Massachusetts has famously gotten many of the state's uninsured covered thanks to the state mandate. The "pay or play" approach taken has long seemed ripe for an ERISA pre-emption challenge (cf. the Wal-Mart case in Maryland). The program now seems to be a victim of its own success, with enrollment in subsidized plans exceeding expectations, and the Commonwealth looking for additional revenues to fund the $130M shortfall. One approach now proposed is to apply the "pay" part of the pay or play rule to a broader swath of employers — including many that have been "playing" by the rules to date.
As the Boston Globe reported last week,
But the proposed new regulations would require employers to meet both requirements, or pay the penalty. The rules, if adopted, would take effect Oct. 1 and raise about $45 million this fiscal year, according to state documents.
The Globe article notes that Matt Fishman, VP for community health at our local 800-pound gorilla, Partners Healthcare (the biggest health care system, and also the biggest employer, in the Commonwealth) argued against that change not because Partners would rather not comply, but because the change, he fears, would open the doors to a legal challenge.
The commentariat and blogerati have been divided to date on whether the Massachusetts version of pay or play would survive an ERISA preemption challenge. (Examples here, here, here and here.) Personally, I have taken the cynical-realist approach, expecting that so long as the penalty for not playing remained as artificially low as the $295 a head figure in the initial Massachusetts rules, and the definition of "playing" was as expansive as it has been, it would not be worthwhile to mount a challenge. I agree with Matt that ratcheting up the stakes in the pay or play game make it more likely that someone will pull the trigger and initiate an ERISA pre-emption challenge.
I won't hold my breath waiting for an amendment of ERISA that would eliminate the possibility of such a lawsuit — Some have been waiting for such an amendment for years; some have been inveighing against it as leading to an unworkable morass of state-by-state mandates that would be difficult for large employers to comply with, which is what the ERISA provision was intended to avoid in the first place. Of course, if this country is really ready for health care reform in a big way (a very big if), this will become a moot question.