Most advocates of individual choice in health care appreciate the Employee Retirement Income Security Act (ERISA), because it allows self-insuring firms to reduce health care costs by avoiding state mandates and offering a uniform health benefit nationwide. Skunk at the garden party, I am significantly less enthusiastic. However, I do understand that, as long as the tax code drives us into corporate serfdom for health coverage, ERISA does provide a valuable option. (For another quasi skeptical perspective, see here.)
But with the recession dragging more businesses into distress, a recent story indicates that ERISA self-insured coverage might well be the worst sort of employer-based coverage in hard times.
Both the New York Times and the Wall Street Journal covered the story of Archway & Mother's Cookie Co., a self-insured firm that went bust in November. At the time, Archway's employees had a number of medical claims outstanding. When the firm disappeared, the creditors (doctors, hospitals, etc.) did not get paid.
If Archway had been fully insured by a state-regulated health insurer, that carrier would have paid the claims. In this case, I was interested to learn that the creditors were going after the individual patients for payment. I'd have thought that the medical creditors would rank with other trade creditors in bankruptcy. (I searched my favorite ERISA law blog for some advice on this matter, without success.)
It is (apparently) common practice today for doctors and hospitals to require patients to sign undertakings committing them to pay themselves if their insurance does not. Even if that happened in this case, it's hardly likely to work out well. After all, these are blue-collar workers at a firm that just went bankrupt! Try as hard as they can to collect, most of these medical creditors won't squeeze much blood from these stones.
Even worse, because the firm is bankrupt and the workers never had "health insurance" as defined by the state, they don't have the option of COBRA continuation, HIPAA continuation, or state-regulated continuation coverage. (Don't get me wrong, I'm not a fan of any of these regulations - which are convoluted "work arounds" for the problem of health coverage through corporate servitude.)
In this case, both patients and providers have been poorly served by the government taking Americans' health care dollars and giving them to our employers. ERISA might be a valuable option within the system, but it's no alternative to wholesale reform of the tax code to return our health care dollars to us.
