While federal health reform sputters, states have begun to pursue their own transformative strategies for achieving universal coverage, the most ambitious of which are state-based single-payer plans. Since the passage of the Affordable Care Act in 2010, legislators in twenty-one states have proposed sixty-six unique bills to establish single-payer health care systems. This paper systematically surveys those state legislative efforts and exposes the federalism trap that threatens to derail them: ERISA's preemption of state regulation relating to employer-sponsored health insurance. ERISA's expansive preemption provision creates a narrow, risky path for state regulation to capture the employer health care expenditures crucial for financing a single-payer system. While this paper illustrates how state proposals may survive ERISA, the threat of preemption drives states to structure their plans in convoluted ways that may undermine other systemic goals such as universality, solidarity, and streamlined administration.
This analysis demonstrates how ERISA's uniquely broad preemption, coupled with its lack of waiver authority, elevates the interests of private employers above those of sovereign states and diminishes states' abilities to serve as laboratories of health reform. We argue that this moment in health reform demands ERISA preemption reform. To restore balance to health care federalism and pave the way for state reforms of all kinds, this paper proposes federal legislative and jurisprudential solutions: amendments to ERISA's preemption provisions, the addition of a statutory waiver, and/or a reinterpretation of ERISA preemption consistent with congressional intent and the presumption against preemption.
INTRODUCTION I. STATE SINGLE-PAYER PLANS A. The Recent Proliferation of State Single-Payer Proposals B. How State Single-Payer Plans Capture Employer Health Expenditures 1. Type A--Funding Plan 2. Type B--Provider Restriction 3. Type C--Assignment, Subrogation, Secondary-Payer 4. Summarizing the Models to Capture Employer Spending II. ERISA'S OBSTACLES TO STATE SINGLE-PAYER PLANS A. The ERISA Preemption Labyrinth 1. Provider Regulation 2. Employer Contributions 3. Insurance Regulation Versus Self-Funded Plans B. State Single-Payer Plans Under ERISA 1. Type A--Funding Plans 2. Type B--Provider Restriction 3. Type C--Assignment, Subrogation, Secondary-Payer 4. Nonduplication Provisions C. Drafting ERISA-Resistant Single-Payer Legislation III. ERISA REFORM AS HEALTH REFORM A. The Federalism Trap B. Clearing a Path for State Health Reform 1. Altering ERISA's Preemption Provisions 2. Adding an ERISA Waiver 3. Shoring up ERISA Preemption Jurisprudence CONCLUSION APPENDIX A: STATE SINGLE-PAYER PROPOSALS, 2010-2019 APPENDIX B: SEARCH METHODOLOGY TO IDENTIFY STATE SINGLE-PAYER BILLS INTRODUCTION
The Affordable Care Act (ACA) marked a seismic shift in the U.S. health care system. It dramatically increased coverage, enlarged the federal role in the regulation of private health insurance, and altered the public's expectations and belief that everyone should have access to affordable coverage that does not discriminate on health status. (1) Yet the ACA did not produce universal coverage, and as a federal settlement of health system regulation and design, it has proven unstable due to political and legal attacks undermining its effectiveness at health care coverage and cost control. (2) Still, a feasible federal replacement for the ACA has proven elusive.
Rather than wait idly by for federal progress, states have picked up the momentum on health reform, spurred both by necessity and an appetite for policy innovation. Of necessity, states have turned to their own reforms in response to federal governmental attempts to undermine the ACA's coverage and cost-containment policies since the Trump Administration took power in 2017. (3) States also are testing different models and serving as laboratories for alternative ways to pay for health care, including some ambitious proposed experiments in single-payer plans. While federal single-payer reform under "Medicare-for-All" (4) gains support and attention, (5) state legislators quietly have drafted and introduced dozens of single-payer bills.
