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News Items, by Subject

ERISA preemption of state law


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Reply Brief of State of California Addressing ERISA Preemption Challenge to CalSavers Auto-IRA Program (PDF)
"CalSavers was not established by and will not be maintained by any employer, but rather by the State; therefore, it is not an 'employee benefit plan' within the meaning of ERISA. To the extent the 1975 Safe Harbor comes into play at all, CalSavers satisfies the 'completely voluntary' prong of the 1975 Safe Harbor ... The minimal burden of opting out of coverage does not make an employee's decision to participate in the CalSavers program less than completely voluntary." [Howard Jarvis Taxpayers Ass'n v. Calif. Secure Choice Ret. Savings Program, No. 18-01584 (E.D. Cal., defendants' supplemental brief filed Nov. 15, 2018)] (State of California)
State Law Claims Over Fraudulent Payment of Life Insurance Benefits Were Not Preempted by ERISA
"Plaintiff Flinn alleged that his deceased wife's sister, an attorney, forged a power of attorney on this behalf to get Minnesota Life to send payment of life insurance benefits to her rather than to him.... The court ... explained that the gravamen of Flinn's complaint is that the Insurers violated their state law obligation to ensure that he, or his true legal representative, received his benefit check. The court determined that his claims do not depend on the terms of the life insurance plan or benefits law generally but on state laws and federal statutes (other than ERISA). As such, they are not completely preempted by ERISA." [Flinn v. Minnesota Life Insurance Company, No. 18-10868 (D. Mass. Nov. 14, 2018) (Kantor & Kantor)
Plaintiffs Must Do More Than Claim a Breach of Fiduciary Duty to State an ERISA Claim
"[W]ithout deciding whether plaintiffs' allegations regarding the misappropriation of funds constituted a breach of fiduciary duty, the court found that plaintiffs had not alleged sufficient facts to show the involvement of a plan covered by ERISA, which was necessary to make an ERISA claim plausible." [Dixon v. Washington, No. 18-2838 (E.D. Pa. Oct. 17, 2018)] (Seyfarth Shaw LLP)
Ninth Circuit: ERISA Does Not Preempt State's Unfair Trade Practices and Mental Health Parity Laws
"[T]he Ninth Circuit Court of Appeals ruled that a state's unfair trade practices and mental health parity laws will not be preempted by ERISA unless certain requirements are met.... The court ... stated that any duty for the insurer to refrain from unfairly harming its competitors arises under state law, not under the terms of an ERISA plan. This claim would exist regardless of whether any ERISA plans were involved, because the insurer has an independent duty to refrain from engaging in unfair and deceptive business practices." [Hansen v. Group Health Plan Cooperative, No. 16-35684 (9th Cir. Sept. 4, 2018)] (The Wagner Law Group)
Health and Welfare Plans Under ERISA: Guidelines for State and Federal Regulation (PDF)
"The principal purpose of this handbook is to provide state insurance regulators with a resource guide to help them through the labyrinth of ERISA preemption analysis.... [T]his handbook focuses exclusively on health-related employee welfare benefit plans.... [It] discusses the scope of ERISA preemption ... highlights the general characteristics of an ERISA plan and reviews the specific types of employee welfare benefit plans governed by ERISA.... [and] explores in a question and answer format a number of timely topics of interest to state insurance regulators." [Redlined draft dated July 20, 2018, with corrections to footnotes on Aug. 16, 2018, would update an existing NAIC publication. Submitted comments on the draft are online (tab labeled Exposure Drafts).] (National Association of Insurance Commissioners [NAIC])
Employee Benefits in the Supreme Court: October 2018 Update (PDF)
32 pages. "[T]he Court has been concerned with who can bring claims involving employee benefits, what kind of claims can they bring, what kind of remedies can they seek -- issues uniquely in the purview of courts, as distinguished from plan sponsors, administrators, fiduciaries or regulators -- and whether State laws implicating employee benefits will be enforced, as frequently as it has considered substantive issues affecting employee benefits. Of the 129 cases, 69 involved retirement arrangements, 33 involved health plans, 19 involved disability benefits, and 15 involved life insurance, leave or fringe benefit arrangements." (Eversheds Sutherland)
Individual Disability Insurance Policies May Create ERISA-Covered Plan
"The owner, as employer, had signed a form specifying the eligible class of employees, and stating that the employer would pay all or part of the premium, as well as recommend the individual LTD polices to eligible employees through an endorsement letter. Also, although individual policies were involved, the employer had made initial contact with the insurer and had facilitated discounted premiums which meant it had 'contributed' to the program, regardless of whether it actually paid the premiums or not." [Bommarito v. The Northwestern Mut. Life Ins. Co., No. 15-1187 (E.D. Cal. July 23, 2018) (The Wagner Law Group)
