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Employee Benefits Security Administration

Fact Sheet

Health Care Arrangements Established by State and Local Governments for Non-Governmental Employees

EBSA plans to clarify the type of health care arrangements and employer mandates that state and local governments can implement to improve access to health care coverage for its populations without creating an "employee welfare benefit plan" within the meaning of Title I of ERISA.

Key Action: Proposed Regulation

The Department's EBSA plans to publish a proposed regulation in September 2010 that would clarify when a health care arrangement established by a State or local government that covers private sector employees does not constitute an "employee welfare benefit plan" for purposes of Title I of ERISA.

Key Concern and Issues to be Addressed

Concerns have been raised regarding the legal status under ERISA of certain health care reform initiatives by state and local governments. This regulation will provide clarification to state and local governments and employers concerning the application of ERISA to such initiatives.

Background

ERISA defines the term "employee welfare benefit plan" or "welfare plan" for purposes of Title I of ERISA. Programs offered by employers to provide medical or disability benefits are examples of employee welfare benefit plans that are covered under ERISA.

ERISA provides protections to safeguard the integrity of welfare plans, including provisions outlining the rights and responsibilities of plan sponsors, participants and beneficiaries. ERISA does not require employers to provide health care benefits. However, if an employer chooses to establish a welfare plan, ERISA will govern the operation of that plan.

Several state and local governments have adopted measures to increase access to health care coverage for their populations. Some state and local governments require employers with a certain number of employees and level of revenue to share responsibility for providing health care benefits to its employees (often called an "employer mandate"). Some state and local governments have created health insurance exchanges or cooperatives to increase affordability of health care.

Challenges to state and local government health care initiatives have led to litigation and uncertainty regarding whether such initiatives require employers to create ERISA-covered welfare plans. Section 514 of ERISA provides that ERISA, rather than state law, governs ERISA-covered welfare plans. The Department's regulation at 29 C.F.R. § 2510.3-1 provides guidance on the arrangements that constitute ERISA-covered welfare plans. The Department believes it is important to clarify the type of health care arrangements and employer mandates that state and local governments can undertake without creating ERISA-covered employee welfare benefit plans to ensure that these health care reform initiatives can proceed with a clearer knowledge of ERISA implications.