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As the new Democratic majorities in the House and Senate establish priorities for the 110th Congress, health care looms large on the nation’s agenda. There is a broad national consensus that current arrangements for providing and financing health care are seriously flawed. There is, however, no comparable consensus as to the cure. Under these circumstances, it is tempting to assume that for the next two years, Congress will not enact any significant health care legislation into law. However, there is one important proposal with potential appeal to many Democrats and some Republicans, including the Bush administration: Abolish � 514 of the Employee Retirement Income Security Act of 1974. That provision, known to health care mavens as ERISA pre-emption, hamstrings the states from adopting their own health care innovations. As a sound bite, “abolish ERISA pre-emption” admittedly lacks zing. Moreover, such abolition will be resisted by the powerful interests now benefitting from it, namely, large corporations protected by � 514 from state regulation. However, abolishing ERISA pre-emption has one strong argument in its favor: By freeing the states to regulate employer-provided health care, and thus to experiment with different formulas for health care reform, such abolition would actually accomplish something constructive. Section 514, while largely unknown to the general public, carries enormous day-to-day consequences for Americans’ health care. Although the courts’ interpretations of � 514 have ebbed and flowed, at bottom, � 514 prevents states from regulating employers’ medical plans for their employees. This effectively precludes states from experimenting with novel formulas for health care. Consider two recently enacted state laws that have received widespread publicity, Maryland’s Wal-Mart Act and the health care legislation adopted with bipartisan support in Massachusetts. The Maryland law requires an employer with 10,000 or more Maryland employees to spend at least 8% of total payroll on employee health care costs. In practice (and everyone acknowledges this), the act affects only one company, Wal-Mart Stores Inc., the sole firm that is big enough to trigger the act’s coverage. The 4th U.S. Circuit Court of Appeals has ruled that ERISA � 514 prevents Maryland from adopting the Wal-Mart law. In contrast to the Maryland act, the new Massachusetts health law is a carefully crafted combination of eclectic ideas. It establishes the Massachusetts health care connector, a public authority that will enable small businesses and individuals to buy health insurance in a state-supervised marketplace. The new law also requires most Massachusetts residents to obtain medical coverage and mandates Massachusetts firms with 11 or more employees to offer such coverage. The law also provides the medical insurance equivalent of food stamps for low-income state residents, subsidizing their insurance purchases made through the connector. The law is more sensible and thoughtful than Maryland’s Wal-Mart Act. However, just as ERISA � 514 forbids Maryland from adopting that act, it is only a matter of time before the courts tell Massachusetts that � 514 prevents the state from adopting its law. ERISA � 514 was adopted in the early 1970s, before health care became the national concern it is today. We will never know if Congress would have adopted � 514 had Congress anticipated its current implications. We do know that today � 514 precludes experiments like the Maryland and Massachusetts laws. There are powerful interests that are happy with this state of affairs, namely, the corporations that � 514 immunizes from state regulation. They will undoubtedly fight to defend the status quo. Nevertheless, the repeal of � 514 makes sense, both as a matter of politics and of policy. Democrats who want to demonstrate an ability to legislate constructively could point to the repeal as freeing the states to experiment with new approaches to health care. Republicans seeking to re-establish their ideological credibility could point to such repeal as a return to the principle of federalism. Room to experiment After � 514 is repealed, some states might use their new room to experiment by testing single-payer systems. At the opposite end of the ideological spectrum, other states might embrace libertarian visions for health care with minimal or no state regulation. Yet others will attempt to combine in new ways the different elements of differing visions. From this ferment of experimentation, we might find that certain policies work best or that a diversity of approaches is desirable. We won’t know until we try. Abolishing ERISA pre-emption has the strong advantage of being both politically feasible and programmatically desirable. By freeing the states to regulate (or not) employer-provided health care, such abolition would actually accomplish something constructive for health care. Edward A. Zelinsky is the Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University and a visiting professor at Yale Law School.

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