Ninth Circuit: ERISA Doesn't Preempt Nevada Law Limiting General Contractors' Obligations to Pay Delinquent Contributions
"The Ninth Circuit ... explained that ... the right to recover unpaid contributions from general contractors was a result of Nevada's vicarious liability law. Therefore, SB 223 trimmed only rights available under state law and not those guaranteed by ERISA. Additionally, the Ninth Circuit observed that SB 223 applied equally to any individual or entity seeking to recover labor debts from a general contractor, which foreclosed the argument that the law impermissibly targeted ERISA plans. " [Bd. of Trustees of Glazing Health & Welfare Trust v. Chambers, No. 16-15588 (9th Cir. Sept. 4, 2018)] (Proskauer)
Medical Providers Test Boundaries of Benefit Assignments
"While the enforceability of anti-assignment clauses in ERISA plans is well-established in every circuit that has considered the issue, the extent of the rights conveyed by an assignment of benefits in the absence of an anti-assignment clause is very much a facts-and-circumstances determination." (Thomson Reuters / EBIA)
Sixth Circuit Finds Group Health Policy for Tribal Members Was Not Subject to ERISA
"In fiduciary breach litigation under ERISA, the Sixth Circuit addressed the extent of a third-party administrator's (TPA) liability regarding two policies under an Indian tribe's health benefit program ... The court held that a policy for tribal members and a policy for tribal employees did not together constitute a single ERISA plan." [Saginaw Chippewa Indian Tribe of Mich. v. Blue Cross Blue Shield of Mich., No. 17-1932 (6th Cir. Aug. 30, 2018, unpub.)] (Thomson Reuters Practical Law)
The ERISA Industry Committee Files Lawsuit Against City of Seattle
"In its lawsuit, ERIC argues that the health benefit plans of large employers are regulated by [ERISA, which] contains a broad federal preemption provision that invalidates any state and local law that relates to employee benefit plans, including health benefit plans. This broad standard has consistently been upheld by the U.S. Supreme Court." (The ERISA Industry Committee [ERIC])
Medicare and ERISA Preempt Arkansas Pharmacy Benefits Manager Law
"In 2015, Arkansas passed legislation that sought to prevent pharmacies from being forced to sell generic prescription drugs at a loss by requiring that PBMs reimburse the pharmacies at a price equal to the cost of acquiring the drugs from wholesalers.... The [Eighth Circuit] ruled that the statute was preempted by ERISA because it had a prohibited 'reference to' ERISA, and because, contrary to Congressional intent, it interfered with national uniform administration of employee benefit plans." [Pharmaceutical Care Mgmt. Assoc. v. Rutledge, Nos. 17-1609 and 17-1629 (8th Cir. June 8, 2018)] (The Wagner Law Group)
ERISA and Medicare Part D Preempt Arkansas Law Regulating Pharmacy Benefits Managers
"The Eighth Circuit has ruled that both ERISA and Medicare Part D preempted an Arkansas law that sought to govern the conduct of pharmacy benefits managers by mandating that pharmacies be reimbursed for generic drugs at a price equal to or higher than the pharmacies' cost for the drug." [Pharmaceutical Care Mgmt. Association v. Rutledge, No. 17-1609 and 17-1629 (8th Cir. June 8, 2018)] (Wolters Kluwer Law & Business)
In Beneficiary Dispute, Supplemental Life Insurance Policy Was Subject to ERISA
"The Seventh Circuit concluded that the policy failed the safe harbor ... because the employer had performed all administrative functions associated with maintenance of the policy.... In particular, the SPD indicated that: [1] The employer was the policyholder for all components of its plan, of which the supplemental life insurance policy was one listed item of several components. [2] The supplemental policy would remain part of the employer's group insurance policy, though it could be converted to an individual life insurance policy in certain situations." [Cehovic-Dixneuf v. Wong, No. 17-1532 (7th Cir. July 11, 2018)] (Thomson Reuters Practical Law)
Arizona Court of Appeals Misses with Fraudulent Transfer Opinion for ERISA Contributions
"[T]he Court of Appeals' attempted distinction would mean that if a non-sponsor employer (i.e., a third-party outsider to the plan) made a contribution to an ERISA plan, that contribution could be unwound as a fraudulent transfer, but if the employee herself made a contribution to an ERISA plan, then hands-off.... At best, the Court of Appeals holding in Shah v. Blaloch is at best dubious, and should be the subject of challenges in subsequent cases." [Shah v. Blaloch, No. 1 CA-CV 15-0812 (Az. App. Oct. 12, 2017)] (Forbes)
CalSavers Lawsuit Raises Tricky ERISA Questions
"While the court may be addressing a narrow question, its answer is anything but clear.... The [DOL] addressed IRAs provided to workers through employers in a 1975 safe harbor.... But as California and other states began exploring state-administered IRA plans over the past decade, the 1975 safe harbor did not provide enough protection for prospective employers in state-administered plans[.]" (BenefitsPro)
