Employer-Based Health Plans: Issues, Trends, and Challenges Posed by ERISA

GAO discussed the Employee Retirement Income Security Act of 1974 (ERISA), focusing on the: (1) proportion of workers in self-funded health insurance plans; (2) kinds of state actions preempted by ERISA; and (3) advantages of ERISA preemption to employers that offer health care coverage to their employees. GAO noted that: (1) nearly 40 percent of enrollees in employer-based health plans, or 44 million people, are in self-funded plans; (2) self-funded plans are exempt from state regulation and taxation under ERISA and provide employers with greater flexibility to design a health benefits package that may have been less feasible to provide under state regulation; (3) self-funded plans are increasing, particularly among smaller firms, but employers are concerned about changes to ERISA, since states are unable to extend regulations, such as solvency standards, preexisting condition clause limits, and guaranteed issue and renewal requirements, to enrollees in these self-funded plans; and (4) employers are increasingly adopting alternative funding arrangements to moderate the risk among the plan, providers, and the employer.