Using ERISA to Improve the Efficiency of Medicaid Expansion Programs

Barbara J. Zabawa, J.D., M.P.H.

University of Wisconsin Law School

To be published in the 2001 Fall edition of the Quinnipiac Health Law Journal

Why Health Insurance Matters

• According to a 1999 Wisconsin Health Survey, 85% of those who were insured all year saw a medical doctor in the past year, compared to 58% of those uninsured.

• A 2000 KFF Survey found 39% of those without health insurance skipped a recommended test or treatment, compared to 13% of those with health insurance.

Wisconsin’s BadgerCare Program

• A Medicaid Expansion Program, made possible under 1997 SCHIP Legislation (Title XXI), started in July 1999.

• Purpose: “to eliminate barriers to successful employment by providing a transition for families from welfare to private insurance” (emphasis added).

Wisconsin’s BadgerCare Program

BadgerCare Enrollment by Category (August 2001)

Enrollees Up to 150% of Federal Poverty Level

Over 150% of Federal Poverty Level

Total BadgerCare Enrollees

Children 19,409 5,383 24,792

Parents 53,195 6,654 59,849

Total by Category 72,604 12,037 84,641

Additional Medicaid ChildrenCovered During August = 51,635

Wisconsin’s BadgerCare Program

• Ineligible if one has current access to employer-sponsored health insurance for which the employer pays at least 80% of the cost of the plan or had such access for the preceding 18 months prior to applying for BadgerCare.

• Applicants who have access to an employer-sponsored plan that pays between 60%-80% of cost of group plan may be eligible for the Health Insurance Premium Payment (HIPP) Program.

Importance of Employer-Based Coverage

• Programs like BadgerCare hope to partner with health care purchasers, particularly self-insured employers, through the HIPP Program; HIFA waiver.

• The National Governor’s Association adopted a bipartisan policy to combine Medicaid with private health insurance.

• 85% of recently surveyed adults by the Commonwealth Fund preferred government assistance in affording employer-based health insurance, rather than expanding public programs.

Importance of Employer-Based Coverage

National Statistics (Non-Elderly):

• 71% have private/employer-based coverage

• 11% have Medicaid• 18% are uninsured

Wisconsin Statistics (Non-Elderly):

• 81% have private/employer-based coverage

• 8% have Medicaid• 11% are uninsured

Verifying Employer-Based Coverage

• Most employers cooperate with the state’s verification efforts (66% return rate of the EVIC form).

• Some employers may not cooperate, however, particularly if administratively burdensome.

• No current follow-up on self-insured employers (which employ approx. one-half of employees in Wisconsin). Applicants remain in BadgerCare.

Verifying Employer-Based Coverage

• Verification of all employer-based coverage is essential to avoid crowd out and “dual coverage.”

Anecdotal Examples:• Discharged employee of self-insured employer not

worried about losing health coverage because on BadgerCare, even though employer had been paying for coverage on its plan;

• An employee’s ex-wife went on BadgerCare (dependents required), so employee asked employer to drop his family coverage;

Verifying Employer-Based Coverage

• State-mandated collection of employer health plan information may result in more complete information.

• ERISA, particularly the “deemer clause,” generally prohibits states from regulating employee benefit plans (§ 514(b)(2)(B)).

• The NGA recognizes ERISA as a barrier in “requiring all health plans to provide states with information crucial to developing a comprehensive understanding of the status of the states’ health care access and delivery systems.”

ERISA Basics

• § 514(a) preempts state laws as they relate to any employee benefit plan (29 USC § 1144(a)).

This means ERISA supersedes state laws that:1. Directly refer to ERISA plans (i.e., employer-

based plans) by imposing obligations on them;2. Regulate same areas as ERISA plans (e.g.,

reporting, disclosure or remedies);3. Regulate an ERISA plan’s benefits, structure or

administration.

ERISA Basics

§ 502(a) – Preemption if state law creates an alternative remedy to what ERISA offers, which includes:

1. Recovering benefits due to beneficiary under terms of plan;

2. Enforcing rights under terms of plan;

3. Clarifying rights to future benefits under plan.

ERISA Basics

• State law requiring employer to submit health plan information would not be an alternative remedy, since ERISA already requires employers to provide plan beneficiaries such information in its Summary Plan Document (SPD). No preemption under § 502(a).