Seventh Circuit Holds That ERISA Does Not Preempt Illinois Slayer Statute
"While this decision provides meaningful guidance on the applicability of slayer statutes to retirement benefits, it is currently only binding on jurisdictions residing in the Seventh Circuit ... It remains to be seen whether the holding will become binding on other jurisdictions as well." [Laborers' Pension Fund v. Miscevic, No. 17-2022 (7th Cir. Jan. 29, 2018)] (Holland & Knight)
ERISA Doesn't Preempt Montana's Mental Health Parity Law
"A federal district court ... determined that ERISA did not preempt Montana's mental health parity law and that the state law was therefore applicable against [a] long-term disability insurer. The court reached this conclusion because the state law regulated health insurance policies and was directed at entities that engage in insurance." [Sand-Smith v. Liberty Life Assurance Co. of Boston, No. 17-0004 (D. Mont. Sept. 20, 2017)] (The Wagner Law Group)
Montana Mental Health Parity Law Not Preempted by ERISA, Applies to Disability Income Replacement Benefits
"A participant ... [asserted that] plan terms limiting benefits for mental illness to 24 months ... violated Montana's mental health parity law. The plan's insurer argued that ERISA preempted the state law ... [T]he court acknowledged that the law is aimed at hospitalization, treatment, and similar benefits but cited several reasons why it is not limited to those benefits.... Also, the law expressly excludes other types of coverage, such as workers' compensation, leading the court to conclude that the state legislature would have expressly excluded disability income replacement benefits had it so intended." [Sand-Smith v. Liberty Life Assur. Co. of Boston, No. 17-004 (D. Mont. Oct. 23, 2017)] (Thomson Reuters / EBIA)
Transamerica, FCE Nix Fraud Claims in ERISA Lawsuit
"Transamerica Life Insurance Co. and FCE Benefit Administrators Inc. convinced a federal judge to toss out state-law claims of fraud by a South Dakota nonprofit accusing them of mismanaging its welfare benefit plan ... The claims of fraudulent inducement and unjust enrichment by BH Services Inc. are expressly pre-empted by [ERISA, the judge held]." [BH Services Inc. v. FCE Benefit Adm'rs Inc., No. 16-5045 (D.S.D. Sept. 27, 2017)] (Bloomberg BNA)
ERISA Does Not Preempt Montana's Mental Health Parity Law
"A federal district court in Montana has ruled that ERISA did not preempt Montana's mental health parity law, as applied to an ERISA group disability income plan, and that the Montana law required the plan to provide a participant the same benefits for a mental health illness that it would apply if the disability had been physical." [Sand-Smith v. Liberty Life Assurance Co. of Boston, No. 17-0004 (D. Mont. Sept. 20, 2017)] (Thomson Reuters Practical Law)
Ninth Circuit: ERISA Preempts State Insurance Law Bans on Discretionary Clauses for Self-Funded ERISA Plans
"The Ninth Circuit has weighed into the national debate over discretionary clauses in ERISA plans, holding that ERISA preempts a state-law ban on discretionary clauses for self-funded disability plans, but not for fully-insured plans.... The Ninth Circuit focused its analysis on the difference between a fully-insured and a self-funded benefit plan." [Williby v. Aetna Life Ins. Co., No. 15-56394 (9th Cir. Aug. 15, 2017)] (Seyfarth Shaw LLP)
Seventh Circuit Finds ERISA Preempted State Unpaid Leave Claim
"An employee's unpaid leave claim under the Illinois Wage Payment and Collection Act was completely preempted by ERISA because the employer's leave policy was dependent on the terms of its VEBA plan ... In affirming the district court's grant of summary judgment for the employer, the appeals court found that the employee's claim did not implicate a duty that was independent of ERISA." [Studer v. Katherine Shaw Bethea Hospital, No. 16-3728 (7th Cir. Aug. 10, 2017)] (Wolters Kluwer Law & Business)
Ninth Circuit: California Law Voiding Discretionary Clauses Is Preempted as to Self-Insured Plans
"The court determined that the self-insured plan qualifies as insurance under California law because it shifts risk from employees to the employer and spreads that risk over the employer's workforce. According to the court, the only notable difference between a self-insured plan and an insured plan is the source of funding, which is not relevant for this analysis. However, turning to ERISA preemption, the court concluded that the STD plan, as a self-insured ERISA plan, is exempt from this state insurance regulation." [Williby v. Aetna Life Ins. Co., No. 15-56394 (9th Cir. Aug. 15, 2017)] (Thomson Reuters / EBIA)
Ninth Circuit: ERISA Preempts California's Ban on Discretionary Clauses as It Applies to Self-Funded Disability Plans
