U.S. House Subcommittee Examines

Impact of State Mandates

on Employer-Provided Health Care

Witnesses Cite Potential Unintended Consequences that Could Arise from a Patchwork of Diverse State Mandates

WASHINGTON, D.C. – The U.S. House Employer-Employee Relations Subcommittee, chaired by Rep. Sam Johnson (R-TX), today heard a variety of concerns from industry leaders on the impact of state mandates on employer-provided health care coverage.  During the last six months, the states of Maryland and Massachusetts have enacted laws that could significantly alter the way in which employers provide health benefits to their employees.  With some 30 similar legislative efforts pending in state legislatures, the potential impact of these mandates on employers, workers, and the chief federal law governing health benefits – the Employee Retirement Income Security Act (ERISA) – is an issue of increasing interest for many.

“If states are tinkering with ERISA, we must make sure that the results are fair and have no unintended consequences or, worse, giant problems in the future,” said Johnson.  “I am also concerned that these proposals largely ignore the problem of sky-rocketing insurance costs and instead simply add additional burdens on employers, as well as their employees.”

Johnson and Committee Republicans have taken the lead in addressing the rapid increases in health insurance costs.  With the support of three dozen Democrats, the House last year approved legislation authored by Johnson, the Small Business Health Fairness Act (H.R. 525).  The measure would allow small businesses to join together through association health plans (AHPs) to purchase insurance for their workers at a lower cost.  More than 60 percent of uninsured Americans either work for a small business or are dependent upon someone who does.

Calling for this type of response to skyrocketing health care costs was Larry Drombetta, President and CEO of HR Stores, Inc.  He described his firm’s difficulty in providing health insurance for its employees and noted his support for legislation such as H.R. 525.

“My health care costs have steadily increased through the years and are increasingly unbearable,” said Drombetta.  “Coverage costs have increased by 155% from 2000-2006, a level my business cannot sustain with related growth.  My health insurance program is in what insurance industry people call a ‘health insurance death spiral.’  Under current law, there is nothing that I can do.  The end result will be no more insurance for my employees.  I believe that what is needed is a federal solution that allows a small business the same access to large group insurance rates that is now available to larger companies and unions.”

Craig Garthwaite, a Research Fellow in Economics for the Employment Policies Institute, shared with the panel his view that many state legislatures have focused too closely on determining who should pay for health benefits, rather than dealing with the underlying issues that have led to spiking health insurance costs.

“It is no surprise then that state legislatures are engaged in robust deliberations on health-care issues,” said Garthwaite.  “Unfortunately, most of their efforts have been misdirected.  Rather than delve into the underlying pressures that make health insurance increasingly unaffordable, state lawmakers have largely directed their energies at determining who should pay for it.  Invariably, their efforts have focused on forcing employers to provide health benefits to their employees.”

Finally, Paul T. Kelly, Senior Vice President of the Retail Industry Leaders Association (RILA), noted to the Subcommittee the importance of ERISA’s uniformity for employers who voluntarily provide health insurance to their employees, particularly in comparison with a potential patchwork of regulations that could arise from dozens of different state laws.

“When Congress enacted ERISA more than three decades ago, it created a system that encourages employers to offer employee health benefits by permitting them to administer health plans uniformly and efficiently,” said Kelly.  “This is especially important to employers that operate in multiple states, such as RILA’s members.  Without such uniformity, these employers would be faced with a patchwork of complex and conflicting state regulations that would make providing health care benefits much less attractive.  The single, national regulatory framework afforded by ERISA gives companies the flexibility they need to meet and respond to the unique requirements of their workforce.” 

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