attempts at Waiver, Pre-ACA
Relieving states from ERISA preemption has been an issue since the very moment of ERISA's enactment. Three months before ERISA was enacted,64 — Hawaii passed a health reform law requiring employers in the state to provide health care coverage for some employees either by purchasing a state-approved plan or funding their own plan that meets state minimum coverage standards.65 Congress amended ERISA in 1983 to exempt Hawaii's law from preemption,66 subject to some limitations.67 Hawaii remains the only state to succeed in getting an ERISA preemption exemption. During the health reform debates of the mid 1990s, several other Hawaii-style legislative exemptions from ERISA were introduced in Congress that would permit specific universal coverage reforms in the sponsors’ home states.68 None of them passed.69
Congress has entertained ERISA waiver legislation in the past, too. In the Clinton-era health reform debates, Congress members from Washington and Oregon introduced federal legislation that would fund state universal health care efforts, supported by administrative waivers of ERISA.70 Those bills failed. House members from Hawaii, New York, Minnesota, and Maryland then introduced legislation proposing two-year ERISA waivers for their states’ reforms,71 but those failed, too.72 On the heels of defeat for the Clinton federal health reform plan in 1994,Reference Oberlander73 a bipartisan bill to support state reform efforts by expanding the savings clause and authorizing specific preemption waivers for sponsors’ states (Hawaii, Oregon, Minnesota, Washington, and Connecticut)74 also failed to pass.75
D. Waiver Proposals in the ACA Era
The drafting and passage of the Affordable Care Act presented an opportunity to address ERISA preemption as part of comprehensive health reforms. Congress declined to take this opportunity,Reference Vukadin76 and instead drafted the ACA to explicitly disavow any impact on ERISA preemption.77
Statutory waiver has featured prominently in the first decade of the ACA era, through the ACA's § 1332 waiver for “State Innovation” and states’ uses and abuses of Medicaid's § 1115 waiver. An executive branch hostile to the ACA has been receptive to Republican-led states’ proposals to dilute ACA protections and shrink access to public programs, perverting these statutory waiver provisions in the ACA and Medicaid into weapons against the statutes themselves. The same executive philosophy has discouraged those statutory waivers to state proposals (from both Republican-led and Democrat-led states) that seek to expand coverage and protections.
Meanwhile, federal and state legislators have renewed the bipartisan call for ERISA preemption waiver to enable state health reforms — from the incremental to the transformative. Representative Ro Khanna reintroduced the State-Based Universal Health Care Act in the House of Representatives in November, 2019, adding ERISA preemption to the list of provisions waivable under the ACA's § 1332.78 The National Council of Insurance Legislators earlier this year passed a resolution “urg[ing] members of Congress to take action and pass legislation that would amend ERISA to add a waiver provision enabling states to include self-insured single state employers in a wide range of healthcare reforms.”79 It has circulated to members of Congress, the Secretaries of Labor and HHS, and the NAIC.
Either route to ERISA preemption waiver would offer welcome relief to state health reform, though a direct amendment to ERISA offers some additional benefits over amendment via ACA § 1332.
1. AMENDING THE ACA: STATE-BASED UNIVERSAL HEALTH CARE ACT
Legislation introduced in the House of Representatives in 2018 and 2019 — the State-Based Universal Health Care Act (SBUHCA) — has proposed to add ERISA preemption waiver authority to the ACA's “State Innovation” waiver provision in support of state efforts at achieving universal coverage.80 SBUHCA requires that state 1332 waiver applications propose “comprehensive” reforms.81 A SBUHCA state waiver application must include a plan for achieving an uninsured rate of 5% uninsured or less within five years. SBUHCA reinforces the existing § 1332 prerequisites (also known as “guardrails”), requiring that the state's proposed law provide coverage for at least as many people as the ACA, that is as comprehensive and affordable as the ACA, as well as budget neutral for the federal government. SBUHCA adds new guardrails for public outreach and education, accessible appeal processes, and the purchase of supplemental insurance.
