Alignment of ERISA with Healthy Contracts Legislation: Supported by Federal Regulations
The Employee Retirement Income Security Act (ERISA), enacted in 1974, is federal law that regulates private sector employee benefit plans, including retirement and health plans. Its primary goal is to protect plan participants and beneficiaries by ensuring they receive plan information and benefits as promised. ERISA mandates that plans provide participants with important information about plan features and funding through regular disclosures. It establishes stringent fiduciary responsibilities for those who manage and control plan assets, requiring them to act in the best interests of the participants with prudence and diligence.
ERISA also sets standards for the fair and timely processing of claims and appeals, ensuring participants have a clear process for securing their benefits. The law includes provisions for minimum funding standards for pension plans to ensure they have sufficient assets to meet future obligations. Additionally, ERISA preempts state laws which relate to employee benefit plans, aiming to create a uniform regulatory environment. The Pension Benefit Guaranty Corporation (PBGC) was also established under ERISA to insure certain types of retirement benefits. Overall, ERISA provides a federal framework to safeguard employees' retirement and health plan benefits, promoting transparency, accountability, and financial integrity in the management of employee benefit plans.
Despite advocacy and legal action, psychotherapy providers’ and ERISA conflicts have centered on issues of inadequate reimbursement, restrictive coverage policies, significant administrative burdens, and legal constraints due to the ERISA preemption powers given to Healthplans over States’ powers. However, given current Federal and State requirements to move from fee-for-service contracts to alternative and value-based contracts, there is excellent opportunity for the State of Oregon and psychotherapy practices to require that Healthplans be accountable and that they negotiate alternative and value-based contracts in good faith with fair dealings.
The Employee Retirement Income Security Act (ERISA) can preempt state initiatives, including those by psychotherapists, to legislate reimbursement increases in fee-for-service for psychotherapy services. Here’s how ERISA is used to preempt such initiatives.
Case Example:
1. State Initiative: A state passes a law requiring health insurers to increase reimbursement rates for psychotherapy services.
2. Employer-Sponsored Health Plans: Many health insurance plans are provided by employers as part of their employee benefits package, and these plans are regulated by ERISA.
3. ERISA Preemption: Because the state law directly impacts the benefits and reimbursement practices of ERISA-regulated plans, it is preempted by ERISA. The state law cannot be enforced against the employer-sponsored plans.
There is an unprecedented opportunity for the State of Oregon to rely on ERISA requirements to make Healthplans Accountable and to end the disparity of power that Commercial Healthplans have over purchasers, employers, Oregon tax-payers, patients and Providers’ practices.
Ways Healthplans Undermine Legislation to Protect Physical Medicine and Mental Health Provider Practices
The Employee Retirement Income Security Act (ERISA) may present challenges to the proposed legislation, especially in the context of Healthplan contracts. That is likely if the legislation’s approach were to confront Healthplans by arguments for greater reimbursements for access. That is not the objective of the Healthy Contracts legislation.
Here’s a summary of ways Healthplans might attempt to use ERISA to challenge the Healthy Contracts Bill:
1. They might assert the Preemption Doctrine, the assertion is not valid
ERISA Preemption: ERISA includes a broad preemption clause that preempts any state laws that “relate to” any employee benefit plan. This means that state laws which directly impact or interfere with ERISA covered plans can be preempted.
Conflict with State Regulations: If the proposed legislation imposes requirements on health plans that conflict with ERISA regulations or the administration of ERISA covered plans, it might be challenged and potentially overturned.
2. They might argue using an Invalid Scope of Applicability
Employee Benefit Plans: ERISA governs employer sponsored health plans, including self insured plans, which many large employers use. The proposed state legislation would not be enforceable on these plans if deemed to conflict with ERISA standards.
3. They might argue there is a Unmanageable Administrative Burden, an argument which is not valid
Uniformity Requirement: One of ERISA’s goals is to ensure uniformity in plan administration across different states. State laws that impose additional administrative requirements or auditing processes on ERISA covered plans might be seen as creating inconsistencies and could be challenged for preemption.
Healthy Contracts Legislation can be Framed to Complement ERISA
The Healthy Contracts legislation must be framed to complement ERISA objectives rather than conflict with Healthplans by emphasizing the legislation’s alignment with ERISA’s core goals of protecting beneficiaries, ensuring transparency, and promoting fiduciary responsibility. Healthy Contracts legislation will support all that. Healthplans will oppose the Healthy Contracts petition because it ensures equitable success for Purchasers, Taxpayers, Employers, Providers’ practices, Patients, and Healthplans.
By emphasizing the ways in which Healthy Contracts legislation enhances fiduciary responsibility, promotes transparency, strengthens compliance, protects participants, aligns with federal standards, and supports public health, strong arguments can be made for Healthy Contracts Legislation.
1. Enhancing Fiduciary Responsibility
ERISA Objective: ERISA mandates that plan fiduciaries act in the best interests of plan participants and beneficiaries with a high standard of care.
Complementary Legislation Argument: Requiring health plans to utilize independent certified internal auditors strengthens fiduciary oversight by ensuring that plan operations are regularly reviewed and held to high ethical standards. This aligns with ERISA’s emphasis on fiduciary responsibility.
2. Promoting Transparency and Disclosure
ERISA Objective: ERISA requires detailed disclosure of plan information to participants, including plan features and funding.
Complementary Legislation Argument: Publishing the results of audits provides additional layers of transparency, helping participants understand how their plans are managed and how decisions impact their benefits. Establishing mechanisms for gathering and addressing stakeholder concerns ensures that plan operations are transparent and responsive to the needs of participants and beneficiaries.
3. Strengthening Compliance and Oversight
ERISA Objective: ERISA sets standards for plan compliance with federal requirements and includes provisions for enforcement.
Complementary Legislation Argument: The use of independent certified internal auditors enhances oversight mechanisms, ensuring that health plans comply with both federal and state regulations. Regular audits and public reporting of findings ensure ongoing compliance with legal and ethical standards, supporting ERISA’s goal of rigorous plan oversight.
4. Protecting Participants and Beneficiaries
ERISA Objective: ERISA is designed to protect the interests of participants and beneficiaries in employee benefit plans.
Complementary Legislation Argument: The legislation’s focus on gathering and addressing stakeholder concerns directly supports the protection of participants and beneficiaries by ensuring their voices are heard and their interests safeguarded. By requiring transparency and accountability in plan management, the Healthy Contracts legislation helps prevent abuses and mismanagement, thereby protecting the interests of plan participants.
5. Aligning with Federal Standards
ERISA Objective: ERISA aims to establish a uniform regulatory framework for employee benefit plans.
Complementary Legislation Argument: The legislation can be crafted to align with federal standards, such as those set by the U.S. Office of Inspector General (OIG) and other regulatory bodies, ensuring it complements rather than conflicts with ERISA’s framework. Emphasizing that the legislation seeks to enhance, not replace, existing federal requirements can demonstrate how it creates a synergistic relationship between state and federal oversight.
6. Enhancing Public Health and Safety
ERISA Objective: While not explicitly stated, ERISA indirectly aims to support public health and safety by ensuring access to reliable and well managed health benefits.
Complementary Legislation Argument: By framing the legislation as a public health initiative that seeks to improve the quality and reliability of health plans, it underscores the alignment with broader societal goals of health and safety. The focus on ethical, accountable, evidence based, and patient centered contracts aligns with the goal of improving health outcomes, benefiting participants and the public at large.