EBRI Issue Brief

State Initiatives in Health Care Reform

Jun 1, 1992 38  pages


  • Many states are actively considering health care reform; however, most proposals still face barriers. Reallocation of health care costs due to reform provides an incentive for employers who face higher costs to move out of the state. Individual states may not have a sufficient tax base to implement and sustain reform measures.
  • State attempts to regulate employers who self-insure raise significant issues related to the Employee Retirement Income Security Act of 1974 (ERISA). To be effective, most state proposals would require Congress to waive ERISA preemption. Congressional consideration of waiver requests could result in revisiting the issue of ERISA preemption.
  • A federal district court ruled May 27, 1992 that ERISA preempts a New Jersey hospital rate-setting law that would require self-insured health plans to pay surcharges to cover the costs of care provided to the poor. The ruling could have a dramatic impact on numerous state reform efforts.
  • In 1991, there were 992 state mandates requiring that certain benefits be included in health insurance plans. These mandates have been criticized as making insurance unaffordable for small employers. Consequently, many states have passed basic benefits laws or bare bones laws that exempt enrollees from most mandates.
  • Insurance reforms are attractive to states because they are consistent with the states' traditional role as regulator of insurance and rely on the private sector to expand coverage, thus appearing not to place large burdens on state budgets. Their effectiveness in expanding coverage is problematic, however, and their ultimate impact on state budgets is unclear.
  • In the absence of national reform, individual states will continue to affect their local health care delivery system through regulation of health insurance and health providers. Employers and other purchasers of health care services who are active in more than one state are likely to find increasing diversity across local health care service markets.