Employees must be allowed to retain employer-based insurance to avoid federal preemption; but beware a corporate 'Trojan Horse'...
By Ernest A. Canning on 2/23/2011, 5:32pm PT  

Guest editorial by Ernest A. Canning

As one of its first acts after taking the majority in the U.S. House, Corporate America's public subsidiary, GOP, Inc., voted against the will of all but 18% of the American people to repeal even modest restraints on the abominable practices of a health insurance cartel whose insatiable greed has created a "health care system" that claims the lives of some 45,000 Americans annually simply because they cannot afford insurance.

Of course, even that alarming number fails to take into account those whose lives are lost when private carriers refuse to authorize vital procedures to those who are lucky enough to have coverage.

In response, and as newly-elected Republican Governors around the nation seek to dismantle benefits such as health care for their constituents, Vermont's newly elected Democratic Governor Peter Shumlin seeks to create the nation's first state-based, single-payer health care system. A troubling question remains, however, as to whether Shumlin has in mind a non-profit, state-run system or a single, profit-seeking, private monopoly...

During an appearance last month on Democracy Now! [video posted below], Shumlin correctly identified the source of the nation's, and his state's, spiraling health care costs: the parasitic profits of the health insurance and pharmaceutical cartels. Those costs, Shumlin said, would ultimately "bankrupt America." He pointed to productive conversations with President Barack Obama and Secretary of Health & Human Services Kathleen Sebelius toward obtaining a waiver that would permit Vermont "to pool federal dollars into a single, uniform system." He identified health care as a right, not a privilege, and forcefully argued that the burden of health insurance should be taken off the backs of employers.

Nonetheless, as Vermont seeks to lead the escape from a corrupt, dysfunctional, and deadly health care system, it must address the pitfall of preemption made possible by a questionable but well-established judicial interpretation of the Employee Retirement Income Security Act of 1974 ("ERISA"), which has permitted the insurance cartel to challenge the validity of any state statute that regulates or impairs employer health insurance plans.

The ERISA preemption problem

As Wendell Potter, a former CIGNA senior executive-turned-whistleblower, explained in Deadly Spin, quoting North Carolina attorney Brent Adams, E.R.I.S.A. was a “well-intentioned law that Congress passed in large part to address the theft of employee retirement benefits by corporations….”

But our courts have not limited the law to the protection of employee pensions. It applies to all employee benefits, including employer health insurance plans. This application of federal law gives rise to preemption --- a judicial doctrine derived from the Supremacy Clause of the U. S. Constitution that permits Congress to supersede state laws on issues of national importance.

As explained by Potter:

Because it is a federal law, ERISA preempts state laws --- meaning that employer-sponsored plans are largely exempt from state benefit mandates and consumer protections. As a consequence, state insurance commissioners have almost no regulatory authority over ERISA-protected plans. Additionally, the 130 million Americans enrolled in ERISA-protected plans cannot sue their insurance company or employer in state court if they have been denied coverage for treatment....

In this case, what this translates to is a barrier to the adoption of any state-based, single-payer system that would prevent employees from utilizing their employer-sponsored plan.

Effort to exempt state single-payer systems deleted by Obama/Democratic Leadership

In July 2009, The BRAD BLOG reported that the "House Labor and Education Committee voted 27 - 19 to adopt an amendment offered by Rep. Dennis Kucinich (D-OH) to HR 3200, the hybrid 'public option' health care legislation that would leave in place the current multi-payer system."

The Kucinich amendment, if adopted, would have allowed advocates of a single-payer health care system to pursue the same local democratic strategy used in Canada, where single-payer was achieved first at the Province level; then extended nationally.

As we noted at the time, the Kucinich amendment was supported by 13 of the Committee's Republicans, but was opposed by the Committee's then-chairman, George Miller (D-CA). Then, in Oct. 2009, the House Democratic leadership, under pressure from the Obama administration, stripped the Kucinich amendment from the health care "reform" bill.

How VT may evade federal preemption

The elimination of the Kucinich amendment makes a sustainable, state-based single-payer system harder to attain. But, it is submitted, the preemption pitfall is not insurmountable. Vermont could include an exception in their bill permitting employees to retain employer-based health insurance plans.

Most employers make health insurance plans optional to their employees. By carving an exception into a single-payer bill which permits employees the option of retaining their employer-provided plans or opting into the single-payer system, Vermont should be able to defeat any federal preemption challenge by arguing that it is undertaking neither to regulate nor to impair any employer-provided plan.

Beware the 'Trojan Horse'!

Governor Shumlin's appearance on Democracy Now! produced a troubling colloquy:

AMY GOODMAN:...I was just reading a piece by Russell Mokhiber, who is head of the Corporate Crime Reporter. He says Vermont’s biggest insurer, "Blue Cross Blue Shield --- with 75 percent of the state’s health insurance business --- signaled [that] it might be interested in taking Hsiao at his word." He’s the Harvard economist that Vermont hired who addressed that joint session of the legislature. The Blue Cross-Blue Shield lobbyist in Vermont said, "If there’s a single payer system, we’d like to be the single payer." Your response, Governor Shumlin?

GOV. PETER SHUMLIN: Well, he’s a smart insurance executive, and he’s got it right.

Shumlin appears to have been sucker-punched by what Potter describes in Deadly Spin as the "charm offensive"; part of a textbook corporate PR strategy, initially developed by the Tobacco industry, to publicly pretend to be part of the solution even as the offending corporations work behind the scene, often through corporate-funded, pseudo-grass roots organizations, to preserve the corporate bottom line by preventing meaningful reform.

Whether they operate as competing health care insurers or by way of a state-sponsored monopoly, private, for-profit health insurance is the problem; not the solution.

As revealed by a 2003 Physicians for a National Health Program (PNHP) study, 31% of all health care costs in the U.S. go to the parasitic middle men --- for profit carriers and HMOs. Canada, a single/public-payer country, by contrast, devotes just 1.3% to administrative costs.

Daniel Wirt, MD, reports that the 31% translates to "more than $350 billion per year, provides no health care: it is consumed by enormous administrative costs, profits for investors and shareholders, and large salaries for managers of these for-profit insurance companies."

One suspects the percentage is now much higher as carriers have, per Potter, reverted to selling "limited benefits" plans, usually to cash-strapped employees in the fast-food industry, that have high deductibles and so many built-in restrictions as to amount to "fake insurance," while companies like Blue Shield of California announce a planned 59% rate increase.

Vermont is uniquely positioned. As reflected by the meager $2,500 Shumlin expended for his gubernatorial campaign, corporate monies have very little influence upon the state's political process. It is critical that Vermonters get this right by affording all of Vermont's citizens the opportunity to opt into a state-run, non-profit, single-payer system. If they do so while evading the ERISA preemption, theirs could prove a model for the rest of the nation to follow.

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Video of Governor Shumlin's January 21 appearance on Democracy Now! follows...

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Ernest A. Canning has been an active member of the California state bar since 1977. Mr. Canning has received both undergraduate and graduate degrees in political science as well as a juris doctor. He is also a Vietnam vet (4th Infantry, Central Highlands 1968).