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Testimony on ERISA before the Vermont legislature

By Ethan Parke
January 12, 2010

My name is Ethan Parke. I live in Montpelier, and I support universal health care in Vermont as outlined in S.88 and H.100. I thank the Senate President Pro Tem and the Chair of the Senate Health Care Committee for their commitment to giving serious consideration to S.88 in the Senate this year.

I want to address a reason that is frequently given for state legislators' reluctance to consider public health care financing, and that issue is ERISA, the Employee Retirement Income Security Act. ERISA is a federal law that preempts states from enacting legislation “relating to” employee benefit plans.

In the course of deliberations on federal health care reform, it was reported that Senator Sanders asked for a legal opinion on the question of whether ERISA would preempt a state law establishing a state single payer system. The conclusion was that, although there is very limited case law on this matter, state legislators should not use ERISA as a reason to be defeatist in their attitude toward establishing publicly-funded health care. The following are reasons why this is so:

• Legislation creating a system that raises taxes to achieve a public good is different from a law that requires employers to provide a specific level of private benefits to their employees. Single payer is not an “employee benefit plan” as defined by ERISA.

• An ERISA challenge would target the financing mechanism in the state health care law. If (in a non-single payer system) employers are separately taxed and then required to provide a certain level of employee benefits, ERISA might be likely to preempt the state law. On the other hand, if an employer assessment is only one revenue source along with many others that are combined and deposited into a public fund that is used to provide uniform health care benefits to a population regardless of employment status, then ERISA is thought not to have the force of preemption.

• Although the first state to enact publicly-funded universal health care is likely to face a court challenge based on ERISA, a state with a properly structured single payer plan would have a strong case in its defense. Other state reform models, such as hybrid public/private programs in which employers are mandated to provide private insurance or pay a tax, would have much more difficulty surviving an ERISA challenge.

• ERISA was enacted to protect employees' and retirees' interests relating to pensions and health benefits. A single payer health system would strengthen those protections. In fact, looking solely at the health care aspects of ERISA, one could say that a single payer plan would fulfill all of the reasons for which ERISA exists. Therefore an ERISA preemption of a state single payer law would make no sense.

I hope these comments are helpful to you as you mark up S.88 and H. 100. Thank you.