"The Ninth Circuit Court of Appeals vacated and remanded the matter to the district court. It held that the employer's STD plan was 'insurance' because its principal purpose was to shift risk of financial loss due to injury from the employees to the employer and spread that risk over its workforce. Since [a California statute] invalidates discretionary clauses in insurance plans, it applies to the STD Plan, even though the Plan is self-funded.... Future litigation on this issue is going to center on what is a self-funded plan. Is a self-funded plan that is partially insured outside the protection of the deemer clause?" [Williby v. Aetna Life Ins. Co., No. 15-56394 (9th Cir. Aug. 15, 2017)] (Kantor & Kantor)
Second Circuit: New York Law Prohibits Insurance Company from Offsetting Personal Injury Settlement Against Long Term Disability Benefits
"Arnone argued that, because he is a New York resident who was employed in New York and injured in New York, N.Y. Gen. Oblig. Law Section 5-335 applies to his settlement and prohibits Aetna from reducing his LTD benefit.... [T]he court found that: [1] section 5-335 would prohibit Aetna's offset action as a matter of law and, for that reason, would render its decision arbitrary and capricious; [2] section 5-335 is a law that regulates insurance and is saved from express preemption under ERISA; [3] the Plan's choice of law provision sets forth only which jurisdiction's law of contract interpretation and contract construction will be applied, it does not bind the court to apply the full breadth of Connecticut law[.]" [Arnone v. Aetna Life Ins. Co., No. 15-2322 (2d Cir. June 22, 2017)] (Kantor & Kantor)
[Opinion] ERISA: A Bipartisan Problem for the ACA and the AHCA
"[T]he ACA's attempt to create greater uniformity of benefits is at odds with the way ERISA creates a special class of protected plans and blocks states efforts to regulate them. When you ask yourself why the ACA's guarantee of essential health benefits applies to some health plans but not to others, the answer is deference to ERISA. When you ask yourself why some health plans are subject to state-mandated benefit laws but some remain exempt, the answer is ERISA.... [The authors] review the recent and upcoming ERISA jurisprudence below and conclude it is time for the Court, or Congress, to cabin ERISA's reach when it comes to health care." (Abbe R. Gluck, Allison K. Hoffman, and Peter D. Jacobson, via Health Affairs)
Grounding Deferential Review in California
"[A] number of states have passed insurance regulations barring discretionary clauses in disability insurance policies ... A question that has dogged these regulations is the extent to which they are preempted by ERISA.... The Ninth Circuit [recently] held that a state discretionary ban is not preempted by ERISA and properly extends to employer-drafted plans as long as the plan provides for insured benefits." [Orzechowski v. Boeing Co. Non-Union Long Term Disab. Plan, No. 14-55919 (9th Cir. May 11, 2017)] (Seyfarth Shaw LLP)
ERISA Benefits and a Claimant's Bankruptcy: When Judicial Estoppel Requires Dismissal of Lawsuits Seeking Long Term Disability Benefits
"The key is to determine when the 'potential cause of action' accrued. And a recent case says those claims 'accrue' when the claimant receives the initial benefit denial letter." [Byrd v. Wellpoint Flexible Benefit Plan and Anthem Life Ins. Co., No. 17-008 (E.D. Mo. May 2, 2017)] (Lane Powell PC)
Text of Supreme Court Opinion: Federal Employees Health Benefit Act Preempts Missouri Law Barring Subrogation and Reimbursement (PDF)
15 pages. "We hold, contrary to the decision of the Missouri Supreme Court, that contractual subrogation and reimbursement prescriptions plainly 'relate to ... payments with respect to benefits' ... therefore, by statutory instruction, they override state law barring subrogation and reimbursement. We further hold, again contrary to the Missouri Supreme Court, that the regime Congress enacted is compatible with the Supremacy Clause. Section 8902(m)(1) itself, not the contracts OPM negotiates, triggers the federal preemption. As Congress directed, where FEHBA contract terms 'relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits),' Section 8902(m)(1) ensures that those terms will be uniformly enforceable nationwide, free from state interference." [Coventry Health Care of Missouri, Inc. v. Nevils, No. 16-149 (U.S. Apr. 18, 2017)] (Supreme Court of the United States)
'Probate Exception' Barred Federal Jurisdiction in Health Plan's Reimbursement Claim Against Estate
"The U.S. District Court for the Northern District of New York has ruled that the so-called 'probate exception' to federal jurisdiction precludes federal courts from adjudicating cases implicating federal question jurisdiction, including cases arising under ERISA. In so doing, the N.D.N.Y. joins ranks with a small but growing number of federal district and circuit courts that recognize the 'probate exception' as an absolute bar to federal jurisdiction over any in rem action in the custody of a state probate court." [In re Boisseau, No. 16-549 (N.D.N.Y. Jan. 30, 2017)] (Begos Brown & Green LLP)
University's Links to Catholic Church Not Sufficient to Exempt Its Disability Plan From ERISA