• Issue is whether states can step in shoes of plan beneficiary and request SPD information directly from employer. A § 514(a) preemption issue.

Three Legal Arguments to Help States Access Employer Health

Plan Information

1. § 514(d) – “other federal laws exception”

2. § 514(b)(7) – QMCSOs3. § 514(b)(8) – Title XIX

preemption exception

Strongest

Weakest

§ 514(d) – Other Federal Laws

• State laws enacted to enforce federal laws are not preempted by ERISA (Shaw v. Delta Airlines, Inc. 463 U.S. 85, 104 (1983)).

• If states try to access employer health plan information to expand health coverage through SCHIP-funded programs such as BadgerCare, then states could argue that requiring such access is necessary to comply with SCHIP.

Relevant SCHIP Provisions• SCHIP prohibits use of SCHIP funds on children

who could be insured through an employer plan but for a contract provision that excludes SCHIP program-eligible children from an employer plan (42 USC § 1397ee(c)(6)(A)).

• SCHIP also requires states to submit a plan to DHHS describing how SCHIP programs will not substitute for coverage under group health plans (42 USC 1397aa(b)(1)), and how states will accomplish coordination of SCHIP programs with other public and private health insurance programs (42 USC 1397bb(b)(3)(C)).

Bottom Line for § 514(d) Argument:

• Without access to ERISA plan information, states will not be able to meet these SCHIP conditions.

**Note: as strong as this argument may be, Congress did not amend ERISA under SCHIP. In fact, Congress specifically stated that SCHIP did not affect or modify ERISA with respect to any group health plan.

QMCSO Exception - § 514(b)(7)

• Exempts from preemption laws passed in relation to QMCSOs.

QMCSOs – medical support orders usually attached to child support orders. OBRA 1993 amended ERISA to give states authority over employer health plans as they involve coverage of children of employer health plan participants (e.g., noncustodial parents).

QMCSO Exception - § 514(b)(7)• As of October 1, 2001, QMCSOs take the form of

the National Medical Support Notice (NMSN). • Upon receipt of a qualified NMSN, ERISA plan

administrators are required to: (a) notify state child support agencies within 40 business days whether coverage under ERISA plan is available to the child (29 USC 1169(a)(5)(c)(ii)(I)); and (b) provide more detailed health plan information, such as the plan’s SPD (65 Fed. Reg. 82,128, 82,131 (Dec. 27, 2000)).

QMCSO Exception - § 514(b)(7)

Accessing this employer health plan information will be limited:1. To only those plans affected by medical child support orders **Note: 21 million children nationwide are subject to medical child support orders;2. By the lack of coordination between state child support agencies and state Medicaid agencies.

TITLE XIX ERISA Preemption Exception

• In Wisconsin, when state provides Medicaid services (including BadgerCare) to a participant in an employer-sponsored plan, the Medicaid recipient assigns their rights to the state (Wis. Stats. § 49.493, see also ERISA §§ 514(b)(8) and 609(b)(3)).

TITLE XIX ERISA Preemption Exception

In the Upholsterer’s case, the court stated such assignment transfers to the assignee “all the rights, title or interest of the assignor in the thing assigned, but not to confer upon assignee any greater right or interest than possessed by the assignor.” (Wis. Dept. of Health and Soc. Serv. V. Upholsterer’s Int’l Union Health and Welfare Fund, 686 F.Supp. 708 (W.D. Wis. 1988)).

TITLE XIX ERISA Preemption Exception

• Under ERISA § 502(a)(1)(B), a plan participant can sue an ERISA plan to recover benefits due, so the state Medicaid agency could do the same as the assignee.

• ERISA § 502(a)(1)(B) also allows one to enforce rights under the plan. One right is to submit a written request for a copy of the SPD. Under the assignment argument, the state could also request a copy of the SPD on behalf of those enrolled in Title XIX programs, like Medicaid and BadgerCare.

TITLE XIX ERISA Preemption Exception

**Note: There may be some issues as to whether programs like BadgerCare, which use SCHIP funding in addition to Title XIX funding, are “Title XIX” programs.

Conclusion• States may not need these legal arguments if they

can establish cooperative relationships with employer-based plans.

• However, if state requests for information become too administratively burdensome, states may find themselves requiring employers to submit health plan information on a regular basis.

• These three ERISA loopholes may facilitate such employer requirements and enhance states’ ability to mix public and private health coverage plans in order to reduce the number of uninsured.