This project surveys state efforts from 2010 through 2019 to establish single-payer health care, which we define as legislative attempts to achieve universal health care coverage for all residents in a state by combining financing for all health care services into a single, state-administered payer. (6) State legislative proposals to establish single-payer plans have been surprisingly robust both in volume and variation, with sixty-six unique single-payer bills introduced across twenty-one states since 2010. (7) Though state single-payer proposals also face steep political, practical, legal, and financial challenges, (8) the volume and detail of state bills suggest many of these are serious, nonsymbolic efforts. Our research particularly focuses on how these states seek to capture the employer-sponsored health insurance that currently covers forty-nine percent of Americans--a critical market for the solvency and viability of any single-payer plan. (9)
Even if individual states can muster the political will and popular support to pass single-payer bills, a federalism trap threatens to thwart their transformative experiments: the Employee Retirement Income Security Act of 1974 (ERISA), (10) a federal statute governing employer-based benefit plans. When state laws conflict with federal ones, preemption doctrine generally displaces the state law in favor of the federal. (11) But the express statement of preemption in ERISA sweeps even further, purporting to invalidate "any and all" state laws that "relate to" an employee benefit plan, not merely those which unavoidably conflict. (12)
This indeterminately broad preemption language in ERISA, combined with an obscure "savings" clause for state regulation of insurers and an equally obscure "deemer" clause interpreted to prohibit states from regulating employer benefit arrangements that mimic insurance, has spawned voluminous litigation and derailed state health reforms for decades. (13) States, for example, may not impose their own "employer mandates" to provide health benefits due to ERISA preemption; they therefore mostly had to wait for federal legislation (the ACA) to impose them. As another example, state laws establishing mandatory minimum health benefits "relate to" employer-provided health benefits; the "savings" clause avoids preemption when states enforce these minimum benefits laws against insurance companies selling insurance to employers, yet the "deemer" clause preempts their application to employers who self-insure their own health benefits. (14) ERISA preemption thus raises a daunting legal challenge and uncertainty for states trying to capture critical employer-based health spending and draw those with employer-based coverage into the single-payer system.
States are tying themselves in knots to avoid ERISA preemption in their health reforms. The state single-payer bills we studied feature several innovations to accomplish indirectly what ERISA prohibits them from doing directly, namely to mandate that employers participate in and cover all their employees through the state's single-payer plan. (15) State single-payer bills contain at least three types of provisions to capture employer health expenditures and move enrollees into the system: (A) funding plans that use payroll taxes, income taxes, or both to raise revenue to pay for the single-payer plan and to encourage employers and employees to shift from employer-based coverage to the state single-payer plan; (16) (B) provider regulations that restrict participating providers from billing any third party other than the single-payer plan at single-payer rates; (17) and (C) assignment/subrogation/secondary-payer provisions that allow the single-payer plan to pay for services for enrollees with dual coverage, and then seek reimbursement from the collateral source of coverage. (18)
This Article comprehensively catalogues state single-payer proposals and analyzes whether ERISA would preempt state efforts to capture the employer expenditures. There are strong arguments why each of these three types of provisions (A-Funding Plan; B-Provider Restriction; or C-Assignment/ Subrogation/Secondary-Payer) should survive ERISA preemption. But courts' unpredictable, tortured, and at times contradictory application of ERISA casts a pall of uncertainty over their durability and invites litigation. (19) Legal uncertainty amplifies the political challenges of establishing a state single-payer system because policymakers may struggle to pass such a sweeping legislative reform if key parts may be preempted. (20) ERISA preemption targets the primary funding provisions in these bills, further threatening the economic modeling and revenue stream upon which single-payer plans depend. Legal uncertainty over ERISA preemption thus narrows the eye of the political and economic needle a state must thread to establish single-payer health care.
ERISA is also an interloper in federal health insurance regulation--an employee-benefits statute not originally intended to govern health care, but which now exerts a powerful influence over it. Unlike most major federal health care statutes including Medicare, Medicaid, and the ACA, ERISA does not provide for waiver, state experimentation, or federal funding. (21) The Department of Labor, which administers ERISA, lacks the statutory authority to waive its preemption, even if the Department finds it would be beneficial. (22) Nor will the agency's enforcement discretion save a state's single-payer provision from preemption because employers or third-party administrators can raise ERISA preemption through litigation, enforced by courts.
The combined effect of ERISA's extremely broad preemption provision and its...