Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-95-01163/USCOURTS-ca10-95-01163-0/pdf.json

Parties Involved:
John Ehnes
Appellee
Ross Fuller
Appellant
Great Oaks Management
Not Party
Gale Norton
Appellee

Document Text:

PUBLISH 

FILED 

Ualted States Court ot Appeals Tenth Clr4!ult 

UNITED STATES COURT OF APPEALS JUN 19 1998 

PATRICK FISHER 

Clerk TENTH CIRCUIT 

ROSS FULLER, Trustee of the 

International Association of Entrepreneurs 

of America Benefit Trust, 

Plaintiff- Appellant, 

and 

GREAT OAKS MANAGEMENT, a 

Colorado corporation, 

Plaintiff, 

v. 

GALE NORTON, Attorney General of the 

State of Colorado; JOHN EHNES, 

Commissioner, Colorado Division of 

Insurance, individually and in their 

professional capacities, 

Defendants - Appellees. 

No. 95-1163 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLORADO 

(D.C. No. 94-C-1742) 

Joseph A. Jordano of FITZGERALD, SCHORR, BARMETfLER & BRENNAN, P.C., 

Omaha, Nebraska (C. Scott Crabtree of ALEXANDER LAW FIRM, P.C., Denver, 

Colorado, with him on the briefs), for Plaintiff- Appellant. 

Appellate Case: 95-1163 Document: 01019279374 Date Filed: 06/19/1996 Page: 1 
Robert M. Howard, Senior Assistant Attorney General (Gale A. Norton, Attorney 

General, and Stephen G. Smith, Assistant Attorney General, with him on the briefs), 

Denver, Colorado, for Defendants - Appellees. 

Before BRORBY, McWILLIAMS and LUCERO, Circuit Judges. 

LUCERO, Circuit Judge. 

Appellant is the trustee of an Employee Retirement Income Security Act of 197 4 

("ERISA") plan offering benefits to the employees of its employer members through a 

multiple employer welfare arrangement ("MEWA"), as defined by section 3 of ERISA. 

29 U.S.C. § 1002(3),(40). He claims that because his plan is within the protection of 

ERISA law, it may not be regulated as an insurance entity by the state of Colorado. 

Underpinning appellant's prosecution of this case is a belief that ERISA preemption 

allows a MEW A and its members to avoid state regulation that would apply to insurance 

companies and employers offering the same benefits. The district court did not find an 

ERISA-created exception to state regulation and dismissed the complaint. We affirm. 

I. BACKGROUND 

In 1992, a group of employers established a nonprofit organization, the 

International Association of Entrepreneurs of America ("IAEA"), to create an ERISA 

welfare benefit plan. The plan offered employees of its members health, disability, 

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occupational illness or accident, and other benefits. To provide benefits, the IAEA 

established the International Association of Entrepreneurs of America Benefit Trust 

("Benefit Trust") as an unincorporated trust. Plaintiff Ross Fuller is the trustee of the 

Benefit Trust. Great Oaks Management is a member of the IAEA and was a plaintiff in 

this action, but is not a party to this appeal. The Benefit Trust created an employee 

welfare plan established for the purpose of providing welfare benefits to the employees of 

its employer members. For purposes of this appeal we look only to allegations in the 

complaint, and assume the plan constitutes a MEWA as defined in 29 U.S.C. § 1002(40).1 

IAEA members may join the plan, which in tum provides employee benefits to plan 

participants and their beneficiaries. All benefits from the Benefit Trust plan are 

administered as one collective unit, and are funded by employer contributions to the trust. 

The trustee, Mr. Fuller, administers the Benefit Trust plan subject to the oversight of a 

Benefit Review Committee, elected by the employer members. 