As long as the state's proposal falls within the ACA guardrails, SBUHCA adds ERISA preemption to the list of waivable statutory provisions. The ERISA waiver portion of the ACA waiver application would be delegated to the Secretary of Labor, in coordination with the Secretary of HHS. Implicit in the addition of the ERISA preemption waiver to the 1332 process is that, while HHS administers the ACA's employer mandate and group health insurance regulations and may waive those federal laws for requesting states,82 that waiver does not immunize a state's own employer mandate or other employer-focused regulations from ERISA's preemption.83
SBUHCA offers a positive step in the direction of ERISA preemption relief, specifically enabling ambitious state reforms. Cabining an ERISA waiver in an ACA 1332 amendment may have the benefit of keeping the ERISA issue slightly under the radar, though the entrenched business interests that vigilantly promote ERISA preemption undoubtedly have the issue within their sights already.84
Effectuating ERISA waiver through this ACA amendment has some important limitations. First, it conditions the availability of a waiver on the continued existence of the ACA which is probable, but by no means assured.85 More importantly, the SBUHCA preemption waiver requires that the ERISA waiver be part of an effort to replace the ACA, and the Department of Labor's grant of any such waiver must stay within the “guardrails” established by the ACA.86 The “comprehensive” state plan requirement could be read to exclude a la carte state legislation on issues like surprise billing, drug prices, or PBM regulation, unless submitted as part of a larger package of reforms to reduce the uninsured rate.
2. AMENDING ERISA: PROPOSAL FOR § 1144(F) STATE HEALTH REFORM WAIVER
Directly amending ERISA to add a preemption waiver would clear a path for a wide array of state coverage expansion and protection reforms, from incremental measures for cost control and data collection, all the way to transformative state single-payer plans. The statutory amendment included at Appendix A: ERISA § 1144 Waiver for State Health Reform (the “State Health Reform Waiver”), offers a proposal for how such a direct ERISA waiver could work. It builds on early lessons from the ACA's § 1332 waiver structure.
The State Health Reform Waiver proposal embraces the theoretical framework for the ACA's 1332 waiver — channeling agency expertise and nationwide perspective, eliciting evidence-based policy experiments from states, promoting transparency and stakeholder participation, nudging agency discretion toward granting waivers that are well-supported, and erecting guardrails against the erosion of federal baseline protections.
First, the State Health Reform waiver proposal adds a definition of “group health plan,” expressly including benefits provided “directly” or through insurance, to capture self-funded benefits within the term. The proposal then adds a subsection (f ) to 29 U.S.C. § 1144, which outlines the scope and processes for waiver.
A state may file an application requesting that the Secretary waive § 1144 preemption of a specified state law. Subsection (f ) identifies the waivable provisions as § 1141(a) (“relates to”) and § 1144(b)(2)(B) (the deemer clause), excluding ERISA's coverage protections and administrative rules from the waiver's ambit. A state's application to waive either of these provisions must “contain such information as the Secretary [of Labor] may require, including” a description of the state reform law and the waiver's likely impact on group health plans within the state. The applying state must also identify any related waivers of Medicaid, Medicare, ACA, or other federal law “relating to health care” to aid coordination among the relevant agencies.
The State Health Reform waiver requires a notice and comment period at the state level first, then provides for a federal notice and comment period after filing, enabling the agency to consider direct input from those affected. The Secretary would have to deliver a decision on the application within six months of filing, report waiver denials (but not grants) to Congress with reasoning, and report annually on other actions. Because ERISA's statutory scheme contains no federal funding for state insurance regulation, the waiver provision need not refer to budget neutrality or passthrough funding.
The State Health Reform Waiver's limited set of waivable provisions supply its most important guardrails against erosion of statutory protections. That is, unlike other provisions that permit waiver of a statute's core protections,Reference Barron and Rakoff87 the State Health Reform Waiver only has the power to suspend ERISA's preemption of additional state regulation — it does not authorize a waiver of any of ERISA's regulations.
