Don Levit

mbozek: I agree with you that the insurance company could lose its license, if the state did, indeed, have the authority. And, let me emphasize, that the state may have authority to do so. First, I want to thank everone, including gburns, for all their contributions. This discussion is finally getting to the meaty part, so let's chew on a few things. I want to thank you, mbozek, for providing the Travelers case for us. I want to focus our attention on this case, for now. I have a lot to say, but I will only state briefly my position, using this case. First, let me state my belief that ERISA plans are ERISA plans, whether they are self insured or fully insured. I refer back to the original definition of an employee welfare benefit plan, which includes those reimbursed by insurance or otherwise. The distinction between insured and self insured plans has everything to do with who is responsible for paying the claims, and nothing to do with the plan itself. The plan's existence is determined solely whether the employer wishes to start it or discontinue it. Again, this is my belief, but even gburns would probably say there is some logic involved here! One last comment before I quote from the Metropolitan case. This case is between Metropolitan and Travelers on one side, and the state of MA on the other. It is not between the plans' sponsors and MA. In footnote 14, it states Section 47B (the mandated mental health benefits) also requires benefit plans that are self-insured to provide the mandated mental health benefits. In light of ERISA's deemer clause, which states that a benefit plan shall not be deemed an insurance company for purposs of the insurance saving clause, MA has never tried to enforce 47B at benefit plans directly, effectively conceding that such an application of 47B would be preempted by ERISA's preemption clause. In a part of its decision that is not challenged here, the Supreme Judicial Court held that part of 47B which applies to insurers is separable from the preempted provisions pertaining directly to benefit plans. See 385 Mass, at 601-602, 433 N.E. 2d, at 1225. If benefit plans are self insured or fully insured, then maybe we have discovered something. What do you think? Don Levit

mbozek: I understand your explanation of state insurance law, and how it applies for fully insured policies. You wrote that state insurance laws will determine what minimum benefits are required for the policy. I agree with you. However, state insurance laws are completely preempted for determining minimum benefits for the ERISA plan that the employer establishes and maintains. The key words are fully insured "policies" versus ERISA "plans." Again, please read the Travelers Supreme Court case, before offering your "rebuttal." I know my premise is a bit radical, but I can support it with Supreme Court cases, as well as ERISA law. I am hoping to present the other "evidence," but we are spending time discussing what has customarily been done, and not looked at the Travelers case. Do you need me to provide the link for the case? Don Levit

GBurns: The reason you disrespect the Supreme Court is the words I used to describe ERISA preemption came straight from the Supreme Court, Travelers, 514 U.S. at 659-660. The words state ERISA preemption is only triggered by state laws that dictate or restrict choice of plan benefits or plan administrative structures. This is regards to the welfare benefit plan established by employers, not the insurance policies sold by licensed, commercial insurers. Please review this case, before providing your "rebuttal." Employers have control over when they establish policies, when they can modify policies, and when they can terminate policies. The state departments of insurance cannot go to XYZ company and say change your benefits, for they do not fit our policy forms. Let us assume that XYZ company has a fully insured plan with a licensed insurance company that corresponds to the policy form filed with the department of insurance. XYZ company says that we want to amend our policy, which they can do without the state department of insurance's approval. XYZ wants to drop all the state mandates, while retaining the 4 federal mandates. This decision is a settlor decision (a business, administrative decision, not a fiduciary decision). XYZ company has no fiduciary responsibility to its employees; the insurance company has no fiduciary responsibility to the state department of insurance, other than to submit the amendments to the department. Because this is a settlor decision, it can be arrived at by the private parties, with no state govrnment being involved (preempted). Just because this practice is probably not done today, does not mean it is not legal, and is not a viable option. Employers and insurers can work together to establish more innovative plans, with the employers providing the impetus, for the employers' decisions of plan benefits and structures are preempted. Don Levit

Kirk: I am not writing about ERISA preempting state laws governing insurance, specifically laws that mandate benefits for insurance companies. I am writing about states being able to regulate ERISA plans themselves, the employers' ability to decide which benefits to include when establishing a plan, and how they choose to amend their plans, once established. The words I wrote come straight out of the Supreme Court decision Travelers, 514 U.S. at 659-660. I would appreciate your (and others) reviewing that case before providing a "rebuttal." By the way, I agree with your statement that ERISA does not preempt insurance companies. It does preempt state departments of insurance from dictating or restricting employers' choices of plan benefits or plan administrative structures. I do have other cases, including from the Supreme Court, that further solidify my premise. What am I suggesting? I am suggesting that employers and insurers have a lot more flexibility to develop innovative plans, with employers, not insurers, providing the impetus. Insurers can amend the plans to correspond with the employers' wishes, if the parties can reach a financial agreement. The changes made are settlor decisions, not fiduciary decisions, which means the state is not involved (preempted). Don Levit

