States face uncertainty when implementing MFA---funding and ERISA preemptions.

To finance these universal and comprehensive benefits, state single-payer bills use several strategies to capture health expenditures from the existing multipayer system, while navigating a number of financial and legal impediments. First, the state bills would consolidate federal funds from Medicare, Medicaid, and the ACA exchanges into the state single-payer plan using  in those federal programs. The Department of Health and Human Services has considerable discretion to  state applications for each of these federal waivers; however, and the state bills generally lack fallback plans for capturing federal funds should the agency deny the waivers. Nor do the state single-payer bills confront financial obstacles from state constitutional prohibitions on , which constrain state plans when tax revenues fall during economic recession. 

Second, but perhaps more crucially, state single-payer bills must find ways to redirect the  that currently cover 49 percent of Americans—a daunting legal task under ERISA. ERISA  all state laws that “relate to” employer-sponsored benefits, so states cannot simply mandate that employers cease offering health benefits. States do retain broad power to regulate health care providers and health insurers, but ERISA preempts the application of state insurance regulations to employers’ self-funded health plans, which now comprise more than  of all employer-sponsored health benefits. ERISA challenges states’ abilitiesto capture employer health spending—a source of funding that would be critical to the viability of a single-payer system.

The labyrinth of ERISA preemption has inspired creative drafting of state single-payer bills to do indirectly what ERISA prohibits them from doing directly. Our survey revealed three strategies for state bills to capture employer expenditures and move employees into the state single-payer system: levy payroll taxes on employers and income taxes on employees; restrict providers from accepting private-insurer reimbursement; and allow the single-payer plan to pay for all eligible patients’ care, then recoup those payments from other coverage a patient may have. The taxes fund the single-payer plan’s coverage of resident employees and nudge employers to cease offering private coverage. The provider reimbursement restriction further encourages a shift to single-payer coverage by shrinking provider networks for private insurance. The pay-and-recoup provision enables those employers who wish to continue providing benefits to do so without fully eroding the administrative advantages of the single-payer system.  

Nearly all states’ bills include one of these strategies; most include a combination of them.  is the only state that has actually enacted single-payer legislation, before  its implementation largely due to the cost of its payroll and income taxes.