Federal lawmakers ought to tackle a number of issues, but revising the Employment Retirement Income Security Act is not one of them. ERISA is rare, a government program that works-and works well.
For now, federal lawmakers are focusing on issues other than pending managed-care regulation bills, some of which change ERISA. But managed-care regulation will be back.
ERISA was enacted in 1974 to encourage employers to offer health and retirement benefits to their employees by exempting self-insured companies from state laws governing the business of health insurance. Large national companies operating in many states no longer had to worry about complying with divergent sets of regulations. They had one federal standard and could offer a uniform benefits package.
In the high-inflation 1980s and early 1990s, many employers saw double-digit increases in their annual healthcare costs. But employers using ERISA plans often held their increases to less than half the increases paid by others.
ERISA's flexible framework helped them control costs by protecting the level of benefits for their employees. They created networks and approached providers to offer high patient volume for discounted fees. More than 125 million individuals are covered under ERISA plans today, according to 1997 data from the U.S. General Accounting Office and the Employee Benefit Research Institute. Congress should be leery of jeopardizing the coverage of millions of Americans.
If ERISA is dismantled and large employers cannot administer one cohesive benefits plan nationwide, cannot leverage their buying power to negotiate favorable rates at multiple locations and must face expanded liability and onerous new regulations, they may be forced to severely reduce or even abandon benefits now offered under ERISA.
Horror stories about alleged managed-care abuses have contributed to the push for managed-care regulation and ERISA changes. But many of those problems have stemmed not from denials of medical care but from misunderstandings or disputes about health plan coverage and exclusions. These problems should not be part of an ERISA debate.
Consumers are concerned about choice, control and access to quality healthcare and good outcomes. But ERISA is not the villain in those areas. In fact, ERISA and other federal regulations already include many consumer protections. The Department of Labor, which administers ERISA, has built appeals and grievance processes into the plans. The department has even proposed regulations that would tighten the time frame for appeals processes.
Liability under ERISA allows for reimbursement for a treatment that was denied but should have been covered, for example. But it does not allow for the huge punitive damages and pain-and-suffering awards that state tort laws do.
Employers would be reluctant to offer health benefits if they knew they could become a deep pocket in litigation and one bad case could mean bankruptcy. They aren't trying to shirk responsibility; they just don't believe state tort laws offer true consumer protection. In fact, dismantling ERISA might also cause an onslaught of lawsuits, many of which would be frivolous, further clogging our courts.
Disassembling ERISA would also increase bureaucracy and regulation. If an employer operates in several states and has to file documents in and follow different regulations for each state, that compliance would be expensive and burdensome. Those higher costs would then be passed to consumers.
Rather than restricting ERISA, Congress should give smaller employers, associations and other groups the same sort of incentives available under ERISA. These groups could aggregate their employees for insurance coverage.
Closing the "ERISA loophole," as some lawmakers call it, would increase health insurance costs for many workers-assuming they could get insurance-and increase the number of uninsured Americans. Congress would do better to focus on the 40 million uninsured Americans instead of adding to that total.
Smith is president and chief executive officer of First Health, a Downers Grove, Ill.-based company that provides group health and workers' compensation programs to national employers.