NCOIL Director of Legislative Affairs & Education

DATE:May 24, 2007

TO:NCOIL Legislators

FROM:Mike Humphreys

NCOIL Director of Legislative Affairs & Education

Health, Long-Term Care & Health Retirement Issues Committee

RE:Recent House Hearing on Health Insurance Reform

Attached is

• a May 23 National Underwriter article entitled Witnesses Call for Relaxing ERISA Uniformity

HOUSE HEARING

Hearing testimony may be found at

Furthering its investigation of solutions to cover the uninsured, the U.S. House Health, Employment, Labor, and Pensions (HELP) Subcommittee held a hearing on May 22, entitled Health Care Reform: Recommendations to Improve Coordination of Federal and State Initiatives.

Congressman Rob Andrews (D-NJ), chair of the Subcommittee, assembled two panels. The first panel consisted of three members of Congress, and a second panel comprisedof six (6) witnesses representing the Health Policy Institute at Georgetown University, the Maryland Department of Health and Mental Hygiene, the New Jersey Department of Banking and Insurance, the Montana State Auditor’s Office, a law firm, and the American Benefits Council.

OPENING REMARKS

Congressman Andrews stated that more than 46 million Americans do not have health insurance coverage and stressed the need for reform. He said that “Although ERISA’s [Employee Income Retirement Security Act] original intent was to establish minimum funding and vesting standard for pension plans, its effect has created an unintended consequence that prohibits states from regulating employer-sponsored health plans.”

PANELISTS & TESTIMONY

CONGRESSIONAL PANEL

Congressman John F. Tierney (D-MA) described the Health Partnership Through Creative Federalism Act, H.R. 506, that he co-sponsored along with the other members of the first panel. H.R. 506 would, among other things, provide federal funding to states to develop and implement innovative health insurance reform proposals. He said the bill would allow states to “seek exceptions to otherwise applicable federal statutes, regulations, and policies, such as and including ERISA.”

Congressman Tom Price, M.D. (R-GA) praised state efforts to address the uninsured and said that H.R. 506would help to promote state innovation. He said the bill would allow states flexibility to implement a variety of strategies including, “tax credits, expansion of Medicaid or SCHIP, creation of pooling arrangements like FEHBP, single-payer systems, health savings accounts, or a defined benefit insurance model.”

Congresswoman Tammy Baldwin (D-WI) further described H.R. 506 and faulted the federal government with hampering state creativity. She said “There’s a reason why the state proposals are often very similar, and that’s because the states are all operating under the same set of constraints that we have imposed upon them.”

WITNESS PANEL (in order of appearance)

Mila Kofman, J.D., Associate Research Professor, Health Policy Institute at Georgetown University, acknowledged that she would prefer the federal government to “develop a meaningful and comprehensive national solution to the health care crisis,” but recognized that absent that, Congress would need to re-evaluate ERISA. She said that ERISA preemptions need to be clarified because ERISA “restricts options and state-based solutions” to health reform.

John Colmers, Secretary of the Maryland Department of Health and Mental Hygiene, shared Maryland’s experience with a Fair Share Health Care Fund Act. The Act, which required employers with 10,000 or more employers to either spend a certain percentage of their payroll on health insurance costs or pay the difference to the state, was challenged under ERISA and struck down by the Federal District Court and Fourth Circuit Court of Appeals. He said that states considering “pay or play” approaches “face a long and potentially contentious process with the courts” because of ERISA.

Commissioner Steven Goldman of the New Jersey Department of Banking of Insurance provided an overview of state reform efforts in New Jersey, Montana, New York, Vermont, and Massachusetts. He also described a National Association of Insurance Commissioners (NAIC) state survey on the preemptive effect of federal laws and said “uncertainty regarding what is permissible has created a threat of protracted legal action to resolve the question, and thus has effectively discouraged the states from acting in those areas.”

John Morrison, J.D., Montana State Auditor, and Commissioner of Insurance and Securities, said the “best solutions for addressing this common problem [uninsured populations] vary widely from state to state because of widely varying demographics.” He said that if states could apply for ERISA waivers from the U.S. Secretary of Labor, “uncertainty, delay, and expense [related to ERISA] could be eliminated.”

Amy Moore, Partner, Covington & Burlington LLP, defended ERISA preemptions and commended large employers for being “a major force behind the improvement of the health care system.” She said that ERISA “does not prevent states from regulating the individual and small group insurance markets” and stated that permitting ERISA waivers will not only “undermine the employment-based health system, it also will prove impractical.”

Kevin Covert, Member, Board of Directors, The American Benefits Council, praised ERISA for permitting large employers to address rising health care costs through “innovative plan designs, implementing wellness programs and promoting transparency.” He said The Council believes healthcare reform should be addressed through a “federal solution that builds on ERISA and promotes uniformity and cost containment.”

Feel free to contact me at (518) 687-0178 or at should you have any questions.