GBurns: You may be right about my knowledge. But you are wrong about the knowledge of the Supreme Court. How dare you be so disrespectful towards the highest court in the land! Don Levit

g8r: Thanks for your reply. ERISA does not preempt insured products, is correct. ERISA preemption is triggered, however, by state laws that dictate or restrict choice of plan benefits or plan administrative structures. ERISA completely preempts the states from dictating to plan sponsors that they cannot provide qualifying HDHPs, for example, to use with HSAs. States can prohibit the insurers from marketing these plans to employers, for there will be no policy forms accepted by the departments of insurance that will allow their sale. However, the states are completely preempted from telling the employers how to design their plans, whether they are self insured or fully insured. So, what happens when an employer asks an insurer to provide the qualifying HDHP, and the state legislature has not provided the enabling legislation? The insurer uses the closest available policy form, sends the amendments to correspond with the actual policy issued, and lo and behold, the coverage is available. What can the state do, legally? I believe absolutely nothing, for the deal was struck between private parties. The state government could not get involved with the amended form, for it is completely preempted. The insurer has no fiduciary liability for offering the amended plan. The only benefits that must be included, whether self insured or fully insured, are the 4 federally mandated benefits. I can support my premise with several federal douments and Supreme Court cases. Don Levit

Whether the plan has medical or dental benefits, co-pays, and how it is insured are ERISA issues, for the employer has the freedom to decide how the plan is structured. State laws that dictate or restrict choice of plan benefits or administrative structures are completely preempted by ERISA. They are completely preempted, whether the plan is self insured or fully insured. What does complete preemption mean? It means that the state has to remove itself from how the employer wishes to design his plan. It may not dictate or restrict his choices. Only the 4 federally mandated benefits can dictate or restrict his choices. I understand and appreciate where GBurns is coming from. For years, I too believed that self insurance was the only way to attain this freedom. Years of cases dealing with ERISA preemption have given employers these abilities. Unfortunately, by custom, we have been imprisoned for so many years, that to think otherwise, well, it's just too good to be true! By the way, I have several other federal documents and Supreme Court cases which support my premise. Don Levit

GBurns and any others: A follow-up to the last T-F question. Is this statement true or false? Please state the reason for your answer. ERISA preemption is triggered by state laws that dictate or restrict choice of plan benefits or plan adnministrative structures. Don Levit

GBurns: Let us assume that I agree with your premise that each part of the plan is related, yet separate, and that each has separate documents. Would you agree that for the plan to exist, that each separate piece must exist? If that is true, is this statement true or false? The plan sponsor can amend his plan to correspond with the HSA/HDHP legislation, and still fully insure his plan? Please explain why, in your opinion, the statement is true or false? I look forward to learning of your comments, as well as any others who are following this discussion. Don Levit

GBurns: I will be the first to admit that I have a lot more to learn about ERISA. And, It is helpful to review the basics, in order to remain sharp. My definition of an "employee benefit plan" comes from ERISA Sections 3(1), 3(2), and 3(3). The court cases are Scott v. Gulf Oil Corp., 754 F.2d 1499 (9th Cir. 1985); Donovan v Dillingham, 688 F.2d 1367 (11th Cir. 1982); Elmore v. Cone Mills Corp., 23 F.3d 855 (4th Cir. 1994). From these basics, remember, we are trying to ascertain if an employer has the freedom to design his plan and negotiate with an insurer regarding the plan's structure. Don Levit

DWL: Can you be a bit more specific about Hawaii's express exemption from ERISA preemption? It seems that you are saying that the employers' options for providing insurance are more limited than the other 49 states that have ERISA preemption. In your opinion, how does the ERISA preemption in the other 49 states allow employers more flexibility for fully insured plans? Also, can you provide the link for Hawaii's express exemption from ERISA preemption? Don Levit

I will attempt to answer my own question using ERISA definitions, not some subjective whim or opinion, of what a plan is. An employee benefit plan is established or maintained by an employer or an employee organization for the purpose of providing benefits to participants and their beneficiaries. Court decisions have held that an employee benefit plan will be subject to ERISA if one can ascertain the intended benefits, the procedure for obtaining those benefits, the source of funding, and the intended beneficiaries. I will be happy to provide the cases, if you wish. Now, please tell me how you can separate the plan and the benefits? Without the benefits, you have no plan. Without the plan, you have no benefits. Now, which came first, the benefits or the plan? Don Levit

GBurns wrote, The coverage is fully insured, not the benefits plan. If that is the case, what is the plan? How can one have a benefits plan, but it not be insured in some way? Don Levit

Kirk: I can fax you the page that I kept. I do not have the link. Maybe someone could offer that to you? My E-mail is donaldlevit@aol.com

All right, guys. Let's get to a Supreme Court opinion. I've had enough of our opinions. Let's see what The Supreme Court decided in the Travelers case, Travelers. 514 U.S. at 659-660. It states, The Court rejected the argument that economic imoact alone was sufficient to trigger preemption. ERISA preemption is only triggered by state laws that dictate or restrict choice of plan benefits or plan administrative structures. This means to me, a complete ERISA preemption that need not look at the savings clause (or even the deemer clause). If there is a complete ERISA preemption in this situation, state law, or custom, is irrelevant. Don Levit

