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Hiding in Plain Sight: ERISA’s Cure for the $1.4 Trillion Health Benefits Market
Monahan, Amy B. Richman, Barak D.
Monahan, Amy B.
Richman, Barak D.
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Abstract
Since 1974, the Employee Retirement Income Security Act (ERISA) has
imposed fiduciary duties on those who manage and administer employee benefit
plans. But for the largest employee benefits—retirement benefits and health
plans, which together constitute 13% of total national compensation—ERISA’s
fiduciary duties have played very different roles. For retirement benefits, ERISA
scrutinizes plan managers and requires employers to select plan investments
with care. For health plans, there is a regulatory vacuum, as ERISA imposes few
federal requirements yet preempts state efforts to ensure quality plan offerings.
In short, ERISA has advanced protections for retirement plans but mostly
curtailed protections for the nearly 165 million Americans who receive health
insurance from employers.
The tragedy is that health benefit plans are in dire need of regulatory
scrutiny. The costs of health insurance have risen dramatically faster than
inflation, cutting into worker take-home pay and inflicting disproportionate
harm on middle- and lower-income workers, while the generosity of employer-provided
plans has thinned. The sorry state of employer-sponsored health
insurance is due, in part, to inattention and inadequate probity from the parties
subject to ERISA’s fiduciary obligations. In sharp contrast, the efficiency and
value of retirement benefits have improved over that same period.
Because of what ERISA requires, and because of what managers of
employee health benefits have failed to do, there is enormous opportunity to
employ ERISA to enhance the value of health benefits for employees, which also
means enhancing the value of the nation’s entire health sector. A handful of
pioneering lawsuits have just started invoking ERISA to subject health benefits
managers to fiduciary obligations, and more are certain to come. Now is the time
for ERISA jurisprudence to confront the consequences of neglecting health
insurance, for courts to consider what demands ERISA imposes on health benefits managers, and critically, for the Department of Labor to exercise its
regulatory authority under ERISA and enforce fiduciary obligations that the
statute imposes and the market sorely needs. This Article documents ERISA’s
authority over health benefits managers, explains why ERISA litigation is on the
upswing, and offers guidance on how the Department of Labor could establish
regulatory safe harbors to bring accountability and predictability to the
enormous health benefits marketplace.