A warning for Colorado

Court ruling suggests several health-care plans violate federal law

The Rocky

Monday, December 31, 2007

The prospects for dramatic changes in Colorado's health-care delivery system got a little more murky last week, thanks to a court order issued by a federal judge in San Francisco.

That's a positive development, in our view. As we said two months ago, presidential candidates are giving medical reform a prominent role in the campaign. So any state legislation enacted in 2008 may well be pre-empted by federal action in 2009.

Next month, lawmakers are expected to begin reviewing five proposals that were selected this year by the Colorado Blue Ribbon Commission for Health Care Reform. As they do, they should keep in mind Wednesday's ruling by U.S. District Court Judge Jeffrey White.

The decision suggests that any state-based measures that affect workplace benefits could violate federal law. And this ruling is no outlier; federal courts in Maryland and New York have recently come to similar conclusions.

The implication for Colorado is that our lawmakers might be wasting their time if they craft reforms that affect employer medical plans.

White struck down a universal health-care program that was to take effect Jan. 1 because the measure violated the Employee Retirement Income Security Act, or ERISA. That's the federal law that gives Washington rather than states the right to regulate workplace benefit plans. ERISA was designed to prevent companies from having to satisfy a hodgepodge of state regulations when they set up pensions and other benefit packages.

The San Francisco system would have required employers to either provide comprehensive medical benefits to workers or pay taxes to subsidize the uninsured.

The court cited several ways the employer mandate ran afoul of ERISA: The benefit package would force some businesses to pay for medical coverage they haven't previously offered; the ordinance's record-keeping mandates would affect how employers managed their medical benefits; and the ordinance would require national employers to offer unique benefits to their workers in San Francisco.

If White is correct, then at least three of the five reform plans from Colorado's commission look suspect.

The single-payer proposal would establish a uniform package of medical benefits for every Coloradan and outlaw nearly all private insurance, invalidating health benefits offered by employers.

The "Plan for Covering Coloradans" has a "play or pay" employer mandate along the lines of the San Francisco system.

And even the fifth or hybrid proposal crafted by the commission might have ERISA issues because of how it lets workers deduct pre-tax money from their paychecks.

Several legal blogs have speculated that the only reason the medical plan in Massachusetts, which has an employer mandate, is still functioning is because it hasn't faced an ERISA challenge.

The lesson: Major policy fixes to the health care system will have to originate in Washington. And if Judge White's ruling stands, even small fixes that affect employers may need congressional approval.

• December 31, 2007

  9:28 a.m.

  Suggest removal

  RS writes:

  Good news! Those of us with "paid for life" health plans purchased through our voluntary military service (service-connected disabled veterans) will now be able to avoid the hideous levels of taxation we would have been expected to pay for benefits we already receive and paid for. Perhaps the focus will now move to those paying the bills instead of the singular focus on benefits to recipients regardless of the cost to the rest of us.