Nicole: You cited Lockheed v. Spink. Would this case refer to ERISA plans which are fully insured, as well as self insured? Specifically, assume an employer wants to offer an HSA. In order to do so, he must offer the qualifying HDHP. State law has not been changed to allow insurers to market this plan. Can the plan sponsor amend his plan to correspond with the HSA/HDHP legislation and still fully insure his plan? Don Levit

mbozek: Thanks for your reply. Please interpret for me, then, my last sentence in the prior post. Is my interpretation of the ERISA preemption correct, as regards to the capital letters that complete the sentence? Again, I am not asking for you to state what the traditional powers of state regulation have been. We are well aware of how things are. I am questioning how things should be according to this particular ERISA preemption. Don Levit

This discussion seems to be centering around what is legal versus what is traditionally done. I agree with JDuns about the states' traditional authority to regulate insured plans, at least once they are established. It is in the employer's ability to establish and structure his ERISA plan, whether self insurd or fully insured, that I am calling attention to. Would those who are interested in this topic agree with me that ERISA preempts state laws that that dictate or restict choice of plan benefits or plan admnistrative stuctures? If you do agree, are you saying there is an exception to this preemption? Maybe the preemption should have an additional statement to state that ERISA preemption is triggered by state laws that dictate or restrict choice of plan benefits, UNLESS THE STATE ARBITRARILY WANTS TO EXCLUDE CERTAIN PLAN STRUCTURES OR BENEFITS. Don Levit

Self funded plans are still subject to DOL oversight. The DOL regulation I cited about amending once a year applied to ERISA plans, so I "assumed" it was including self funded plans. Can you cite where self funded ERISA plans would not be subject to DOL scrutiny in the matter of how often plans can be amended? Don Levit

GBurns wrote the employer plan itself is an ERISA plan. This leaves it to question as to what and where ERISA preempts. I disagree. Congress intended ERISA to preempt at least 3 categories of state law that have a connection with an ERISA plan. One of those catgories is laws that mandate employee benefit structures or their administraton. These mandated benefit laws do not apply to ERISA plans, whether self insured or fully insured. The question then may arise, "If there are no state mandated benefits for ERISA plans, what benefits can the plan sponsors offer?" The level of benefits to be provided is within the control of the privateparties creating the plan, Alessi, 451 U.S. at 511 (finding it is private parties not the Government, that control the level of benefits; Waller, 120 F.3d at 140 (finding ERISA leaves the level of plan benefits conferred to the private parties creating the plan), and employers or other plan sponsors are generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare plans. Curtiss-Wright Corp., 514 U.S. at 78. Seems to me that employers have the freedom to design their plans in any way. The insurer, if fully insured, has the right to accept or reject the employer's proposed plan, for it is the private parties, not the Government, that control the level of benefits. For that reason, any "amendments" to a policy form must be "appoved" by the state departments of insurance, for their discretion is this matter is completely preempted. Don Levit

Whether self insured or fully insured, the plan sponsor has the right once a year to amend the plan. Health plans are voluntary - they can be established, modified, or terminated, at the sponsor's discretion. A participant has no more protection from this happening, if the plan is fully insured. Don Levit

The DOL regulations state any plan amendment must apply to all individuals, and made effective no earlier than the first day of the first plan year after the amendment isadopted. If donein this manner, this is not to be considered to be directed at individual participants and beneficiaries. Don Levit

The structure of ERISA plans is determined completely by the plan sponsor. Indeed, he can adopt, amend, or terminate the plan at any time. Deciding what benefits to include is not a fiduciary act; rather, it is a settlor act, simply an administrative business decision. So, too, is the response of an insurer to an employer a business decision, not a fiduciary decision. What the insurer and the plan sponsor of an ERISA plan finally may agree to are between private parties. The state department of insurance has no say as to what benefits a plan sponsor must include in his plan. The insurer must offer the policy forms which are approved by the state department of insurance for the group ERISA plan. However, as a business decision, neither the insurer nor the plan sponsor need get approval from the state for any amendments to the approved policy form. My rationale is that ERISA plan strcture is completely preempted, and thus, the state department cannot legally interfere. I have many documents, including Supreme Court cases, to back my premise. Don Levit

DWL: Are you saying then, that employers can sponsor HSAs without any legislatures passing enabling legislation? If so, would the commercial insurers be able to provide the benefits for HSAs and the qualifying HDHPs without having the "appropriate" policy form approved by the departments of insurance? Don Levit

As many of you know, the Treasury Department has extended until the end of 2005, for states to enact legislation providing for HSAs. While states do have authority for state tax policy, and they do have authority to regulate licensed insurers - states have no authority to regulate the structure of ERISA plans. For example, if a plan sponsor wished to offer an HSA along with the qualifying HDHP, he can do so. The only benefits that are mandated for ERISA plans are the four benefits mandated by the federal government. Aside from these requirements, any state mandated benefits are completely preempted by ERISA. Because of this complete preemption, licensed insurers need not be concerned about legal ramifications for providing only those benefits asked for by the plan sponsors. While required to offer all state mandated benefits, the plan sponsor can pick and choose which to accept, if any, and be charged only for those benefits he contracts for. Any thoughts? Don Levit