The failure to pass a comprehensive federal healthcare reform bill has unleashed some pent-up demand for state-level reforms to cover the uninsured and control costs.
But state reform advocates are faced with a tall hurdle: the 1974 Employee Retirement Income Security Act. The law, known as ERISA, bars states from regulating employee benefits.
In fact, a recent report from the National Governors' Association described the act as a "roadblock to reform." In the report, the NGA called for greater flexibility under ERISA in the absence of national healthcare reform.
Hence, many state officials and some members of Congress are taking aim at ERISA in an attempt to loosen the law's hold on state governments.
For example, two senators have introduced federal legislation called the Health Innovation Partnership Act that would grant waivers to eight states with reform initiatives at risk because of ERISA (See chart). The sponsors are Sens. Robert Graham (D-Fla.) and Mark Hatfield (R-Ore.).
But not everyone favors the relaxation of ERISA's restrictions. Some lobbyists on Capitol Hill have been sporting buttons that read "ERISA waivers mean mandates."
Big employers opposed.The lobbyists are working for the business sector and, specifically, large multistate employers, which will face a number of different state health insurance regulations if ERISA restrictions are lifted and state reform advocates have their way.
Speaking at a Sept. 29 conference in Washington sponsored by the National Employee Benefits Institute, Sen. David Durenberger (R-Minn.) issued a warning to the private sector to get its act together on ERISA. He chided the business community for lobbying against national reform while not pushing a reform agenda of its own.
If business sits back, state reform efforts may gain ground, especially if states are freed from their ERISA shackles, he said.
"Once you give the states the license to tax and (impose) employer mandates, in effect, you have (the) Clinton (plan) by the back door," Mr. Durenberger said. "The debate at the state level is always portrayed as giving healthcare to people who don't have it, at somebody else's expense. How ordinary people end up paying for it gets lost at the state level."
Mr. Durenberger also said some of the business sector's allies in Congress in the fight against reform could become adversaries because many of them support states' rights and could back granting states more flexibility.
Single-payer opportunity.Also pressing for ERISA reform may be Democrats who wanted national reform but now see an opening in state reform initiatives, such as California's ballot initiative on a state single-payer plan.
"It's not hard for a Republican to say yes to some kind of ERISA waiver, and it's easy for a Democrat," Mr. Durenberger said.
A leading single-payer supporter is Sen. Paul Wellstone (D-Minn.), who also spoke at the Washington conference in support of ERISA reforms. "I think we're a grass-roots political culture. I think states are the laboratories of reform," he said.
An advocate of national health insurance, Mr. Wellstone believes states should have the right to pursue single-payer options or managed competition.
But large multistate companies could be the losers in an ERISA-waiver movement because they could be forced to comply with numerous, and potentially inconsistent, state laws.
"It creates huge problems for business development in the states," said Larry Atkins, coordinator of the Corporate Health Care Coalition, which consists of 24 Fortune 100 companies that supported employer mandates in a national healthcare program.
As shown by this year's reform debate, those employers have significant clout, leading some insiders to conclude that Congress will never vote for waiving ERISA for the states.
"The problem with state flexibility is that everybody's for it, until they find out who's against it," said a Senate staff member. "Then they get the phone call from IBM or Boeing."
But large employers also have made some enemies with their opposition to national reform, which could hurt their chances of fending off a state-flexibility movement.
"No one's looking to help them out," said John Rother, a lobbyist for the American Association of Retired Persons.
States want opportunity.State
officials also have clout, and the governors have staked out a strong position in the NGA report about the need to give them more flexibility.
The recent NGA report concluded, "If states are willing to withstand the political pressures and assume the potential economic impacts of businesses or individuals subject to new taxes relocating, they should be permitted the authority to finance and regulate healthcare within their borders."
Mr. Atkins said state governments are more than just interest groups in the reform debate, and also must be sensitive to the concerns of the large employers.
"States are political institutions too," Mr. Atkins said. "Nobody wants to go to war over this."
One lobbyist for small and medium-sized insurance companies said ERISA modifications could be the battle royal of the next session of Congress.
"I think they're going to go at each other big time," said Duane Parde, director of state affairs for the Council for Affordable Health Insurance, Alexandria, Va.