Colorado Single-Payer Health Care System on the Ballot in 2016, ERISA Preemption in Question

November 13, 2015

Colorado voters will decide next year whether the state should create a single-payer health care system funded by a 10 percent payroll tax that would raise $25 billion per year for health care costs.  Under the ColoradoCare plan, employers would pay a 6.67 percent payroll tax and employees would pay 3.33 percent.  While it is unclear whether ColoradoCare would exempt multistate employers, proponents assume that "Colorado businesses will choose to discontinue purchasing other insurance coverage because ColoradoCare would provide high quality and comprehensive coverage for every resident."  Should the ballot initiative pass, Colorado would become the second state to attempt to create a single-payer system after Vermont, which dropped its effort last year because of cost.  According to Vermont Governor Peter Shumlin, the 11.5 percent payroll tax on businesses and sliding premiums up to 9.5 percent of individuals' income "might hurt our economy."  Like Vermont, Colorado would need to rely on Section 1332 of the ACA, which through a waiver process lets states develop their own health care reform as long as they insure the same number of people with benefits at least as comprehensive as what the ACA provides.  However, it is the Obama Administration's current policy position that ERISA's provisions—including the preemption of any state regulation of self-insured plans—cannot be waived under Section 1332.  Whether or not this position on ERISA preemption continues after 2017 will be determined by the next administration.  Separately, a new Lockton report found Colorado employers' health care costs for 2016 climbed 8 percent on average, but they cut the increase in half by making changes to their plan designs.  Meanwhile, the average cost of sliver plans offered on the Colorado exchange for individuals will jump by 10.4 percent in 2016.