The Benefit Trust began soliciting members in Colorado and inquired of the 

Colorado Division of Insurance ("Division") how to obtain a certificate of insurance 

allowing it to provide health benefits and workmen's compensation benefits. Colorado 

prohibits entities from conducting insurance activities without a certificate from the 

1 Another court has found that this MEW A does not constitute an ERISA plan 

because employers have a limited relationship with each other and little control over the 

plan. See International Ass'n. ofEntrepreneurs of America Benefit Trust v. Foster, 883 

F. Supp. 1050, 1060-61 (E.D. Va. 1995). 

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Appellate Case: 95-1163 Document: 01019279374 Date Filed: 06/19/1996 Page: 3 
Division, or providing workmen's compensation benefits without complying with certain 

insurance requirements. The Commissioner of the Division notified the Benefit Trust 

that it was unlawfully providing workmen's compensation and other insurance benefits in 

contravention of Colorado law. He ordered the Benefit Trust to cease and desist from 

these prohibited activities and to submit documents relating to any "unauthorized 

transaction of insurance." Rather than complying with the order, the plaintiffs responded 

by filing this suit. Plaintiffs requested a declaratory judgment that application of 

Colorado insurance laws to MEW As like the IAEA is preempted by federal ERISA 

regulation, and alleged that Colorado's MEWA regulation violates the Commerce and 

Equal Protection clauses of the United States Constitution; they also asked the court to 

enter an injunction to prohibit the Division from interfering with the plan's activities in 

Colorado. 

Defendants filed a motion to dismiss for failure to state a claim, Fed. R. Civ. P. 

12(b)(6), that was granted as to both defendants. With respect to defendant Norton, the 

court found that the Colorado Attorney General has no initial responsibility for enforcing 

Colorado's insurance or workmen's compensation laws. Plaintiff does not appeal that 

dismissal. 

The district court also dismissed the suit with respect to the Director of the 

Division. The court frrst found that ERISA explicitly limited preemption of state 

regulation ofMEWAs, and created an exception for state regulation ofworkmen's 

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compensation coverage; second, it held that Colorado's laws regulating MEW As and 

workmen's compensation fit within the exceptions and are not inconsistent with ERISA 

regulation; and, finally, it held that Colo. Rev. Stat. § 10-3-903.5(7), which exempts from 

much state insurance regulation qualified MEW As that have been operating continuously 

since 1983, is not inconsistent with ERISA provisions, primarily because this regulation 

does not prohibit more recent MEW As from operating in Colorado--it merely subjects 

them to Colorado's insurance laws. Its order did not address plaintiffs' constitutional 

challenges. On appeal, Fuller renews each of the issues raised in the complaint. 

II. DISCUSSION 

We uphold a dismissal under Fed. R. Civ. P. 12(b)(6) only when it appears that 

the plaintiff can prove no set of facts in support of the claims that would entitle him to 

relief, accepting the well-pleaded allegations of the complaint as true and construing them 

in the light most favorable to the plaintiff. Roman v. Cessna Aircraft Co., 55 F.3d 542, 

543 (lOth Cir. 1995). We review the district court's legal rulings on ERISA preemption 

de novo. Ah:parts Co. v. Custom Benefit Servs .. Inc., 28 F.3d 1062, 1064 (lOth Cir. 

1994). Plaintiff's attack on Colorado's ability to regulate benefits offered by the Benefit 

Trust plan takes three forms. First, he contends that Colorado's workmen's compensation 

scheme is preempted from interfering with MEW A plans so long as the plans' benefits 

comply with minimum state requirements. Second, ERISA does not allow the state to 

regulate MEW As as insurance, and requirements of Colorado's insurance regulation are 

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Appellate Case: 95-1163 Document: 01019279374 Date Filed: 06/19/1996 Page: 5 
inconsistent with ERISA provisions. Third, even if Colorado's MEW A regulatory 

scheme does not run afoul of ERISA, the MEWA regulation is unconstitutional as an 

irrational classification under the Equal Protection Clause of the Fourteenth Amendment, 

or a violation of reserved congressional power under the dormant Commerce Clause. 

A. Are Colorado's restrictions on the provision of workmen's compensation 

benefits preempted by ERISA? 

Colo. Rev. Stat.§ 8-44-101 requires employers to provide workmen's 

compensation benefits through one of a number of mechanisms. Choices include 

obtaining insurance through a state fund, insuring through a licensed insurance company, 

or procuring a self-insurance permit from the director of insurance. Colo. Rev. Stat. § 8-

44-10 1 (a)-( c). Plaintiff contends that the workmen's compensation laws are inconsistent 

with ERISA because they do not permit MEW As to provide benefits that are expressly 

contemplated by ERISA; for this reason, ERISA preempts application of these 

requirements to the MEWA under review. 

