Victory for ERISA Preemption in PPACA Regulations Signals Sensitivity Within the Administration to Large Employer Concerns

February 24, 2012

This week, HHS and Treasury issued final regulations establishing the procedural framework for states seeking so-called “innovation waivers” from various requirements under federal law, but clarified that the agency’s waiver authority does not extend to ERISA’s preemption provision.  PPACA authorizes states to apply to HHS for an “innovation waiver” from certain of its requirements after January 1, 2017.  The waivers are intended to allow states the flexibility to pursue their own innovative health care strategies.  Large employers have expressed concern that such waivers could allow states to regulate self-insured health plans and interfere with uniform plan design and administration, thus undermining the protections of ERISA preemption.  However, for the first time, the agencies clarified that “while the Secretaries have broad discretion to determine the scope of a waiver, no Federal laws or requirements may be waived that are not within the Secretaries’ authority,” specifically mentioning ERISA.  Thus, it appears that a state could not begin directly regulating self-insured plans on the grounds that it received an innovation waiver.  However, the substantive rules governing the scope and subject matter of state waivers are yet to be finalized.