As a concession to proponents of ERISA preemption, the waiver does not bind the Secretary to grant any application that meets the criteria; it leaves the grant or denial decision to the agency's discretion, bounded by the waiver provision's standards and processes. Alternatively, a waiver provision could be drafted so that the Secretary must grant a waiver application, or must grant an application that satisfies certain conditions.88 These alternative formulations would likely mean more state laws would get preemption waivers, and for that reason would be more likely to generate the kind of resistance that has prevented all other attempts from passing in Congress. Agency discretion thus may limit the waiver's impact, but increase its long odds of being enacted.
Statutory waivers can soften the federalism impact and unintended consequences of federal laws, giving states the flexibility to work within a federal statutory scheme and reopening the “laboratories of democracy” despite preemption. States urgently need this flexibility to adapt to federal dysfunction and to test the transformative models being debated at the national level. The ACA's federal regulatory infrastructure, meanwhile, has diminished the justifications for maintaining the ERISA preemption obstacle to state health reforms. And employer-sponsored insurance has not proven to have enough cost-control or health-promoting benefits to justify the preemptive force field ERISA maintains around it. This is an opportune moment to take seriously the possibility of an ERISA preemption waiver that has percolated constantly since the statute's passage over forty-five years ago. To bring a welcome measure of coherence to health care federalism, ERISA preemption reform must be part of the next steps in health reform.
E. Assessing Waiver
The proposed State Health Reform Waiver avoids some, but not all, of the pitfalls of the ACA § 1332 waiver and other waiver schemes. Most obviously, leaving the grant/denial decision to agency discretion does not fully insulate against the dangers of a hostile administration and agency's unfaithful execution of the statute. This danger materialized in the current administration's use of Medicaid's § 1115 waivers to impose work requirements and ACA's § 1332 waiver as resistance to the ACA's Medicaid expansion and health insurance exchanges. What in theory is a resort to federal agency expertise can in practice enable that agency to act politically under the guise of expertise. While the State Health Reform Waiver might avoid this political pitfall by making the grant of a waiver mandatory for all applications meeting certain criteria, that still would leave agency discretion in determining whether the criteria were met and could be cast as a stealth repeal of the entire preemption, diminishing waiver's stance as a compromise position maintaining the preemption baseline with targeted opportunities for flexibility.
The proposal's inherent structure avoids other major pitfalls of statutory waiver because it does not waive ERISA's core provisions and protections, but rather waives only the prohibition on additional state regulations. It is mostly a one-way ratchet, enabling expanded state protections and coverage initiatives. Unlike in statutory waivers such as ACA § 1332, even the Secretary's grant of a State Health Reform Waiver would leave ERISA's federal protections and baselines (scant as they are) in place. If a state wanted to pass a law contradicting or weakening ERISA's protections (or the ACA’s), ordinary conflict preemption doctrine would still prevent state enforcement.89
Giving an executive agency the authority and discretion to determine preemption waiver applications thus has the potential for some mischief. Yet a preemption waiver provision also provides states a venue other than litigation in which to argue their positions about the extent and desirability of ERISA preemption. Even with its acknowledged limitations, the potential for a preemption waiver is preferable to maintaining ERISA preemption's status quo.
Conclusion
Statutory waivers can soften the federalism impact and unintended consequences of federal laws,90 giving states the flexibility to work within a federal statutory scheme and reopening the “laboratories of democracy” despite preemption.Reference Lee and Estes91 States urgently need this flexibility to adapt to federal dysfunction and to test the transformative models being debated at the national level. The ACA's federal regulatory infrastructure, meanwhile, has diminished the justifications for maintaining the ERISA preemption obstacle to state health reforms. And employer-sponsored insurance has not proven to have enough cost-control or healthpromoting benefits to justify the preemptive force field ERISA maintains around it. This is an opportune moment to take seriously the possibility of an ERISA preemption waiver that has percolated constantly since the statute's passage over forty-five years ago. To bring a welcome measure of coherence to health care federalism, ERISA preemption reform must be part of the next steps in health reform.