ERISA provides a complex and extensive preemption regime: "Except as provided 

in subsection (b) ofthis section, the provisions of this subchapter and subchapter III of 

this chapter shall supersede any and all State laws insofar as they may now or hereafter 

relate to any employee benefit plan described in section 1003(a) of this title and not 

exempt under section 1003(b) of this title." 29 U.S.C. § 1144(a).2 A state law "relates 

2 Section 1003(a), referred to in the various clauses of the preemption provision, 

(continued ... ) 

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Appellate Case: 95-1163 Document: 01019279374 Date Filed: 06/19/1996 Page: 6 
to" an employee welfare plan if it has "a connection with or reference to such a plan." 

Shaw v. Delta Air Lines. Inc., 463 U.S. 85, 96-97 (1983). Preemption has been applied 

very broadly, and prevents states from applying a wide body of law to employee benefit 

plans, including laws that only indirectly affect ERISA plans. ~Pilot Life Ins. Co. v. 

Dedeaux, 481 U.S. 41,45-46 (1987) ("[T]he express pre-emption provisions of ERISA 

are deliberately expansive and designed to establish pension plan regulation as 

exclusively a federal concern." (quotation omitted)). 

Exempted from ERISA preemption are laws regulating some arrangements that 

constitute employee benefit plans, including plans "maintained solely for the purpose of 

complying with applicable workmen's compensation laws or unemployment 

compensation laws or disability insurance laws." 29 U.S.C. §§ 1003(b)(3), 1144(a). In 

this case we review the relationship between the broad preemptive language in§ 1144(a) 

and Congress's desire, reflected in§ 1003(b), to leave to the states their traditional role in 

regulating workmen's compensation, disability, and unemployment benefits. We "must 

presume that Congress does not intend to pre-empt areas of traditional state regulation" 

when we determine the scope of express ERISA preemption. Metropolitan Life Ins. Co. 

v. Massachusetts, 471 U.S. 724, 740 (1985) (citing Jones v. Rath Packin~. Co., 430 U.S. 

2

( ... continued) 

describes all ERISA benefit plans created or administered by private employers or labor 

organizations, while § 1 003(b) exempts from the operation of ERISA preemption a 

narrow class of plans. 

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Appellate Case: 95-1163 Document: 01019279374 Date Filed: 06/19/1996 Page: 7 
519, 525 (1977)). In ShmY, the Supreme Court held that New York State, through its 

disability benefits law, could not regulate multibenefit plans offering disability benefits. 

463 U.S. at 107-08. While the state cannot regulate the multibenefit plan itself, it may 

compel employers to choose to provide disability benefits comporting with state law 

within a multibenefit plan or to create a separate plan that does comply . .W. at 108. 

While specifically directed to regulation of disability benefits, Shaw applies with equal 

force in the case of workmen's compensation benefits. Employee Staffin~ Servs. v. 

Aubry, 20 F.3d 1038, 1041 (9th Cir. 1994) 

Five circuits, including ours, have expressly held that ERISA does not preempt 

state laws regulating workmen's compensation, because these laws do not "relate to" 

benefit plans. Contract Servs. Employee Trust v. Davis, 55 F.3d 533, 536 (lOth Cir. 

1995); Fuller v. Skomicka, 79 F.3d 685 (7th Cir. 1996); Employers Resource Mlmlt. Co. 

v. James, 62 F.3d 627 (4th Cir. 1995); Combined Mgmt. v. Superintendent of the Bureau 

oflns., 22 F.3d 1 (1st Cir.), cert. denied, 115 S. Ct. 350 (1994); Aubry, 20 F.3d at 1041. 

While Contract Services did not specifically hold that a state has plenary authority to 

regulate workmen's compensation benefits offered under the MEW A umbrella, we 

followed the analysis of the First and Ninth Circuits to hold that merely because state 

regulation might have an economic impact on a multibenefit ERISA plan it does not 

automatically "relate to" an ERISA plan. Contract Servs., 55 F.3d at 535-36. Moreover, 

two of the cases from other circuits involved employers who procured workmen's 

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compensation coverage through the IAEA. See Fuller, 79 F .3d at 686; Combined MimJ.t., 

22 F.3d at 2. All five of these cases conclude that a multibenefit plan could not take 

advantage ofERlSA preemption to avoid state laws that would apply if the plan provided 

only workmen's compensation benefits (see 29 U.S.C. § 1003(b)(3)), by placing these 

benefits into a multibenefit plan.~,~, Contract Servs., 55 F.3d at 536. Our reasoning 

in Contract Services applies with even greater force to multibenefit plans provided by 

MEW As, because Congress, in §1144(b)(6)(A), has already indicated a weaker 

preemption interest, and a correspondingly stronger state regulation interest, in such 

arrangements. ~infra part B. I. 

