"As any teacher of insurance law knows," ERISA stinks

We’ve heard so far from me, a frustrated lawyer who’s seen too many clients cheated by insurers and ERISA, and from several frustrated federal judges who’ve grown weary of having to apply this most unjust law. Today academia enters the fray. Professor Tony Sebok of the Benjamin N. Cardozo School of Law blogs today at TortsProf Blog about ERISA and its malignant effects:

As any teacher of insurance law knows, ERISA—the Employee Retirement Income Security Act of 1974 (29 U.S.C. § 1001 et seq.)—has been interpreted by the Supreme Court to provide complete preemption of all state contract and tort remedies relating to the interpretation of employer-provided health insurance plans. These plans, of course, sit exactly at the center of the current debate over healthcare reform. In his speech last week, President Obama promised “[a]s soon as I sign this bill, it will be against the law for insurance companies to drop your coverage when you get sick or water it down when you need it the most.”

This is a wonderful claim, except that the federal government, through ERISA, preempted the state law remedies that would have allowed disappointed policyholders who got their coverage through their employers to sue when companies “drop[ped their] coverage” when they got sick or “water[ed] it down” when they needed it the most. To get a sense of how much damage the federal government has already done, one only has to read the angry pleas to Congress to remove this preemption from judges like Federal District Court Judge William Young in Andrews-Clarke v. Travelers Ins. Co., 984 F. Supp. 49, 50 (D. Mass. 1997) who wrote, “ERISA has evolved into a shield of immunity that protects health insurers, utilization review providers, and other managed care entities from potential liability for the consequences of their wrongful denial of health benefits.”

One simple reform to the healthcare system which would be simple, budget-neutral and actually conservative would be to repeal the part of ERISA that immunizes health insurance providers from state common law actions in tort and contract. I honestly do not know whether the plans being considered by the Congress would provide this repeal, or whether they simply maintain the federal preemption but provide for federal remedies with more teeth than the current system. The current federal remedies—reimbursement of out-of-pocket expenses by a victorious beneficiary or injunctive relief—are useless for most people, and certainly lack the deterrent effect of state tort and even contract remedies.

If anyone knows whether Obamacare will finally get rid of ERISA preemption, please let me know.

We know that the most-discussed proposal to date, HR 3200, would not only not eliminate ERISA preemption but would expressly continue it, so Professor Sebok would be disappointed about that, as would we all. But HR 3200 is only one bill; there are others and there more to come, so now is the time to write your Congressional representative.