The individual and employer mandates, foundations of the Affordable Care Act, were first enacted in Massachusetts in 2006 -- and the employer mandate especially could have been challenged under the federal Employee Retirement Income Security Act (ERISA).
"That's probably one of the reasons why I was hired in the first place," said Alden Bianchi, a Boston-based attorney with the firm Mintz Levin, who was hired as outside counsel by then Governor Mitt Romney. "The question was: is that preempted? To this day, there are differing opinions on that. It was never really challenged. We'll never know."
Last summer the U.S. Supreme Court upheld most of the ACA, leaving intact the still somewhat contentious individual mandate and the somewhat complicated employer responsibility requirements.
While the high court was never considering the constitutionality of the ACA's employer mandate, it could have been challenged in Massachusetts in the late 2000s on the grounds of federal ERISA preemption, Bianchi said.
In 1945, two years after the National War Labor Board declared employer-sponsored insurance to be tax exempt, Congress gave most insurance regulation duties to the states with the passage of the McCarran-Ferguson Act. Then in 1974, after large corporations with operations in multiple states grew wary of patchwork compliance demands, Congress enacted ERISA, establishing federal administrative, notice and reporting rules for large group health plans.
Early on, said Bianchi, an ERISA specialist, the Supreme Court took a fairly broad view of ERISA preemption, but also established some exceptions, ruling that "laws that are too tenuously remote or peripheral cannot be preempted."
Had anyone challenged employer mandate in Massachusetts (branded the "fair share contribution"), the argument against preemption would have been that the fine, $295 per employee per year, "is insignificant; it's not a big enough amount of money to preempt," Bianchi said.
More recently, in 1995, the Supreme Court upheld a New York City surcharge on commercial group health plans and narrowed the ERISA preemption framework, ruling that state a law is only preempted if it affects plans' "structure or administration," not necessarily the contents of a policy or a tax.
"If you look at the $295 as a tax, it was not about plan structure or administration, and therefore was not preempted" Bianchi said.
"Those are the two arguments in favor of not being preempted. I mean, either one could have gone either way. I wouldn't try to predict that now."
The ACA's employer mandate may be free of preemption challenges, while still creating a variety of incentives for employers to restructure workers hours and also creating new tax hardships by default for employers with low-income workers in states that don't expand Medicaid.
But there are still some ERISA uncertainties to come in some states -- namely in Vermont's plans for a single payer system.
"We're looking to a future state where there's one claims system and one administrative system," said Lindsey Tucker, deputy commissioner at the Department of Health Access, which manages the insurance exchange Vermont Health Connect, which is described as a "road to single payer."
"The state would hold the risk for all of its residents, so there would not be a private insurance company that would be an insurer in the way that we understand insurance companies today," said Tucker, a former policy manager at the nonprofit Health Care For All in Massachusetts.
What does that mean for large employers? Would they be compelled to have their workers covered by the state -- and could they even be, under ERISA? Tucker and others aren't entirely sure, and don't want to speculate.
From his vantage point in Boston, Bianchi surmises Vermont regulators may try to push the boundaries of ERISA.
"Vermont regulators, as best I can tell, are taking a very aggressive stance against ERISA preemption. They claim the right to be able to regulate third party administrators -- even though they can't regulate the plans, they can regulate the TPAs."
Vermont regulators have already won a small victory in an ERISA preemption battle over access to TPA-managed medical claims data, which the state compiled from all payers as part of its single payer planning.
In 2011, Liberty Mutual, a company with a self-funded health plan for its Vermont employees, using Blue Cross Blue Shield of Massachusetts as a TPA, refused to give the Department of Financial Regulation its employees' claims data and sued on the grounds of ERISA preemption. A federal judge sided with the state, ruling that the state law did not affect ERISA plan administration.
The question of state regulation of self-funded ERISA-covered plans by way of their TPAs is one that may have to be litigated more to fully answer. And it's a legal question the Supreme Court kind of wondered itself, Bianchi noted.
In a 2004 Supreme Court decision on ERISA, Kentucky Association of Health Plans v. Miller, involving a dispute over state requirements for HMO access to "any willing provider," the majority opinion included a 419-word footnote raising but not answering the question of whether states can regulate TPAs. "They kind of left the door open," Bianchi said.