Plaintiff contends that these circuit cases misinterpret the exception to ERlSA 

application found in§ 1003(b)(3) and the limited holding of Shaw. According to 

plaintiff, Shaw stands for the proposition that § 1 003(b )(3) allows state law application 

only to the portions of plans providing workmen's compensation (or in Shaw, disability) 

benefits that are inferior to state-mandated benefits. He alleges that the Benefit Trust plan 

benefits meet the requirements of the Colorado scheme. Plaintiff misreads Shaw. There, 

the Supreme Court expressly allowed New York to impose requirements on disability 

benefits, whether or not the benefits were offered within multibenefit plans. 463 U.S. at 

108. Laws insuring that benefits will be paid certainly must be considered 

"requirements" of state workmen's compensation law with which plan benefits must 

comply. ~ kl. Thus, consistent with our earlier ruling in Contract Services, we 

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conclude that Colorado's workmen's compensation laws, including§ 8-44-101, are not 

preempted by ERISA as applied to MEW As. The district court properly dismissed this 

claim. 

B. Preemption of Colorado's MEW A Regulation 

Plaintiff challenges Colorado's authority to apply its insurance laws to the Benefit 

Trust plan by subjecting it to the jurisdiction of the Division. The relevant statute of 

which plaintiff complains, Colo. Rev. Stat.§ 10-3-903.5, reads: 

Jurisdiction over providers of health care benefits. (1) Notwithstanding 

any other provision of law, and except as provided in this section, any 

person or other entity which provides coverage in this state for medical, 

surgical, chiropractic, ... dental, hospital, or optometric expenses, whether 

such coverage is by direct payment, reimbursement, or otherwise, shall be 

presumed to be subject to the jurisdiction of the division of insurance .... 

(2) ... Nothing in this section shall be construed to in any way limit the 

ability of the division of insurance to regulate insurance companies, 

multiple employer trusts, multiple employer welfare arrangements, 

association health plans, or preferred provider organizations. 

An entity falling within§ 10-3-903.5 is subject to examination by the Division, and to 

"all appropriate provisions [of Colorado insurance regulation] regarding the conduct of its 

business." Colo. Rev. Stat. § 10-3-903.5(3),(4). 

Colorado has chosen to exempt certain qualifying MEW As from direct regulation 

by the Division. "The provisions of this section and any other laws of this state that 

regulate insurance or insurance companies shall not apply to ... any multiple employer 

welfare arrangement which meets the requirements of paragraph (c)." Colo. Rev. Stat.§ 

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10-3-903.5(7)(a). In order to qualify for the exemption from insurance laws a MEWA 

must have been in existence since January 1, 1983, must comply with disclosure, 

reporting, and funding requirements, and must be sponsored by an association that fulfills 

certain membership and activity requirements. Colo. Rev. Stat. § 10-3-903.5(7)(c). 

Plaintiff admits the Benefit Trust plan is ineligible for the exemption described in § 10-3-

903.5(7)(c), but asserts that ERISA preempts Colorado's attempt to regulate the Benefit 

Trust through the Division. 

By directly regulating MEW As, Colo. Rev. Stat. § 10-3-903.5 clearly "relates to" 

an employee benefit plan within the meaning of the ERISA preemption clause. 29 U.S.C. 

