Hiding in Plain Sight: ERISA’s Cure for the $1.4 Trillion Health Benefits Market 

Since 1974, the Employee Retirement Income Security Act (ERISA) has imposed fiduciary duties on those who manage and administer employee benefit plans. But for the largest employee benefits—retirement benefits and health plans, which together constitute 13% of total national compensation—ERISA’s fiduciary duties have played very different roles. For retirement benefits, ERISA scrutinizes plan managers and requires employers to select plan investments with care. For health plans, there is a regulatory vacuum, as ERISA imposes few federal requirements yet preempts state efforts to ensure quality plan offerings. In short, ERISA has advanced protections for retirement plans but mostly curtailed protections for the nearly 165 million Americans who receive health insurance from employers. 

The tragedy is that health benefit plans are in dire need of regulatory scrutiny. The costs of health insurance have risen dramatically faster than inflation, cutting into worker take-home pay and inflicting disproportionate harm on middle- and lower-income workers, while the generosity of employer-provided plans has thinned. The sorry state of employer-sponsored health insurance is due, in part, to inattention and inadequate probity from the parties subject to ERISA’s fiduciary obligations. In sharp contrast, the efficiency and value of retirement benefits have improved over that same period. 

Because of what ERISA requires, and because of what managers of employee health benefits have failed to do, there is enormous opportunity to employ ERISA to enhance the value of health benefits for employees, which also means enhancing the value of the nation’s entire health sector. A handful of pioneering lawsuits have just started invoking ERISA to subject health benefits managers to fiduciary obligations, and more are certain to come. Now is the time for ERISA jurisprudence to confront the consequences of neglecting health insurance, for courts to consider what demands ERISA imposes on health benefits managers, and critically, for the Department of Labor to exercise its regulatory authority under ERISA and enforce fiduciary obligations that the statute imposes and the market sorely needs. This Article documents ERISA’s authority over health benefits managers, explains why ERISA litigation is on the upswing, and offers guidance on how the Department of Labor could establish regulatory safe harbors to bring accountability and predictability to the enormous health benefits marketplace.