Large Companies Would Be Exempt From Insurance Regulations, Under Baucus Bill

On September 16, Sen. Jay Rockefeller (D-WV) announced that he would not vote for the Senate Finance Committee’s health care bill unless the committee replaced the network of cooperatives with a robust public option, increased the threshold on the excise tax, restored the CHIP program (the reform bill folded it into the Exchange), improved affordability measures, and regulated self-insured plans.

This last demand may be the least understood and most complicated aspect of health care reform. The Senate Finance Committee’s legislation does not require large employers that self insure to abide by the same rules and regulations as insurers operating in the Exchange or the individual health insurance markets. As Rockefeller explained during mark-up, “you are grandfathering in an unfairness in the insurance market, where you treat 50 percent of the American people in one way…and 46 percent in a very favored way without restrictions, without discipline.” “Most people don’t know that they are treated so differently. Most people don’t know that they have these restrictions on them,” Rockefeller said. Watch it:

Self-insured plans — which are regulated by a law called ERISA — do not have to accept Americans with pre-existing conditions, or remove caps on out-of-pocket or lifetime expenses. “As many as 73 million people, or 55% of those who get insurance through private-sector jobs, are covered in self-insured plans, according to the non-partisan Employee Benefit Research Institute. Workers are often not aware their plans are self-insured because employers hire insurance companies to process claims.”

Congress enacted ERISA in 1974 to allow companies operating across state lines to offer uniform benefit packages. The law establishes minimum standards for pensions, but allows self-insured companies to elude both state and federal regulations.

The initial draft of ERISA exempt employee benefit plans for health and pension from state laws, but subject self-insured companies to existing state regulations. Large corporations would have to abide by the consumer protections of the various states, or so it seemed. Before the final floor vote, Congress folded to big-business demands and inserted the so-called “deemer” clause, barring “self-funded plans from being considered insured plans subject to state insurance regulations.” Suddenly, self-insured companies were exempt from federal and state regulations. The fix was in.

Rockefeller has offered an amendment (C1) to apply health insurance market reforms to the large group and self-insured market. Large corporations are already lining up in opposition.

On Friday, the US Chamber of Commerce chief lobbyist Bruce Josten “sent out a memo this afternoon listing three ‘dangerous amendments’ the business community should weigh in on before the committee gets back to work on Tuesday.” Rockefeller C1 is the most dangerous:

This amendment will significantly and adversely impact larger employers and self-insured plans and the millions of Americans who count on their employer provided health coverage. The federal uniformity standard under ERISA (also known as the “preemption” standard) is critical to our health care system, especially the 170 million Americans receiving coverage from the employer-based system. Its hallmark feature is that it allows employers to offer uniform benefits to their employees, retirees and families without being subject to the conflicting patchwork of mandates, restrictions and costly rules that vary from state to state….This amendment would jeopardize employers’ ability to offer uniform national plans without interference by contradicting state rules. Benefits costs could soar.

But Rockefeller’s amendment would presumably subject self-insured plans to the new federal regulations, permitting large corporations to continue offering uniform plan. The Committee is expected to consider Rockefeller’s amendment this week.