§ 1144(a). This, however, only begins our inquiry. ERISA preemption, while broad, is 

not absolute. Congress specifically excepted state laws regulating insurance. This 

provision, commonly referred to as the "savings clause," states: "Except as provided in 

subparagraph (B), nothing in this subchapter shall be construed to exempt or relieve any 

person from any law of any State which regulates insurance, banking, or securities." 29 

U.S.C. § 1144(b)(2)(A). The state power allowed by the savings clause is in tum limited 

by the next subparagraph, known as the "deemer clause": 

Neither an employee benefit plan described in section 1003(a) of this title, 

which is not exempt under section 1 003(b) of this title (other than a plan 

established primarily for the purpose of providing death benefits), nor any 

trust established under such a plan, shall be deemed to be an insurance 

company ... or to be en~a~ed in the business of insurance ... for purposes 

of any law of any State purporting to regulate insurance companies, 

insurance contracts, banks, trust companies, or investment companies. 

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29 U.S.C. § 1144(b)(2)(B) (emphasis added). The combined effect of the savings and 

deemer clauses is to allow state insurance regulation of general application, while 

forbidding a state from applying such regulation to ERISA plans directly. FMC Corp. v. 

Holli~ay, 498 U.S. 52, 61 (1990). 

Finally, and most relevant to this discussion, ERISA allows state regulation of 

MEW As in specific situations, such as the one before us, by removing federal restriction. 

The pertinent provision, applicable to MEW As (which by definition provide welfare, not 

pension, benefits), states: 

(6)(A) Notwithstanding any other provision of this section--

(i) in the case of an employee welfare benefit plan which is a 

multiple employer welfare arrangement and is fully insured (or 

which is a multiple employer welfare arrangement subject to an 

exemption under subparagraph (B)), any law of any State which 

regulates insurance may apply to such arrangement to the extent that 

such law provides--

(!) standards, requiring the maintenance of specified levels of 

reserves and specified levels of contributions, which any such plan, 

or any trust established under such a plan, must meet in order to be 

considered under such law able to pay benefits in full when due, and 

(II) provisions to enforce such standards, and 

(ii) in the case of any other employee welfare benefit plan which is a 

multiple employer welfare arrangement, in addition to this 

subchapter, any law of any State which regulates insurance may 

apply to the extent not inconsistent with the preceding sections of 

this subchapter. 

29 U.S.C. § 1144(b)(6)(A) (the "MEWA clause"). Because plaintiff admits that the 

Benefit Trust plan is not "fully insured" as defined by ERISA, the extent of preemption 

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Appellate Case: 95-1163 Document: 01019279374 Date Filed: 06/19/1996 Page: 12 
applied to Colorado's laws is determined by§ 1144(b)(6)(A)(ii). 

Plaintiff raises three arguments why Colorado's MEW A regulation is not protected 

from ERISA preemption by 29 U.S.C. § 1144(b)(6)(A)(ii): first, the deemer clause 

forbids Colorado from "deeming" the Benefit Trust to be insurance for the purpose of 

subjecting it to regulation by the Division, regardless of the MEW A clause; second, the 

MEWA clause does not exempt Colo. Rev. Stat. § 10-3-903.5 from preemption because it 

is not a "law of any State which regulates insurance"; third, even if§ 10-3-903.5 is a law 

which regulates insurance, Colorado's insurance scheme would subject the Benefit Trust 

to laws "inconsistent" with ERISA. 

1. Does Colorado Impermissibly "Deem" MEW As to be Insurance? 

While admitting that the MEW A clause allows states to apply insurance laws to 

MEW As, plaintiff nevertheless contends that states may not effectuate this regulation by 

merely "deeming" MEW As to be insurance arrangements. He argues that enactment of 

the MEW A clause does not affect the operation of the deemer clause. At the outset, we 

assume for purposes of this argument that by presumptively subjecting MEW As to be 

subject to the jurisdiction of the Division, Colo. Rev. Stat. § 10-3-903.5 "deems" 

MEW As to "be engaged in the business of insurance." Our task, then, is to determine the 

effect of the MEWA clause on the deemer clause. 

In FMC Corp. v. Holliday, 498 U.S. 52 (1990), the Supreme Court held that the 

deemer clause exempts self funded ERISA plans from state regulation "insofar as that 

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regulation 'relates to' the plans." ld. at 61. On the other hand, state insurance laws 

indirectly may regulate plans that are not self funded, because insured plans are bound by 

state regulation insofar as the regulations apply to their insurers. ld. The Court drew this 

distinction from Congress's interest in creating national rules governing pension plans 

and in avoiding "'endless litigation over the validity of State action."' I d. at 64-65 

(quotin~ 120 Cong. Rec. 29942 (1974) (remarks of Sen. Javits)V 

The MEW A provision was added in a 1983 amendment to ERISA. Pub. L. No. 

