ERISA

The Employee Retirement Income Security Act (ERISA) was passed in 1974 with two purposes: a) to protect employee benefits and b) to help employers operating in multiple states by providing uniformity in administration and regulation of benefit plans. Many of the consequences of ERISA as they relate to health insurance were unintended; although there have been many proposals to amend ERISA during the past 30 years, Congress has been reluctant to amend it since this would risk unraveling the many political compromises required to enact the original statute. ERISA applies only to self-insured employer-sponsored benefit plans; self-insured plans cover 65 percent of insured Americans (Jacobson 2002) or 124 million persons (Copeland and Pierron 1998).

There are three significant sections of ERISA law as they apply to health insurance benefits plans.

  • Preemption Clause: Provides that ERISA supersedes any and all state laws insofar as they apply to employee-sponsored benefit plans.
  • Savings Clause: Provides that nothing in ERISA “shall be construed to exempt or relieve any person from any law of any state which regulates insurance, banking or securities.”
  • Deemer Clause: Determines that self-insured employer-sponsored benefit plans are not deemed to be insurance companies or in the business of insurance as referred to in the savings clause.4 Hence self-insured health insurance plans are not under the state’s authority.

The Duke Center for Health Policy has developed a draft working paper assessing the costs and benefits of ERISA.

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