"For many years, most courts (and the DOL and IRS) treated plans maintained by church-affiliated organizations as church plans even if they were not established by a church; the narrower reading embraced by the appellate courts ... is a relatively recent development. In March, the U.S. Supreme Court is scheduled to hear arguments on this issue (in those cases), and a decision is expected before the current term ends in June. While those cases all involve pension plans, health and welfare plans like the disability plan here are likely to be affected by the Court's decision." [Durham v. Prudential Life Ins. Co. of America, No. 16-8202 (C.D. Cal. Feb. 10, 2017)] (Thomson Reuters / EBIA)
Supreme Court Declines to Hear Challenge to Validity of Forum Selection Clauses in ERISA Plans
"The U.S. Supreme Court on Jan. 17 ended a yearlong legal challenge to the enforceability of a forum selection clause in an ERISA-governed benefit plan, when the court denied the plaintiff's petition for writ of certiorari. The petitioner unsuccessfully opposed transfer, moved for retransfer and twice sought review of the Eighth Circuit before filing her petition for writ of certiorari with the Supreme Court." (Greensfelder)
Supreme Court Declines to Hear Challenge to Michigan Claims-Paid Tax
"[T]he Sixth Circuit, had decided, on remand from the Supreme Court, that the Michigan Health Insurance Claims Assessment Act was not preempted by ERISA. The Act imposes a 1 percent tax on all paid claims by insurers or third-party administrators for health services rendered in Michigan to Michigan residents.... On remand, the Sixth Circuit reaffirmed its original decision, finding that nothing in Gobeille warranted overturning its decision. SIIA's attempt to appeal this decision to the Supreme Court was declined on January 9, 2017." [Self-Insurance Inst. of America v. Snyder, No. 12-2264 (6th Cir. July 1, 2016; cert. denied Jan. 9, 2017)] (McDermott Will & Emery, via Lexology)
ERISA Preemption After Gobeille V. Liberty Mutual: Completing the Retrenchment of Shaw
"In Gobeille, the Court completed the process of reconciling the restrained approach to ERISA preemption announced in New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance Co. with the Court's literal and expansive approach adopted earlier in Shaw v. Delta Air Lines, Inc....The Court reached this conclusion in a way which indicates that, going forward, Traveler's more restrained approach to ERISA preemption exclusively prevails. This is particularly significant for state-sponsored private sector retirement plans, now immune from ERISA preemption challenge, as well as for state taxes as they apply to the investment trusts of ERISA-regulated retirement plans." (Prof. Edward A. Zelinsky, via SSRN)
Text of Eighth Circuit Opinion: ERISA Preempts Iowa Requirement for Reporting by Pharmacy Benefit Managers (PDF)
13 pages. "Iowa's law compels PBMs as third-party administrators to report to the commissioner and to network pharmacies their methodology for establishing reimbursement amounts paid to pharmacies for providing certain generic drugs to plan participants.... [This statute] imposes mandates and restrictions on a PBM's relationship with Iowa and its pharmacies that run counter to ERISA's intent of making plan oversight and procedures uniform.... ERISA's express preemption clause requires invalidation of the statute as applied to PBMs in their administration and management of prescription drug benefits for ERISA plans." [Pharmaceutical Care Management Association v. Gerhart, No. 15-3292 (8th Cir. Jan. 11, 2017)] (U.S. Court of Appeals for the Eighth Circuit)
Benefits Litigation Update, Fall 2016 (PDF)
Articles include: [1] The Goldilocks Paradox for defined contribution plans: how will plan sponsors determine whether investment alternatives offered are 'just right'? [2] ERISA class action certified challenging behavioral health TPA's administration of mental health benefits; [3] Defining the scope of ERISA preemption; [4] Plan fiduciaries continue to be scrutinized; [5] Employers offering their own proprietary funds under their 401(k) plans at heightened risk for litigation; and [6] EEOC loses another wellness plan voluntariness challenge but prevails on its ADA safe harbor argument. (Epstein Becker Green; The ERISA Industry Committee [ERIC])
Identifying ERISA-Covered Employee Benefit Plans (PDF)
11 pages. "[If] benefits are subject to ERISA, the employer or employee association sponsoring the plan or arrangement has certain obligations regarding the rights and benefits of employees (and their beneficiaries). If the employer fails to satisfy these obligations, it may face [DOL] enforcement action, civil penalty assessments, and/or participant lawsuits.... This practice note covers the following topics: [1] Significance of ERISA Coverage; [2] Determining Whether a Plan Is Covered by ERISA; [3] Identifying Plans That Are Excluded from ERISA Coverage; [4] Defining an ERISA Employee Benefit Plan; [5] Conclusions and Action Steps." (Holland & Knight, via Lexis Practice Advisor)
Text of Opinion Granting Summary Judgment for DOL in NAFA Challenge to Final Fiduciary Rule, Denying Injunction