Appendix A: ERISA § 1144 Waiver for State Health Reform
The text below is excerpted from 29 U.S.C. § 1144, with the following modifications:
Underlined text represents proposed additions.
Ellipses […] indicate omissions of portions not directly affected by the waiver.
29 U.S.C. § 1144
(a) Supersedure; effective date Except as provided in subsections (b) and (f ) of this section, the provisions of this subchapter and subchapter III shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title. This section shall take effect on January 1, 1975.
(b) Construction and application
…(2) (A) Except as provided in subparagraph (B), nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities.
(B) Neither an employee benefit plan described in section 1003(a) of this title, which is not exempt under section 1003(b) of this title (other than a plan established primarily for the purpose of providing death benefits), nor any trust established under such a plan, shall be deemed to be an insurance company or other insurer, bank, trust company, or investment company or to be engaged in the business of insurance or banking for purposes of any law of any State purporting to regulate insurance companies, insurance contracts, banks, trust companies, or investment companies.
…
(c) Definitions
For purposes of this section:
(3) The term “group health plan” includes any “employee welfare benefit plan” as defined in section 1002(1) of this title which is established or maintained by an employer, an employee organization, or both, that provides medical care for participants or their dependents directly or through insurance, reimbursement, or otherwise.
(4) The term “Secretary” means the Secretary of Labor.
…
(f) Waiver for state flexibility. A State may apply to the Secretary for the waiver of section 1144(a) or section 1144(b)(2)(B) of this Part or both provisions as applied to State laws implicating group health plans defined in section 1144(c)(3).
(1) Such application shall —
(A) be filed at such time and in such manner as the Secretary may require;
(B) contain such information as the Secretary may require, including —
(i) a description of the State law or laws which would fall within the scope of the requested waiver, and
(ii) the requested waiver's likely impact on group health plans operating within the State; and
(C) refer to any related waiver applications submitted by the State under 42 U.S.C. § 18052, titles XVIII, XIX, and XXI of the Social Security Act [42 U.S.C. 1395 et seq., 1396 et seq., 1397aa et seq.], or any other Federal law relating to the provision of health care items or services.
(2) Waiver consideration and transparency.
(A) In general. An application for a waiver under this section shall be considered by the Secretary in accordance with the regulations described in subparagraph (B).
(B) Regulations. The Secretary shall promulgate regulations relating to waivers under this section that provide —
(i) a process for public notice and comment at the State level, including public hearings, sufficient to ensure a meaningful level of public input; and
(ii) a process for providing public notice and comment after the application is received by the Secretary, that is sufficient to ensure a meaningful level of public input and that does not impose requirements that are in addition to, or duplicative of, requirements imposed under the Administrative Procedures Act, or requirements that are unreasonable or unnecessarily burdensome with respect to State compliance.
(C) Report. The Secretary shall annually report to Congress concerning actions taken by the Secretary with respect to applications for waivers under this section.
(3) Scope of waiver. A waiver granted under this section shall not supersede the requirements enacted in sections 1021-1143 and 1145-1091c of this Title. The Secretary may not waive under this section any Federal law or requirement that is not within the authority of the Secretary.
(4) Determinations by Secretary. (A) Time for determination. The Secretary shall make a determination under subsection (f)(1) not later than 180 days after the receipt of an application from a State under such subsection. (B) Effect of determination.
(i) Granting of waivers. If the Secretary determines to grant a waiver under subsection (f)(1), the Secretary shall notify the State involved of such determination and the terms and effectiveness of such waiver.
(ii) Denial of waiver. If the Secretary determines a waiver should not be granted under subsection (f)(1), the Secretary shall notify the State involved, and the appropriate committees of Congress of such determination and the reasons for the denial.
(5) Term of waiver. The Secretary may limit the duration of a waiver granted under section (f )(1) to not less than 5 years. If the Secretary grants a waiver with a limited duration, the State may request continuation of such waiver on the expiration of the initial term.
