Protections for ERISA Self-Insured Employee Welfare Benefit Plan Participants: New Possibilities for State Action in the Event of Plan Failure

Employees who receive health benefits through ERISA self-insured plans need protection when self-insured plans fail. Because of the breadth of ERISA preemption, states have been unable to assess ERISA self-insured plans for contribution to state insurance guaranty funds, and thus have been unable to include those employees in the protection of those funds. Further, attempts at federal reform to protect these employees have failed to garner support. However, under the recent Travelers, United Wire, and Safeco decisions, it may be possible for states to assess ERISA self-insured funds and their participants through a combination of hospital use surcharges and taxes on the sale of stop-loss insurance for contribution to state insurance guaranty funds. This Comment explores ERISA preemption analysis in light of these recent cases, and suggests state reforms to protect plan participants in the event of plan failure. Part II explores ERISA preemption analysis in greater depth. Part III examines recent cases that have created new possibilities for state health care reform by limiting the scope of ERISA preemption. Part IV proposes state reforms to protect participants in selfinsured plans in the event of plan failure. Specifically, this Comment proposes that through a combination of surcharges on hospital use and taxes on the sale of stop-loss insurance, states can act within the bounds of ERISA preemption to include self-insured health plan participants in the protection of state insurance guaranty funds. Copyright 2010 by The Board of Regents of the University of Wisconsin System; Reprinted by permission of the Wisconsin Law Review