92 pages. "[NAFA] first argues that title I of ERISA does not authorize the Department to impose fiduciary duties on those who advise IRAs.... [W]hen they regulate IRA advisers, PTE 84-24 and the BIC exemption rely on the Department's authority under title II. Second, NAFA argues that title II does not impose fiduciary duties on those who advise IRAs ... But that contention ignores the plain language of the statute, which grants the Department ... broad authority to adopt non-statutory exemptions and to impose conditions on any such exemptions.... Third, NAFA argues that the Department's use of its exemption authority will lead to 'an absurd and irrational result' because it will subject those IRA advisers who are paid on a commission basis (and who must, accordingly, rely on the exemption) to ERISA fiduciary duties, but will not extend those same duties to those who are paid an asset management fee (and who, accordingly, need not rely on the exemption). But, far from irrational, that is precisely the point; in the Department's view, those who are paid on a commission basis may be tempted to make investment recommendations that maximize their compensation while disserving the interests of plan participants and beneficiaries. Advisers paid an asset management fee generally will not face this conflict. Finally, NAFA argues that ... the fiduciary standards incorporated in PTE 84-24 and the BIC Exemption would override state insurance law suitability standards.... NAFA ignores the fact that the preemption provisions apply only to title I of ERISA, and thus have no bearing on the scope of the Department's title II authority[.]" [Nat'l Assoc. for Fixed Annuities (NAFA) v. Perez, No. 16-1035 (D.D.C. Nov. 4, 2016)] (U.S. District Court for the District of Columbia)
Self-Funded ERISA Plans Subject to California Law Barring Discretionary Clauses
"[M]any states have enacted laws banning discretionary clauses in insurance policies. For insured plans, these laws have generally withstood ERISA preemption attacks. Two federal district courts in California have gone a step further and concluded that the California Insurance Code provision that bars discretionary clauses also applies to self-funded ERISA short-term disability plans." (Proskauer Rose LLP)
State Tax Laws Withstand Most ERISA Preemption Challenges
"Gobeille and the Sixth Circuit reaffirmance [of Self-Insurance Inst. of America v. Snyder] suggest that ERISA permits a wide variety of state tax laws to be applied to ERISA plans, their third-party administrators and other service providers, including the reporting and record-keeping requirements used to enforce those laws." (Albert Feuer, via SSRN)
State Law May Prohibit Discretionary Clauses in ERISA-Covered Plans
"[T]he court ruled that state laws such as the California law, whether applied to self-funded plans or not, do not govern a central matter of plan administration or interfere with nationally uniform plan administration.; therefore, they do not have an 'impermissible connection' to ERISA plans. Accordingly, the court concluded that the California law was not preempted and that it will review the plan administrator's claims decision under the stricter de novo standard." [Thomas v. Aetna Life Ins. Co., No. 15-1112 (E.D. Cal. Aug. 15, 2016)] (The Wagner Law Group)
Government-Mandated Sick-Leave Plans Unlikely to Be Preempted by ERISA
"In the absence of federal action, five states, 27 cities and one county have passed local sick leave laws. The types of employees covered, waiting periods, maximum leave permitted and rate at which leave accrues differs greatly among the various laws. This patchwork of state and local leave laws creates challenges for employers whose employee populations span across these jurisdictions.... While the idea of using ERISA to preempt state and local laws sounds promising, ... relying on ERISA for preemption will not guarantee that result." (Fox Rothschild LLP)
State Law Barring Enforcement of Discretionary Clauses Is Not Preempted When Applied to Self-Insured Plan
"The National Association of Insurance Commissioners has argued that [discretionary clauses] allow insurers to engage in inappropriate claim practices and then rely on the [language] as a shield. But insurers have argued that discretionary clauses keep insurance costs manageable by limiting access to de novo review. Similar policy arguments can be made about discretionary clauses in self-insured plans. A number of states have attempted to prohibit or restrict discretionary clauses, but courts have reached differing conclusions as to whether such laws are preempted by ERISA." [Thomas v. Aetna Life Ins. Co., No. 15-1112 (E.D. Cal. Aug. 15, 2016)] (Thomson Reuters / EBIA)
Discretion and Preemption: Unraveling ERISA, State Insurance Law
"While the California federal court ... acknowledged the existence of the deemer clause, the court still found the California ban on discretionary clauses applicable based on a finding that '[S]ection 10110.6 applies to contracts.' But that finding directly conflicts with ERISA's preemption provision, which has federalized garden-variety disputes over health and disability benefits and removed claims relating to such benefits from the ambit of breach-of-contract actions even where such benefits are provided though insurance." [Thomas v. Aetna Life Ins. Co., No. 15-1112 (E.D. Cal. Aug. 15, 2016)] (DeBofsky & Associates, P.C.)
