On May 4, the House Education and the Workforce Subcommittee on Employer-Employee Relations held a hearing entitled, “Examining the Impact of State Mandates on Employer-Provided Health Insurance.”
Chair Sam Johnson (R-TX) stated, “In Congress, we have a civic obligation to make sure that the proposals developing in the states don’t override any federal laws. That’s especially true when it comes to health insurance because: one peoples’ lives are on the line and, two the laws that govern many health insurance plans are protected by a federal law, called ERISA.” He continued, “Let’s be clear: employer-provided health insurance is a benefit to the employee; it’s not mandatory. Governments who value freedom and free enterprise do not tell businesses how to operate.” Chair Johnson specifically expressed his opposition to the recently-passed Maryland law targeted at requiring companies with over 10,000 employees to pay the costs of health insurance for employees or provide a payment to the state to compensate for its health care coverage of low-income workers and families.
Rep. Donald Payne (D-NJ) spoke of the crisis of the uninsured and the impact of the rising costs of health insurance on low-income families. He stated: “The Institute of Medicine estimated that 18,000 Americans die unnecessarily each year because they lack health insurance…As we talk about this, I hope that we can keep in mind the families who are forced to decide between paying for cancer treatment and paying for their weekly groceries.” Rep. Payne cited a survey done by USA Today, the Kaiser Family Foundation, and the Harvard School of Public Health that found 62 percent of Americans who struggle to pay their bills have health insurance. He urged Congress to take action, but in the meantime asked that Congress stay “out of the way” of states that are trying to address the crisis.
Craig Garthwaite, research fellow in economics at the Employment Policies Institute, expressed his concerns with recent state efforts to reduce the number of uninsured residents: “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…the research reveals that where possible employers will pass the cost of mandated benefits onto employees through lower wages.”
Mila Kofman, associate research professor at Georgetown University, expressed her support for an examination of the interplay between ERISA and state-based reforms. “As states continue to find ways to address the health care crisis in the United States,” she said, “ERISA continues to present a number of challenges to state-based reform.” Ms. Kofman stated that health care coverage is expensive because medical care is expensive; we also are an aging population so we use more health care services. Ms. Kofman urged that greater attention be given to the “cost drivers,” as well as the need to develop a more equitable way to address the crisis. She expressed her support for state reform efforts, such as the plans approved in Massachusetts and Maryland, saying, “cost-shifting (for uncompensated care) costs over $40 billion per year and hurts employers that provide comprehensive and generous benefits. The cost-savings from eliminating uncompensated care that state initiatives like ‘fair share’ seek to accomplish will help those businesses.”
Ms. Kofman explained that many states have enacted programs in the past decade that have helped, such as high risk pools and reinsurance programs. Explaining that policymakers use benefit mandates to encourage people to receive preventive care, she specifically cited a wide range of benefits required in states: forty-six states require health insurers to cover diabetes supplies and education, twenty-seven states require cervical cancer screening, every state requires mammogram coverage and thirty-two states include coverage for well-baby care. She also noted that without mandates, optional benefits can drive up the cost of policies if only those who need them choose that coverage, or some services might not be available at all. Citing several specific examples, Ms. Kofman said, “in Washington State premiums for policies that covered maternity and mental health benefits were anywhere from 30 to 100 percent more expensive than policies that excluded those two benefits…in states that do not require maternity to be covered, an individual policy with a maternity rider is rarely available; and even when available, they price for a maternity rider is higher than paying for the average pregnancy out-of-pocket.” She asked federal policymakers developing new initiatives at the federal level to be very careful when considering proposals to expand ERISA; such efforts could hurt state programs to address the health insurance crisis.
Larry Drombettta, president and CEO of HR Stores Inc., a small business in Maryland, testified on behalf of the National Retail Federation. Mr. Drombetta voiced the federation’s support for employer-based health insurance coverage. His employees tend to be young and include part-time workers; he stated that two-thirds of retail workers are women. The cost of insurance for his company, which includes 35 employees, has increased by 155 percent over the past several years. Mr. Drombetta expressed concern that the younger members of his staff do not choose to be covered by the company health insurance plan out of the belief that they don’t need it, thereby limiting the pool of employees covered to older workers. That demographic drives up his rates, and it continues to go higher as his workforce ages, leading to a “health insurance death spiral.” Mr. Drombetta contended that legislating mandates amounts to an “ill-advised tax a tax on workers…and the economy in general.” He expressed the opposition of the federation to several state initiatives that would require smaller employers to pay a mandated amount toward employee health costs.
Paul Kelly, senior vice president of federal and state government affairs for the Retail Industry Leaders Association (RILA), which represents large retailers, expressed the association’s “adamant” opposition to state mandated benefits. He maintained that the state laws violate ERISA and do nothing to address the health care crisis. By removing flexibility for businesses by requiring them to provide mandated benefits, these “fair share” bills “chill” employer efforts to provide health coverage and competitive wages. Mr. Kelly argued that forcing employers to pay a specific amount does nothing to reduce health care costs; in Maryland, the law only affects a small percentage of uninsured workers in the state, and excludes state employees. The association is concerned that the Maryland law will be considered a model for other states, and has filed lawsuits to challenge the employer mandates in Maryland and Suffolk County, New York. RILA believes that ERISA is the key “lynchpin” for employers. Without the uniformity required, employers will be faced with a “hodgepodge” of state laws, causing confusion and disruption, jeopardizing employer-sponsored health care in this country.
After the testimony was completed, most of the discussion focused on whether state mandates should be curbed or encouraged. Chair Johnson asked the panel if association health plans (AHPs) would provide preventive care. Mr. Kelly responded that employees were free to spend as they choose, so they could choose preventive services.
Both Reps. Carolyn McCarthy (D-NY) and Betty McCollum (D-MN) expressed their opposition to AHPs. Rep. McCollum stated, “I am going to speak as a woman: with the AHPs, they offer no protection for women contraceptive protection, mammography, breast cancer, maternity coverage…AHPs that discriminate against women for their coverage in the USA, I just don’t see as acceptable.”