97-473 (97th Cong., 2nd Sess.) (1983). The impetus behind the amendment was an 

interest in curbing abuses by multiple employer trusts, which would claim ERISA 

preemption when states attempted to regulate them as quasi-insurance companies. 129 

Cong. Rec. 30356 (1982) (statement of Rep. Erlenbom). After thwarting state regulation, 

some of these uninsured trusts declared bankruptcy, leaving employees responsible for 

millions of dollars in unpaid hospital and medical bills. I d.; 129 Cong. Rec. 30355 

(statement of Rep. Rostenkowski). The purpose of the amendment was to make clear the 

extent to which state law is preempted with respect to employee benefit plans that are also 

3 Until FMC, the scope of the deemer clause had been unclear. The provision was 

interpreted by lower courts either to preempt only state regulation that, as a pretext for 

regulating ERISA plans, purported to regulate the business of insurance, or, more 

broadly, to any state insurance law that would apply to a self insured plan. Compare,~. 

Northern Group Servs .. Inc. v. Auto Owners Ins. Co., 833 F.2d 85, 93 (6th Cir. 1987), 

cert. denied, 486 U.S. 1017 (1988) with Mullenix v. Aetna Life and Cas. Ins. Co., 912 

F.2d 1406 (lith Cir. 1990). FMC settled the question by adopting the latter 

interpretation. · 

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MEW As. ld. at 30357. The result, as the Conference Report notes, is that "[i]n the case 

of a multiple employer welfare arrangement that is not fully insured, the provision 

exempts from ERISA preemption any state laws that regulate insurance. Notwithstanding 

this provision, the Secretary is authorized to determine the extent to which the ERISA 

preemption provision will be applied to a [MEWA] that is not fully insured." H.R. Rep. 

97-984, at 19, r<a>rinted in, 1982 U.S.C.C.A.N. at 4604. 

The Second Circuit has held that the MEW A clause "authorizes states to regulate 

MEW As as insurance companies." Atlantic Healthcare Benefits Trust v. Goo2ins, 2 F.3d 

1, 5 (2d Cir. 1993), cert. denied, 114 S. Ct. 689 (1994). Based on both the language and 

structure of§ 1144 and on the legislative history of the MEW A amendment, we agree. 

The savings clause limits preemption of state insurance law to the extent it could be read 

to "exempt or relieve any person from [state insurance law]." 29 U.S.C. § 1144(b)(2)(A) 

(emphasis added). The deemer clause, in tum, qualifies the savings clause and insures 

that states will not treat ERISA plans as "persons" subject to state laws enumerated in the 

savings clause. Finally, the MEWA clause is a limited exception to the deemer clause, 

and allows states to regulate MEW A-sponsored plans as if they were engaged in the 

business of insurance. 

In this fashion Congress satisfied its goal of reserving to the states regulation of the 

business of insurance and protecting ERISA plans themselves from being subjected to 

state and local regulation. ~FMC Corp .. 498 U.S. at 61-65. This interest in protecting 

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plans from preemption is notably absent in the MEW A clause, which specifically 

authorizes state regulation of MEW As as insurance providers, even if the MEWA is an 

employee benefit plan. 29 U.S.C. § 1144(b)(6)(A). Congress obviously viewed self 

funded arrangements by multiple employers to be different, and less deserving of federal 

preemption from state insurance regulators, than self funded plans by single employers. 

~ Goo~ns, 2 F.3d at 5. Finally, if MEW As that are not fully insured cannot be deemed 

to be insurance companies for the purpose of state insurance regulations, it is difficult to 

understand exactly what the MEW A clause adds to the existing ERISA preemption 

arrangement. We avoid interpreting statutes in a manner that makes any part superfluous. 

~United States v. Nordic Village. Inc., 503 U.S. 30, 36 (1992). 