The Centre Barely Holds: ERISA Preemption After Gobeille v. Liberty Mutual (PDF)
"The multiple opinions generated by [Gobeille] demonstrate the ambiguity of current Supreme Court jurisprudence on ERISA preemption. Perhaps more troubling is the extent to which the differing opinions reach differing conclusions while relying on the same established standards, suggesting that the standards simply cannot provide accurate prescriptive guidance to either lower courts or practitioners." (Stephen Rosenberg of the Wagner Law Group, in Tax Management Compensation Planning Journal)
District Court Finds Constructive Trust by Law Firm Supports Plan's Claim for Equitable Relief
"If an ERISA plan participant reimburses the plan, may the participant subsequently litigate issues concerning the reimbursement in state court? The court grapples with that issue in this case. The facts involve competing claims by the plan fiduciaries in federal court and the plan participant's law firm in state court. The comments in [this article] show a possible way around the complexities presented in this case." [UnitedHealth Group. Inc. v. MacElree Harvey, Ltd., No. 16-1026 (E.D. Pa. Aug. 23, 2016)] (ERISABoard.com)
California Court Says ERISA Preempts Physician's State Law Claim of Tortious Interference
"[Dr. Morris Silver's claim against a self-funded health plan] for interference with contractual relations [with his patients] is predicated on the EOB the Plan sent to policyholders stating the 'Total Patient Responsibility' for the amount charged by Silver was zero. Whether use of this EOB essentially constituted a tort -- a question with wide-ranging implications for any plan using a similar form -- is precisely the kind of decision that conflict preemption is intended to eliminate ... As such, this cause of action addresses an area of exclusive federal concern -- the manner in which adverse determinations are communicated to plan participants -- and directly affects the relationship between the plan and participants." [Morris B. Silver M.D., Inc. v. Int'l Longshore & Warehouse Union, No. B267941 (Cal. Ct. App. Aug. 22, 2016)] (Cary Kane ERISA Lawyer Blog)
District Court Applies Discretionary Clause Ban to ERISA Self-Funded Plan
"This opinion addresses two issues: first, the adequacy of the plan document's delegation of discretionary authority to the claims administrator and, second, whether state law prohibiting discretionary clauses may apply to a self funded ERISA plan. In a poorly reasoned opinion, the district court reached the wrong conclusion on both issues. The mistake in the ERISA preemption analysis is the most troubling." [Thomas v. Aetna Life Ins. Co., No. 15-1112 (E.D. Cal. Aug. 15, 2016)] (ERISABoard.com)
[Guidance Overview] Exposure Draft for NAIC ERISA Handbook: Key United States Supreme Court Opinions on ERISA's Preemption Provisions (PDF)
22 pages. "The interplay between ERISA's preemption, saving and deemer clauses and the impact of these clauses on state regulatory authority has been the subject of a multitude of cases presented before the judiciary. The Supreme Court established tests to be used when evaluating whether a state law is preempted because it 'relates to' an employee benefit plan or because the state law 'deems' an employee benefit plan to be an insurer or to be engaged in the business of insurance. The Court also established tests to be used when evaluating if a state law is 'saved' because it regulates 'the business of insurance'." (ERISA (B) Working Group, National Association of Insurance Commissioners [NAIC])
State Court Lien Adjudication Claim Subject to Removal and ERISA Preemption
"[T]he question is whether an ERISA plan participant may avoid ERISA's preemptive provisions by filing a state court petition to adjudicate a health plan's reimbursement provisions.... Does state law impose an independent legal duty? This is the second prong issue. The Court concluded that it did not.... And the Court found that interpretation of plan terms formed an 'essential part' of state law Petition.... Thus, the state law claim was properly removed to federal court and preempted by ERISA." [Rudel v. Hawaii Mgmt. Alliance Ass'n,, No. 15-00539 (D. Haw. Aug. 1, 2016)] (ERISABoard.com)
Sixth Circuit Again Says Michigan Tax Not Preempted by ERISA
"The court's analysis holds state tax laws in a privileged status vis-a-vis the preemption analysis.... The Sixth Circuit had relatively little trouble finding that the Michigan tax did not 'directly regulate' primary administrative functions of the affected ERISA plans. Instead, the administrative burdens resulting from the Michigan tax regime were found to be ancillary to the state tax function." [Self-Insurance Inst. of America v. Snyder, No. 12-2264 (6th Cir. July 1, 2016)] (Morgan Lewis)
Michigan Health Claims Tax Law Survives ERISA Preemption Challenge, Once Again
"The Sixth Circuit rejected the trade association's arguments that the Michigan law related to ERISA plans ... Employer/plan sponsors of self-insured health plans may have been optimistic for a different outcome in this case, following the Supreme Court's ruling earlier this year in Gobeille. Under this latest decision involving the Michigan tax on health claims paid, however, plan sponsors should prepare to comply with the law's tax and reporting requirements." [Self-Insurance Inst. of America v. Snyder, No. 12-2264 (6th Cir. July 1, 2016)] (Practical Law Company)
