State Cost-Control Reforms and ERISA Preemption

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The Commonwealth Fund





  • Issue: State legislators continue to pursue reforms aimed at reducing health care costs. But the federal Employee Retirement Income Security Act (ERISA) threatens enforcement of state laws that impact employer-sponsored health insurance, especially the self-funded plans that comprise 64 percent of employer-sponsored coverage. ERISA preempts state laws directly targeting these plans and stretches into topics with only a tangential relationship to employer insurance. Preemption dilutes states’ ability to collect data, control prices, and protect consumers.
  • Goals: Identify types of health care cost reforms states have pursued since 2019 and assess the ERISA preemption implications for those state reforms.
  • Methods: Survey state health bills relating to health care costs passed from 2019 to June 2021, identify common provisions, and analyze the ERISA preemption implications for those provisions.
  • Key Findings and Conclusions: States recently passed an array of reforms, mostly targeting prescription drug costs, provider reimbursement, consumer protection, data collection on health care spending, and insurance coverage. Many of these reforms are fully enforceable, but ERISA preemption threatens some popular measures as applied to employers’ self-funded plans. While recent Supreme Court precedents limit ERISA preemption’s application, the law still poses an obstacle to state cost-control reforms — whether ambitious or modest.

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