2. Does Colo. Rev. Stat.§ 10-3-903.5 Regulate Insurance? 

For MEW As that are not fully insured, as defined in ERISA, the state may apply 

any "law of any State which regulates insurance ... not inconsistent [with ERISA]." 29 

U.S.C. § 1144(b)(6)(ii) (emphasis added). Plaintiff asserts that Colo. Rev. Stat.§ 10-3-

903.5, which subjects MEW As to the jurisdiction of the Division, is not a law which 

"regulates insurance." The term "law of any state which regulates insurance" has been 

read in the context of the ERISA savings clause to be coextensive with the term as 

defined by the McCarron-Ferguson Act, which cedes to the states extensive authority to 

regulate the "business of insurance." Pilot Life, 481 U.S. 48. We see no reason to 

believe Congress intended the term to be used differently in the context of the MEW A 

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clause. See Gustafson v. Alloyd Co., 115 S. Ct. 1061, 1067 (1995) (the normal rule of 

statutory construction is that identical terms used in different parts of the same act are 

intended to have the same meaning). 

In Pilot Life, the Supreme Court developed a test, derived from Metropolitan Life 

Insurance Co. v. Massachusetts, 471 U.S. 724 (1985), to determine whether a challenged 

state law regulates insurance for the purpose of ERISA preemption. Pilot Life, 481 U.S. 

at 48. The court must first look to the "common-sense view" of whether the law is meant 

to regulate insurance for the purposes of the ERISA preemption regime. Id. It then tests 

this determination by reference to three criteria: "First, whether the practice has the effect 

of transferring or spreading a policyholder's risk; second, whether the practice is an 

integral part of the policy relationship between the insurer and the insured; and third, 

whether the practice is limited to entities within the insurance industry." Id. at 48-49 

(quotation omitted). 

Colorado enacted Colo. Rev. Stat. § 10-3-903.5 to address what it perceived as an 

insurance problem; specifically, the state believed that MEW A-type vehicles were 

attempting to provide insurance services, and wanted to regulate these entities through its 

insurance laws. Colorado's approach is consistent with the intent of the MEWA clause. 

The MEWA amendment's sponsor in the House of Representatives viewed uninsured 

MEW As as thinly disguised insurance arrangements that properly should be regulated at 

the state level. 129 Cong. Rec. 30356 (statement of Rep. Erlenbom). By subjecting 

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MEW As to the jurisdiction of the Division, Colo. Rev. Stat. § 10-3-903.5 establishes the 

equivalent of a licensing requirement. As another court has noted, licensing is integral to 

regulating the insurance relationship; the licensure process precedes effective insurance 

regulation. Foster, 883 F. Supp. at 1064. The Department ofLabor, in an advisory 

opinion to a state insurance regulator, agrees. ~ Dep't of Lab. Advisory Op. 90-18A 

(July 2, 1990). Plaintiff does not point to any specific part of Colorado's insurance code--

to which the Benefit Trust plan would be subjected by§ 10-3-903.5--that does not 

regulate the business of insurance as contemplated by the McCarron-Ferguson Act. As 

we have decided that a state may deem a MEW A to be subject to regulation as insurance, 

the entire regulatory regime falls well within the Pilot Life test. We decline plaintiffs 

invitation to engage in a semantic absurdity by deciding that a law bringing an entity 

under the umbrella of state insurance regulation is not itself a law regulating the "business 

of insurance." 

3. Are Colorado's MEWA regulations "inconsistent" with ERISA 

requirements because they require MEW A plans to comply with laws 

designed for insurance companies? 

The MEW A clause does not allow all state insurance regulations to apply to 

MEW As that are not fully insured. It permits only regulation that is "not inconsistent 

with [ERISA provisions]." Plaintiff argues that Colorado laws intended for regulation of 

insurance companies are inconsistent with ERISA. He contends that by forcing MEW As 

to adopt the structure of insurance entities, the Colorado regulations do not allow 

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MEW As to provide benefits as MEW As, as expressly permitted by ERISA. More 

specifically, by being forced to become an insurance-type entity, the IAEA would be 

forced to engage in a prohibited transaction as defined by§ 406(a) of ERISA, 29 U.S.C. § 

1106(a).4 Thus, plaintiff argues, the MEWA clause does not shield Colo. Rev. Stat.§ 10-

3-903.5 from ERISA preemption. 

