Surviving preemption: the importance of Chapter 58 in the context of America's health care crisis.

I. INTRODUCTION Amidst a lavish ceremony in Boston's Faneuil Hall on April 12, 2006, Massachusetts Governor Mitt Romney signed into law Chapter 58 of the Acts of 2006: An Act Providing Access to Affordable, Quality, Accountable Health Care.1 At that time, Chapter 58 represented the most comprehensive state health reform ever passed in the country, and the first with the potential to provide near universal health coverage.2 Since Romney signed Chapter 58, it has been the focus of a great deal of national media attention. Other states are evaluating whether Chapter 58's complicated bipartisan formula could be effective within their borders, and Romney plans on basing his presidential campaign to a large extent on Chapter 58's potential as a model for national health reform. However, Chapter 58 faces a potential legal challenge under the preemption clause of the federal 1974 Employee Retirement Income Security Act (ERISA).3 In part, ERISA acts to limit the burden on employee benefit plans established by multi-state employers from state regulation.4 Chapter 58 relies on employer contributions as a source of revenue for the increased coverage prescribed by the legislation.5 The provisions that outline this requirement, the Fair Share Contribution6 and the Free Rider Surcharge,7 are those at risk of preemption. Legislative history, recent court decisions, and public policy suggest, however, that Chapter 58 will sidestep the ERISA pitfalls that have trapped previous state health reform initiatives. Part I of this note will provide an overview of ERISA's preemption clause. Part II of this note will provide an overview of Chapter 58 with particular emphasis on the two key prongs of employer responsibility: the Fair Share Contribution and the Free Rider Surcharge. Part III of this note will analyze Chapter 58's employer responsibility provisions in light of the ERISA preemption clause, trends established by recent court decisions, and public policy. Ultimately if Chapter 58 is faced with an ERISA challenge, Part IV will conclude that a court is likely to uphold the legislation's employer responsibility provisions. II. ERISA PREEMPTION MECHANICS The Employee Retirement Income security Act (ERISA) was enacted by Congress in 1974 under the authority of the Commerce Clause.8 The legislation was designed to impose federal standards on employee pension plans, an area traditionally regulated by the states.9 At the last minute, Congress also decided to expand the legislation and prohibit state laws governing all types of employee benefit plans.10 The intention of the expanded prohibition was to disallow states from interfering with the creation of uniform benefit plans by multi-state employers.11 In that vein, section 514(a) of ERISA contains a preemption provision that precludes all state laws to the extent that they mandate the creation of ERISA plans or "relate to" existing employer sponsored health plans.12 Normally, uniform standards are established when the federal government usurps state regulation, and this is exactly what ERISA provided with respect to pension plans.13 However, the federal government declined to do so for many of the other benefits the legislation precluded in its final form. Unfortunately for state health policy makers, this includes health benefit plans.14 The result "is a law that precludes state regulation of ERISA health plans without substituting federal standards, leaving the plans in a regulatory vacuum."15 Generally, if a state law is not automatically prohibited for mandating the creation of ERISA plans, courts ask four questions to determine whether the law should be preempted by ERISA. First, as a preliminary matter, the court must determine whether the existing employee benefit plan in conflict with the state law constitutes an ERISA plan.16 This threshold is low; most welfare benefit plans qualify as an ERISA plans.17 In the health context, the term "welfare benefit plan" is defined as any plan, fund, or program established by an employer to provide employees with medical, surgical, or hospital care benefits or benefits in the event of sickness, accident, disability, or death. …