Waivers – ERISA

How does WWHT affect employer sponsored health coverage?

Currently, most employers who offer health insurance coverage are regulated by a law called The Employee Retirement Income Security Act of 1974 (commonly referred to as ERISA). This is a federal law that, while it doesn’t require employers to provide health insurance or retirement benefits,  regulates the employer’s minimum responsibilities to their employees if an employer does offer those benefits through the private market or self-insurance.

The law was originally intended primarily to protect workers’ retirement benefits and create accountability for employers, which it does to a certain extent. However, it also applies to healthcare coverage benefits, and over the years its “pre-emption clause” has been used to obstruct state level healthcare reform efforts through a series of court cases. This law doesn’t prevent Washington State from setting coverage standards for employer-provided coverage or from regulating the insurance market generally. It does prevent–i.e., pre-empt–Washington State from mandating employer participation in a state level public health insurance program for all employees. Here is more detailed information about ERISA, and there also are a significant number of research articles and case reviews related to the ERISA law for those who are VERY interested.

The WWHT updated revision for introduction in the 2021 legislative session was drafted with the ERISA challenge in mind, and includes a transitional waiver even for non-ERISA employers. Employers whose employees are already covered by ERISA plan benefits, including union-negotiated health benefits will be able to participate in the Whole Washington Health trust coverage voluntarily, but employers will be required to fund each employee’s healthcare costs at the same rate even when they don’t participate in the trust’s coverage. A union could negotiate a supplemental benefits package to pair with the Whole Washington Health trust and an employer providing ERISA coverage could elect to cover its employees through the trust only. All employers would be required to contribute towards the health coverage of all their employees after 2024, but would have significant flexibility for how to meet that obligation, ERISA plan employers could continue to elect to provide their current coverage and would receive employer “credit” towards their required health spending from the Employment Security Department. This flexibility—needed under ERISA–could be phased out entirely if an applicable federal bill passes waiving ERISA pre-emption for states that establish universal health care plans.

*ERISA doesn’t apply to churches, most government employers, or businesses that are not providing private health insurance (or self-insurance) coverage to employees.

Timeline for the 2021 WWHT provisions that would affect businesses and employers

January 2022 –

  • Long-term Capital Gains tax begins.
  • Benefits package is available to those covered through existing publicly-funded benefits and available on the health benefits exchange.

January 2023 –

  • Whole Washington Health trust is available for all residents (and their employers) to enroll electively, but employers are not obligated to pay the Health Security Assessment. A small business assistance program is established for businesses with 0-50 employees who experience financial hardship with the Health Security Assessment and elect to participate for their employees.

January 2024 –

  • Sole Proprietors will owe a 2% Personal Health Assessment on their net earnings from self-employment (Schedule C, Line 31) annually, but will be eligible for a Transitional Waiver if they have other ACA minimum essential coverage. This does not apply if net earnings are less than $15,000 for the year and there is a progressive exemption of up to $12,000 annually that phases out at $60,000 in net earnings for a year.

January 2024 –

  • All employers will be required to make healthcare expenditures on behalf of each employee at a rate of 10.5% of their gross payroll (progressive exemption details below). Employers may deduct up to 2% of their gross payroll from the employee’s pay for the employee’s contribution. This applies to all employers with employees, including part-time and temporary employees. There is a progressive per-employee exemption of up to $12,000 annually that phases out completely for employees earning more than $60,000 in a year. This assessment provides flexibility for employers to design competitive employee benefits packages that could cover all or a portion of the employee’s contribution towards the required healthcare expenditures, as well as the premium an employee may owe to enroll in the public health trust for coverage. The employer may choose to fulfill their entire required spending for an employee by enrolling the employee in the trust. The ESD will manage Medical Reimbursement Accounts with the unspent expenditures from employers that the employees can then use for out-of-pocket costs (when they are enrolled in other ACA minimal essential coverage). Only union-negotiated health benefits will be exempted and only until those benefits are renegotiated by the unions.
  • Transitional Waivers Expire After an Elective Enrollment Process After 51% of residents are enrolled in a state managed plan, the Health Benefits Exchange will be dissolved and funding redirected to the WWHT.