Updates to ERISA? Payers, hospitals share diverging recommendations with Congress

The Employee Retirement Income Security Act, or ERISA, is turning 50 this year and lawmakers are curious to hear about how the law could be updated to increase coverage affordability and care access.

Payers and providers, it turns out, have very different ideas on where Congress should focus its efforts.

In response to the House Committee on Education and the Workforce’s January request for information, lobbying groups representing both sides of the industry weighed in on the act that outlines federal guidelines for employee benefit plans, including employer-sponsored group health plans.

The ERISA Industry Committee (ERIC), which represents large employer plan sponsors, put its weight behind strengthening ERISA preemption to limit the impact of state-level mandates. These requirements can introduce conflicts from market to market and increase the burden for multi-state employers to design and administer level benefits to their workers, the group warned.

“The very foundation of ERISA is national uniformity and preemption from state regulation, and ERIC is committed to opposing the erosion of ERISA by state mandates on self-insured companies that offer ERISA plans,” the group’s President and CEO James Gelfand said in a release accompanying ERIC’s letter to the committee.

The American Hospital Association (AHA), meanwhile, took the call as an opportunity to critique the “dramatic vertical consolidation” corporate health insurers have achieved since ERISA was first signed into law. Large payers like UnitedHealth Group and Elevance, AHA wrote, often serve as third-party administrators for employers’ self-funded plans and so can participate in “harmful self-dealing” that reduces care options.

“The AHA also has concerns that self-dealing among vertically consolidated commercial insurers can be used to manipulate medical loss ratios (MLR) such that commercial insurers can keep a greater share of Americans' hard-earned premium payments,” the hospital group wrote in its letter.

Strengthened preemption, PBM transparency top payer asks

The committee’s information request had cast a broad net, calling for comments ranging from fiduciary requirements and transparency’s impact on plan transactions to cybersecurity and quality data sharing. Any resulting updates to the law would be slated to impact an estimated 153 million employees and dependents whose coverage is guided by the law.

For ERIC it was the preemption issue that, by volume, comprised more than half of its full response to Congress. ERISA “expressly prohibits” states or localities from forcing changes to plans established under ERISA, yet “despite ERISA’s statutory command, there is a growing wave of state and local laws that attempt to impose benefits design and coverage mandates, reporting, recordkeeping or other requirements and burdens,” they wrote.

Among these have been state pharmacy benefit manager (PBM) laws, state telehealth laws, state all-payer claims databases and coverage reforms through assessments on payers and state innovation waivers, ERIC wrote.

Failing to clamp down on these “will adversely impact labor markets, disadvantage employees based on where they live or work, cause employers to cut back on benefit coverage, and raise the cost of health benefits,” according to the letter.

Within the umbrella of reporting, ERIC advocated for expanding flexibilities around electronic delivery of health plan communications, increasing the transparency of PBM compensation sources and clarifying gag law attestation requirements in contracts between providers and plans.

ERIC also encouraged Congress to allow the industry to adopt cybersecurity practices “in real-time, rather than setting an overly-prescriptive government standard.” Further, it called out support for two pending bills in the legislature: the Lower Costs, More Transparency Act for provisions on PBM accountability and transparency as well as implementation of site-neutral payment policy and “honest billing requirements,” and; the Pharmacy Benefit Manager Reform Act, which includes policy linking PBM revenue to fees paid by pharmaceutical manufacturers.

Hospitals seek stronger commercial plan oversight, blocks to MLR manipulation

The AHA, speaking on behalf of member hospitals and healthcare providers, pushed Congress to consider updates on ways to “prevent health plans from prioritizing profits over patient care” while steering its focus away from additional statutory requirements for providers in areas like price transparency.

Commercial insurers’ vertical integration fueled the association’s concerns about patient steering, which they said can increase health system costs and lead to care decisions that “benefit the insurer financially when not in the best clinical or financial interest of the patient.”

Those concerns were funneled into Congress’ interest in potentially cutting back on MLR requirements to potentially increase insurers' incentive to reduce spending. The hospitals group pushed back on this consideration, writing that “to the contrary, AHA believes that insurers will continue to enrich themselves even more in the absence [of] an MLR standard.”

Further, AHA said it has “concerns” that large national insurers are using their in-house PBMs (e.g., CVS Caremark, Express Scripts and OptumRx) to game MLR requirements. AHA noted that pharmaceutical spending to vertically-owned PBMs contributes to a large portion of a payer’s MLR calculation but “is essentially the insurers paying themselves,” allowing the plans to “manipulate” the calculation for their own profit rather than directing the funds to beneficiaries “or otherwise directing them toward actual healthcare spending.”

“We urge policymakers to pursue solutions to increase oversight of the MLR as it relates to vertically integrated insurer conglomerates,” AHA wrote.

Elsewhere in its letter, AHA encouraged Congress to increase scrutiny of commercial insurer policies and practices that have led to an uptick of “inappropriate denials of care,” which the group said could constitute nonadherence to the fiduciary duties already set forth under ERISA. It also critiqued widespread payment delays affecting providers and urged lawmakers to add a federal standard for prompt payments for ERISA-regulated coverage.

On the other hand, AHA struck a similar tone as ERIC when it came to cybersecurity. The group said that the current rules laid out in the Health Insurance Portability and Accountability Act (HIPAA) are appropriate and that Congress should not make any major revisions or additions within ERISA.

If anything, AHA wrote that Congress “should enact full federal preemption for HIPAA, including for the ERISA-covered entities that are already subject to HIPAA” to create a uniform standard across the country.

Price transparency previously passed by Congress and being implemented by the Centers for Medicare and Medicaid Services are similarly sufficient, though AHA noted that the specifics within these rollouts could be better aligned and streamlined.

“We would therefore request that Congress refrain from advancing additional legislation that may further confuse or complicate providers’ ability to provide meaningful price estimates and potentially add unnecessary costs to the health care system,” AHA wrote.