1. Describe ERISA preemption of state insurance laws and mandates. Discuss the implications of this preemption.
The employee Retirement Income security Act of 1974 (ERISA) is a comprehensive federal statute which imposes minimum standards on employee benefit plans. In order to avoid conflicting state regulations, ERISA preempts state laws which relate to these plans. ERISA’s preemption, however, is not complete. Consistent with the federal policy embodied in the McCarran-Ferguson Act of leaving the regulation of insurance to the states, Congress saved from ERISA preemption any state law which regulates insurance. States have enacted legislation that requires insurers to pay for the services of a particular type of health care provider, even if the terms of the policy specify that the payment will be made only to another type of provider. These “mandated-provider” laws, as they are called, relate to employee benefit plans because they change the terms of the insurance policies purchased by these plans. Thus, unless mandated-provider laws regulate insurance, such laws are preempted by ERISA as applied to employee benefit plans. The question whether mandated-provider laws are laws that regulate insurance is important because of the prevalence of such statutes, the large number of individuals covered by insurance plans, and the significant effect such statutes have on the structure, administration, and cost of insured plans. Insurers are generally opposed to mandated-provider provider laws because they induce many employee groups to self-insure plans, create dis-uniformities in multistate plans, increase the cost of plan administration, and force insurers to pay less effective or less efficient providers. Insurers and employee groups are also opposed to mandated-provider laws because they interfere with insurers’ attempts to lower costs by forming preferred provider