To cope with incipient coronavirus outbreaks, Washington and New York have announced emergency directives requiring insurers to cover COVID-19 testing without cost-sharing. The states recognize that high deductibles and other out-of-pocket payments discourage people from getting tested, which in turn threatens public health.
Both states have acted pursuant to laws governing the regulation of insurance. In Washington, for example, the state insurance commissioner is empowered to issue orders addressing “medical coverage to ensure access to care” when the governor declares an emergency. Similarly, New York’s Superintendent of Financial Services says that it will issue an “emergency regulation” to require insurers to cover testing without cost-sharing (though the precise authority to issue that regulation is a little vague).
But the directives are more limited in scope than they appear, and will provide no help at all to the approximately 100 million people nationwide who receive coverage through self-insured employers. As with so many problems that arise in health law, the reason is the Employee Retirement Income Security Act of 1974 (ERISA).
When Congress adopted ERISA, it wasn’t thinking very hard about health insurance. It was thinking about pension plans, which many employers had chronically underfunded, leaving retired employees high and dry. So Congress adopted ERISA to offer some basic protections for employees. In exchange, Congress preempted any state laws that “relate to” employee benefit plans.
Congress carved out an exception to ERISA’s broad preemptive scope for laws regulating insurance. That’s a domain that’s traditionally been left to the states. Washington and New York can thus tell private insurers—including those that offer employer-sponsored coverage—to abide by their emergency rules.
But lots of firms don’t actually buy insurance for their employees. Instead, larger firms usually “self-insure,” meaning that they pay for their employees’ health expenses themselves. (Odds are that, if you’re employed, you work at a self-insured firm—61% of people with employer-sponsored coverage do.) And ERISA clarifies that employers, when they self-insure, aren’t to be treated as insurers.
The upshot of this convoluted scheme is that the states can’t regulate self-funded employer plans. They’re regulated, instead, by the U.S. Department of Labor under ERISA. But because Congress didn’t think of ERISA as a regulation of health insurance, it didn’t authorize the kind of emergency health regulations that Washington and New York are now drawing on.
That’s one reason the federal government has looked so feckless when it’s tried to say that it will guarantee access to testing. Vice President Pence, for example, said yesterday that testing is an “‘essential health benefit,’ which means the test will be covered by health insurance plans, Medicare and Medicaid.” But the EHB rules don’t apply at all to large employers or to Medicare. Even if they did, insurers can (and do!) impose cost-sharing for EHBs, and could do so for a COVID-19 test. It’s a completely meaningless statement.
Nor can the federal government slide coronavirus testing into the part of the Affordable Care Act that requires coverage without cost-sharing for high-quality preventive services designated by the U.S. Preventive Services Task Force. Not only is that task force ill-equipped to move quickly, but the ACA says that its recommendations can only take effect after a “minimum interval” that “shall not be less than 1 year.” That’s much too late.
Unless I’m missing something, the federal government simply does not have the legal power to require employers to cover coronavirus testing without cost-sharing. The Association of Health Insurance Plans has said that its members may voluntarily waive cost-sharing, but they may not, and in any event AHIP doesn’t represent employers, who get to make the final call on what they do and don’t cover.
Congress will have to act—and it should act immediately to assure swift, reliable, and no-cost access to testing services. The broader lesson, though, is that Congress’s blunderbuss approach to preemption under ERISA has led to a situation in which neither the states nor the federal government is equipped to regulate the coverage practices of large, self-insured employers. That gap in legal authority could have pernicious consequences in the coming months.
