Question: Are ERISA self-insured health plans required to provide coverage for state insurance mandates?
Compliance Team Response:
State insurance mandates do not apply to self-insured health plans subject to ERISA.
For these purposes, “self-insured” refers to any plan option that is not fully insured. For example, a level-funded plan is treated as a self-insured plan for these ERISA preemption purposes.
There are a few basic rules to be aware of:
General Rule: ERISA Express Preemption
ERISA expressly preempts state laws that relate to ERISA employee benefit plans.
In general, this means that state laws relating to ERISA employee benefit plans are not enforceable against the plan. Federal law (ERISA) preempts the enforcement of such state laws.
The Savings Clause: Fully Insured Plans
One major exception from the general rule is that ERISA does not preempt any state insurance laws for a fully insured plan. In other words, state insurance law applies to regulate the terms of an employer-sponsored fully insured group health plan.
This exception is typically referred to as the “Savings Clause” from ERISA preemption. State insurance mandates are “saved” from ERISA preemption with respect to a fully insured plan.
Employer-sponsored group health plans that are fully insured must therefore provide the state insurance coverage mandates of the state where the policy is sitused.
The Deemer Clause: Self-Insured Plans
Self-insured plans are not subject to any state insurance mandates because ERISA confirms that self-insured plans cannot be treated as subject to state insurance law.
This is typically referred to as the “Deemer Clause” in ERISA preemption. Self-insured plans cannot be “deemed” to be an insurance policy subject to state insurance mandates.
Employer-sponsored ERISA group health plans that are self-insured are therefore not subject to any state insurance coverage mandates.
Federal Mandates: Fully Insured and Self-Insured Plans
Federal coverage mandates will apply to both fully insured and self-insured employer-sponsored group health plans. However, such federal mandates are far less extensive than state insurance mandates.
The main federal mandates that apply to all ERISA employer-sponsored group health plans are:
- Newborns’ and Mothers’ Health Protection Act (NMHPA): Prohibits plans from restricting coverage for certain lengths of hospital stays in connection with childbirth.
- Women’s Health and Cancer Rights Act (WHCRA): Requires certain plan coverage reconstructive surgery associated with a mastectomy.
- ACA Non-Grandfathered Plan Preventive Services Mandate: Requires plans to provide certain preventive services without cost-sharing.
- ACA Non-Grandfathered Plan Clinical Trials Mandate: Requires plans to cover routine patient costs associated with clinical trials.
- ACA Small Group, Fully Insured, Non-Grandfathered Plan Essential Health Benefits Mandate: Requires plans to cover ACA-defined essential health benefits.
Fully insured employer-sponsored group health plans must include state insurance coverage mandates. Self-insured employer-sponsored group health plans subject to ERISA do not have to include any insurance coverage mandates.
More Information Regarding ERISA Preemption
For more information on ERISA preemption, see our previous ABD Compliance FAST: ERISA Preemption of State Court Orders.
(a) Supersedure; effective date.
Except as provided in subsection (b) of this section, the provisions of this title and title IV shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 4(a) [29 USC §1003(a)] and not exempt under section 4(b) [29 USC §1003(b)]. This section shall take effect on January 1, 1975.
(b) Construction and application.
(1) This section shall not apply with respect to any cause of action which arose, or any act or omission which occurred, before January 1, 1975.
(A) Except as provided in subparagraph (B), nothing in this title shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities.
(B) Neither an employee benefit plan described in section 4(a) [29 USC §1003(a)], which is not exempt under section 4(b) [29 USC §1003(b)] (other than a plan established primarily for the purpose of providing death benefits), nor any trust established under such a plan, shall be deemed to be an insurance company or other insurer, bank, trust company, or investment company or to be engaged in the business of insurance or banking for purposes of any law of any State purporting to regulate insurance companies, insurance contracts, banks, trust companies, or investment companies.
Disclaimer: The intent of this analysis is to provide the recipient with general information regarding the status of, and/or potential concerns related to, the recipient’s current employee benefits issues. This analysis does not necessarily fully address the recipient’s specific issue, and it should not be construed as, nor is it intended to provide, legal advice. Furthermore, this message does not establish an attorney-client relationship. Questions regarding specific issues should be addressed to the person(s) who provide legal advice to the recipient regarding employee benefits issues (e.g., the recipient’s general counsel or an attorney hired by the recipient who specializes in employee benefits law).