More Mandated Benefits? Stop! Think!

More Mandated Benefits?  Stop!  Think!

    ERISA regulates and mandates a system that is, above everything else, voluntary.  In my view, mandates have no place in it, not because they are not good objectives, but because they are not voluntary, not free, and inevitably counter-productive.

    Why not mandate?  Because mandates undermine the voluntary market - a market that produces for the employees of most participating employers a package of benefits that is better than anything a government could or would mandate .  The voluntary market is not universal (like Social Security or Medicare).  It is a result of business decisions to provide these benefits because they are good business.   Universal mandates (for example, so-called “Mandatory Universal Pensions” or “MUPs”) are always just a devious way of making private employers pay for a safety net that should be paid by taxes.  A mandate will always be minimal, like the minimum wage, because it is a national, universal, rock-bottom benefit.  That is not what private employee benefits are about.

    Why not mandate at the state level (like Maryland’s Pay or Play)?  Same reason, only worse: It’s not even a universal mandate.   It’s still ultra-minimal.  And it guts the private employee benefit system’s cornerstone – federal preemption.  It just balkanizes the system.

    But why not abandon federal preemption?  Take a look at 14(b) of the National Labor Relations Act (the so-called “right to work” provision).  The supporters of non-preemption are, these days, at the liberal end of the political spectrum – and there they are supporting the same theory as “right to work” laws (which they have always opposed).  Those who ignore past experience are condemned, of course, to repeat it.

    Once that preemption door is opened, what, inevitably, also comes through it?  How about these: Each new unpreempted state law will come with a new unpreempted state remedy (without which, of course, the state law is meaningless).  And that state remedy – bet on it – will come with compensatory and punitive damages – the very thing that ERISA preemption sought to head off. 

    What’s wrong with that?  If you don’t know, you won’t care, but it’s the death knell of the ingenuity and further development of the private voluntary system.  It just converts the floor into a ceiling.

    The moral to the story?  If you want to pass a federal benefits law (“National Health” for example), OK.  Go for it.  But do it as a governmental benefit with governmental financing and governmental control.  Don’t pretend it is or should be part of the private voluntary ERISA system.  In the private system, it’s pure poison.

Comments

[Don Levit]

If states really wanted to experiment with innovative approaches, they should get away from mandating that employers, individuals, and the state and federal government share in financing the same old, tired products.

While states can regulate insurers, they also, according to federal law, must regulate multi-state ERISA plans in a uniform and consistent manner.
I think this opens up a lot of innovative features for self-funded VEBAs located in 3 contiguous states.
Don Levit

[Roy Harmon]

In terms of federalism, I would expect to find conservatives seeking an expanded role of State government, and that only as a feature of an overall perspective that limited government is best.

A recent article appearing on the Heritage Foundation website comments that "[s]tates are taking the lead in health care reform, and Massachusetts’ new system includes important innovations. Much can and should be learned from states’ efforts. Successful health care reform in the United States is much more likely to come from such experimentation, and its lessons, than from imposing solutions from Washington. State experimentation in health care follows in the footsteps of welfare reform and embodies the benefit of federalism." http://www.heritage.org/Research/HealthCare/wm1045.cfm

(Flaws in the Massachusetts plan "that reflect the state’s liberal politics" are alse noted in the article.)

On this view, the conservative would support State initiatives, but prefer solutions that limit the government's role.

Roy

[Frank Cummings]

Exactly, Roy! It's a paradox. They seem to have given up on an improved federal law, just when they have won a national election!
Frank

[Roy Harmon]

Frank,

Your statement that "the supporters of non-preemption are, these days, at the liberal end of the political spectrum" intrigues me. It would seem that the "liberal end" of the spectrum (in terms of the traditional political paradigms) would favor federal over State control. Now I understand you to say that it is the liberal crowd that favors enlarging the States' domain.

Roy