One of the advantages of self-insurance is the avoidance of state insurance regulations. Federal law provides that with certain exceptions, ERISA preempts “any and all state laws insofar as they relate to any employee benefit plan.”
Many employers manage employees in multiple states, and even if their employees are in a single state, adopting a self-insured arrangement avoids complying with complex and costly state mandates. As states seek to manage the upwardly spiraling costs of healthcare, there are a number of new burdens being placed on employers. A recent SCOTUS 6-2 ruling disallowed a Vermont database reporting mandate, and reaffirms that states will not be permitted to impose requirements on these ERISA governed plans.
More and more companies will be looking to switch to self-insurance to avoid state mandates and costly state imposed taxes and fees. This ruling has been a welcome relief. When political candidates stump for selling insurance across state lines these are the mandates and taxes that create the barrier.
Interestingly, ACA requires that in order to be compliant, a plan must adopt “Minimum Essential Benefits” designated by the state in which the plan is situated. Since self-insured plans are exempt from state law, ACA allows them the choice of state for which they would like to follow Minimum Essential Benefits guidelines. This is a costly decision when it comes to benefits like infertility and autism-spectrum ABA treatment. Most advisors recommend Utah, the state with the most lenient coverage mandates, as the state of choice to follow. It’s a struggle for employers to grasp Utah; like most of healthcare, it adds confusion to a complex system.
