The federal Employee Retirement Income Security Act (ERISA) establishes federal standards for the administration of all employee pension plans and “employee welfare benefit plans”, such as health insurance benefits, training, day care, legal help and all other benefits.

ERISA applies to all plans offered by one or more employers, unions or groups of employees, except for plans that cover federal, state, local government or church employees. It also does not apply to benefits required by regulatory provisions such as workers’ comp and unemployment insurance. Among the requirements set for health insurance benefit plans, are mandated maternity and breast reconstruction benefits, limited parity for mental health services, guaranteed renewability, continuation coverage for terminated employees (COBRA), non-discrimination based on medical condition.

Any healthcare reform effort at the state level must take ERISA into account, because it “shall supercede any and all state laws” that “relate to employee benefit plans”. It shall not “relieve any person from any law of any State which regulates insurance”. Nor does it impair state laws that relate purely to standards of care and the regulation of health care providers.

In practical terms, states cannot make any laws that mandate employers to provide health insurance to their employees. They can regulate what benefits must be offered by insurance companies, but they cannot regulate benefits offered by self-insured employers. They can regulate standards of care, but cannot establish reporting requirements or conflict resolution procedures for employer-sponsored health plans. They cannot tax employers selectively based on benefits provided, however they can tax insurers, providers or establish a payroll tax that applies to all employers. The US Congress has only granted one exception, which accommodates Hawaii’s employer mandate law.

No specific legal opinion has been obtained yet. But available information suggests that the New Mexico Health Choices proposal is not vulnerable to legal challenges based on ERISA.

1) The proposal does not mandate that employers provide health benefits. It does not disallow employer-based insurance either. It has no provisions that “relate to” employer-based medical insurance or other benefits.

2) The payroll tax that is part of healthcare financing applies to all employers, without discrimination based on the level of benefits offered to employees.

3) The payroll tax goes into a statewide pool of funds; that is not a mechanism created by employers for their employees, therefore it is not an employee welfare benefit subject to ERISA.

4) The insurance products purchased by individuals with their state credits under the proposal are also not subject to ERISA’s federal mandates. They are regulated under state laws by the New Mexico Division of Insurance.