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If Health Reform is Approved, Many Federal and State Laws Will Need to Change

Cheryl Clark, for HealthLeaders Media, July 16, 2009

Across the nation, numerous state laws and regulations may need to be pre-empted or changed if a comprehensive health reform package, such as that proposed Tuesday by House Democrats, is to succeed.

That's the bottom line in a report by Timothy Jost, professor of law at the Washington and Lee University School of Law in Lexington, VA, who looked at numerous federal and state laws as they relate to bringing concepts of a public plan, a health insurance exchange, and other strategies to make care delivery more efficient any closer to reality.

"If . . . Congress comprehensively overhauls the U.S. health care system, as I hope it will, it must not only resolve conflicts between new programs and existing federal law, but it also will need to consider how new federal initiatives will mesh with existing state law," Jost wrote. His article, entitled "Health Care Reform Requires Law Reform," is published today in the online edition of Health Affairs.

"As we prepare for health reform, it is important that we inventory and analyze state and federal laws that will affect reform so that we can proceed intelligently," Jost said. "Good groundwork now can spare us missteps if and when reform comes to pass."

As an example of how things may get out of hand is a setting of an insurance exchange, by which an entity, such as a state agency, may facilitate the buying, selling, and administration of private health insurance to individuals or employers through a competitive marketplace.

"One concern raised by experience with purchasing exchanges is that participating insurers can become the victims of adverse selection if coverage or underwriting rules are more liberal in the exchange than out of it," Jost noted. To prevent some participating insurers–who happen to have more lenient underwriting practices–from ending up with a disproportionate number of older and sicker enrollees, uniform federal coverage and underwriting laws may be necessary.

If "pay or play" rules are set forth, requiring employers of a certain size to either provide health insurance coverage for their workers or contribute funds on their behalf so those employees could be insured through a public plan, a change in federal law, such as Employee Retirement Income Security Act regulations, may be required.

For instance, San Francisco has been sued by the Golden Gate Restaurant Association, which seeks to overturn the city's enactment last year of an ordinance requiring companies with 20 or more employees to buy health insurance for their employees or pay into a public fund. Although the association has lost battles through the normal court appeals process, it awaits a determination of judicial review from the U.S. Supreme Court on grounds the city's ordinance violates ERISA.

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