Text of Sixth Circuit Opinion: ERISA Does Not Preempt Michigan Claims-Paid Tax as Applied to Self-Insured Health Plans (PDF)
"Broadly worded as it is, ERISA's express-preemption provision extends only to the administration of employee benefit plans.... Though Gobeille recognized that 'reporting, disclosure, and recordkeeping are central to, and an essential part of, the uniform system of plan administration contemplated by ERISA,' it held that only state laws that directly regulate these aspects of ERISA -- whether by imposing additional administrative burdens or by interfering with uniform administration -- are preempted.... It is this limitation that ultimately forecloses SIIA's arguments." [Self-Insurance Inst. of America v. Snyder, No. 12-2264 (6th Cir. July 1, 2016)] (U.S. Court of Appeals for the Sixth Circuit)
Strategies for Health System Innovation After Gobeille
"Given the impediments to comprehensive monitoring of health information that Gobeille creates, states should consider the following strategies. Data sharing agreements with self-insured plans ... Data reporting from health care professionals and facilities ... Federal regulatory action ... Congressional action." (JAMA)
District Court: Claim of Intentional Infliction of Emotional Distress is Narrow Enough to Avoid ERISA Preemption
"The governing rule is that so long as the claim could result in relief irrespective of the outcome of the ERISA claim, the plaintiff states a viable cause of action and is able to survive a motion to dismiss. However, if the claim is linked to or intertwined with the underlying ERISA claim such that the success or failure of the claim would depend on a favorable decision on the benefit claim, it will be pre-empted.... Here, the court ... [concluded] that the intentional infliction of emotional distress claim was not preempted. However, if [the participant] had alleged an entitlement to emotional distress damages solely on account of the claim denial or alleged consequential damages on account of a delay in processing his claim, such as asserting an eviction from his home due to the delay, such a claim would easily have been found pre-empted." [Kresich v. Metropolitan Life Ins. Co., No. 15-cv-05801 (N.D. Cal. Apr. 4, 2016)] (DeBofsky & Associates, P.C.)
Text of Federal District Court Opinion: ERISA Did Not Preempt Action for Intentional Infliction of Emotional Distress in Handling of Disability Claim (PDF)
"Plaintiff alleges ... Defendant 'knew of his physical disabilities and weak emotional state,' yet it prolonged review of his claim to force him to 'drop his disability claim, return to work in pain, and/or accept a smaller settlement than he is rightly entitled' under the Plan.... Although the conduct occurred in connection with Plaintiff's claim, Plaintiff alleges Defendant engaged in such tortious conduct as falsely accusing him of 'lying about and exaggerating' his disability and intimidating him into attending multiple IMEs that Defendant knew would cause him pain and emotional distress. If such claims were held to be preempted by ERISA, Plaintiff would be subject to such treatment with no available recourse, and a plan administrator could investigate a claim in all manner of tortious ways with impunity." [Kresich v. Metropolitan Life Ins. Co., No. 15-cv-05801 (N.D. Cal. Apr. 4, 2016)] (U.S. District Court for the Northern District of California)
ERISA Preemption Is Alive and Well
"Although prior Supreme Court decisions had suggested as much, [Gobeille v. Liberty Mutual Ins. Co.] makes clear that reporting, disclosure, and recordkeeping are fundamental ERISA plan administration activities, and that ERISA will preempt state laws that purport to directly regulate employee benefit plans in these areas regardless of whether they 'conflict' with any requirements imposed by ERISA." (Steptoe & Johnson LLP)
The High Court's Preemption Tango and the Future of ERISA
"The majority opinion in [Gobeille v. Liberty Mutual Ins. Co.], and the strongly worded dissent authored by Supreme Court Justice Ruth Bader Ginsberg (joined by Supreme Court Justice Sonia Sotomayor) are evidence of the push and pull in the tango over the scope of ERISA preemption. This case may also have practical implications for ERISA practitioners who are trying to keep in step with state laws that are out of step with ERISA's preemptive sweep." (Alston & Bird LLP)
Supreme Court's Gobeille Decision Delivers a Win for Self-Funded Health Plan Sponsors
"The Court's opinion has undoubtedly left the door open for the [DOL] to create regulations mandating self-funded plans to report health information. However, this would be no easy task should the [DOL] decide to do so. Currently, the [DOL] does not have anything like an [all-payer claims database (APCD)], and it is questionable whether it has the resources and expertise to collect and manage big data of this nature. Should the [DOL] decide not to implement such regulations, states with APCDs are left with the following options: [1] allow self-funded plans to self-report health data to the state, or [2] attempt to gather this data directly from the providers, which would be less efficient and more expensive than gathering it from the plan itself or the plan's third-party administrator." [Gobeille v. Liberty Mutual Ins. Co., No. 14-181 (U.S. Mar. 1, 2016)] (Trucker Huss)
 
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