Employer-Based Health Plans:

Issues, Trends, and Challenges Posed by ERISA

HEHS-95-167: Published: Jul 25, 1995. Publicly Released: Jul 25, 1995.

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Pursuant to congressional requests, GAO provided information on the: (1) Employee Retirement Income Security Act's (ERISA) relationship to the current system of employer-based health coverage; (2) implications of the trend toward employer self-funding on the oversight of employees' health care coverage; (3) kinds of state actions preempted by ERISA; and (4) advantages of ERISA preemption to employers that offer health care coverage to their workers.

GAO found that: (1) although courts have historically interpreted ERISA to broadly restrict state regulation of employer health plans, recent Supreme Court decisions may allow states greater flexibility under general health care regulation provisions; (2) self-funded employer health plans appear to be increasing, but many employers are moderating their risks by using stop-loss coverage or managed care arrangements; (3) about 40 percent of ERISA plans, which cover about 44 million people, are employer self-funded plans which states are preempted from regulating and taxing because they are not considered to be insurance; (4) other ERISA plans cover an additional 27 percent of the U.S. population; (5) states believe that ERISA impedes their ability to ensure adequate consumer protections and enact health cost reduction reforms; (6) states also believe that they should be able to tax and collect data on all health plan participants uniformly; (6) employers believe that ERISA has made it possible for them to offer their employees health care coverage tailored to their needs and thus reduce their costs; and (7) employers fear that changes to ERISA that would give states greater regulatory flexibility would increase their costs and jeopardize their ability to provide employee health coverage.

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