Congressman Introduces ERISA Reform

It is estimated that 60% to 70% of American people who have health insurance have a plan which falls under the provisions of the Employee Retirement Insurance Security Act of 1974 (ERISA). ERISA was designed to protect and enhance pensions and benefits for employees of nationwide companies, and was heavily lobbied for by business as more and more employers established facilities in multiple states.

Companies found that as they tried to develop retirement and pension plans for their employees, they had to deal with 50 different sets of state rules. Labor unions supported ERISA because of the difficulty of negotiating multistate contracts and conforming to 50 different sets of labor laws. ERISA solved this problem for labor and business by preempting all of the state laws concerning retirement and pensions, and replacing them with a single, simplified set of federal regulations for those employers who operate across state lines.

As it was originally fashioned, ERISA was not intended to address health care benefits, but in a session after the bill had been passed and was going to the conference committee, the committee members decided to include health benefit provisions. This means that all of the health regulations concerning ERISA-covered health insurance plans in all 50 states are preempted. They have no effect on ERISA plans. There is no appeal process, and further, ERISA also preempts medical malpractice law. Because medical malpractice is a tort, it can only be heard in state courts; since there is no provision in federal law for medical malpractice to be heard, individuals covered by ERISA-run plans are unable to sue for medical malpractice.

On April 23, 1997, Rep. Charlie Norwood (R-Ga.) introduced the Patient Access to Responsible Care Act (PARCA), H.R. 1415 and S. 644. PARCA is designed to provide a number of things for physicians as well as consumers. Perhaps key are consumers' ability to sue health insurance plans that cause injury or death through denial or restriction of care; and the ability to appeal the decisions of their health insurance plan, both with officials from the plan and with outside arbitration if necessary.

Under PARCA, physicians will no longer be bound by gag clauses in contracts and must be provided reasonable notice if they are to be dropped from participation in a plan, and allowed to appeal the decision. All doctors and hospitals must have the freedom to apply to enter a health plan contract, and insurance companies must develop standardized qualifications for determining participation.

The Norwood bill is broader than most other managed care proposals, and has generated concern among managed care companies and firms that are self-insured. Lobbyists for the insurance industry released an actuarial analysis on the cost of implementing PARCA. According to the report, PARCA would increase costs for health insurance by 7% to 9%. The report estimated an increase in premiums based on a mandatory point-of-service option. PARCA calls for employees currently offered only a closed network plan to be given the choice of a point-of-service plan, and the employee would pay the additional fair market value for the plan if they choose to enroll.

Consumer Protection

In a statement to the Subcommittee on Health and Environment of the House Commerce Committee, the Health Insurance Association of America (HIAA) discussed issues related to consumer protections in the health care industry, liability among them. The HIAA stated that legislation encouraging litigation in the health care arena would allow consumers to not only sue their physician for malpractice, but pass liability for medical outcomes onto health plans and third party administrators. They claimed that litigation is not a way to improve quality of care, and punitive damages do not improve medical outcomes.

In answer to self-insured employers' fear of being sued as the administrator of a health plan, Norwood introduced H.R. 2960, a stand-alone bill to reform ERISA, on Nov. 8, 1997. It contains measures similar to PARCA, but features amended language to specifically address employers' concerns that reforming ERISA preemption of medical malpractice laws could result in legal liability for them if they provide self-insured health plans to employees.

The new bill, the Responsibility in Managed Care Act, does one thing, John Stone, Norwood's communications director, told Psychiatric Times. "It does not overturn the ERISA preemption of all state law. It simply says that medical malpractice is not preempted by ERISA. If a health insurance company denies, delays or restricts promised care in their contract and that results in damages, the member can sue under state law for medical malpractice. It specifically protects employers from liability."

According to Stone, that is a key point. Only those people making specific medical decisions on an individual case basis would be liable for medical malpractice. The bill is also very clear that it does not mandate any particular coverage of a managed care plan.

"Employers can still design a rock-bottom price policy that covers very few things," said Stone, "but if they promise in their contract to provide a given service and they deny, delay or restrict access to that service, then they are responsible.

"There were a number of conservative members of Congress who said they recognized the need for ERISA reform, but took exception to other parts of [PARCA]. We've broken out the ERISA portion, clarified the language so we can make certain that everybody understands that employers are not to be made liable for this, and further that insurance companies who are sued for medical malpractice are prohibited from seeking damages against the employer through a secondary suit."

Norwood hopes that this new bill will get through committee during the next session of Congress, which began Jan. 27, but makes no prediction on when it will come up before the full House. In a statement to the press supporting his new bill, he said, "Anyone in this country who makes a medical decision concerning the care given to an individual patient should be held accountable."