Where state regulation is not entirely excluded by a federal framework, state 

regulation is not "inconsistent" unless there is an actual conflict between federal and state 

requirements. See Fidelity Federal Sav. v. De La Cuesta, 458 U.S. 141, 153 (1982) 

(applying "inconsistency" test to different federal preemption issue). An "actual conflict" 

is said to arise only when "compliance with both federal and state regulations is a 

physical impossibility" or when state law "stands as an obstacle to the accomplishment 

and execution ofthe full purposes and objectives of Congress." ld. A Department of 

Labor advisory opinion is insightful; it concludes that a state insurance scheme effectively 

prohibiting a MEW A from obtaining a certificate of authority to operate in the state 

would be "inconsistent with" ERISA. Dep't ofLab. Advisory Op. 90-18A (July 2, 1990). 

On the other hand, "it is the view of the Department that it would be contrary to 

4 Section 406(a) provides: "Except as provided in section 1108 of this title: (1) A 

fiduciary with respect to a plan shall not cause the plan to engage in a transaction, if he 

knows or should know that such transaction constitutes a direct or indirect-- (D) transfer 

to, or use by or for the benefit of, a party in interest, of any assets of the plan." 29 U.S.C. 

§ 1106(a)(l)(D). A "party in interest" includes "an employer any ofwhose employees are 

covered under the plan." 29 U.S.C. § 1002(14)(c). 

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Appellate Case: 95-1163 Document: 01019279374 Date Filed: 06/19/1996 Page: 19 
congressional intent to conclude that states, while having the authority to apply insurance 

laws to such plans, do not have the authority to require and enforce registration, licensing, 

reporting and similar requirements necessary to establish and monitor compliance with 

those laws." liV 

Plaintiff appears to argue that through merely subjecting MEW As to regulation by 

the Division, § 10-3-903.5 is inconsistent with ERISA because Colorado might require it 

to engage in practices prohibited by ERISA or, conversely, prohibit practices specifically 

allowed by ERISA.6 He does not present facts, however, that suggest the Benefit Trust 

will be required to become an insurance entity in contravention of ERISA, that it is being 

5 Although a Department of Labor advisory opinion is binding only on the parties 

to whom it is addressed and has no precedential effect, see ERISA Proc. 76-1, § 10, the 

opinion of an agency charged with administering a statute can, in appropriate 

circumstances, provide guidance to a court. Federal Elec. Comm'n v. Colorado 

Republican Party Fed. Campai~ Comm'n., 59 F.3d 1015, 1021 (lOth Cir. 1995), cert. 

granted, 116 S. Ct. 689 (Jan. 6, 1996); see .al.s.Q Wisconsin Educ. Assn. Ins. Trust v. Iowa 

State Board of Public Instruction, 804 F.2d 1059, 1065 (8th Cir. 1986) ("situations exist 

where it is prudent to consult the expert opinion of the Department of Labor in construing 

the statutory meaning of an [ERISA term]"). In this case, the Department's advisory 

opinion is valuable both because the circumstances in this case almost mirror those 

described in the advisory opinion, and because of the important role the Department of 

Labor has in granting exemptions from state regulation to MEW As that are not fully 

insured. ~ 29 U.S.C. § 1144(b)(6)(B). 

6 Plaintiff presents a strained argument that because Colorado law prohibits that 

which ERISA permits, the laws are inconsistent. ERISA contemplates such an approach 

by the state. For example, 29 U.S.C. § 1144(b)(6)(A) specifically allows state regulation 

of even fully insured MEW As in a manner more strict than ERISA would require. Under 

ERISA, welfare benefit plans are not subject to funding requirements, but under § 

1144(b)(6)(A)(i)(l) states may require "maintenance of specified levels of reserves and 

specified levels of contributions." 

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subjected to laws with which it cannot comply, or that it will be unable to get a certificate 

of compliance from the Division.7 Under Fed. R.Civ. P. 12(b)(6), we evaluate all well 

pleaded facts--not conclusory allegations. JQjola v. Chavez, 55 F.3d 488, 494 n.8 (lOth 

Cir. 1995). Without pointing to specific conflicting regulations, plaintiff is reduced to 

asserting, without factual support, that ERISA and the Colorado insurance code are in 

conflict. Absent these conclusory allegations, it appears that plaintiff's argument rests on 

the proposition that it is unlawful to deem a MEW A to be engaged in the business of 

insurance. We disagree. As discussed above, the MEW A clause contemplates states 

deeming MEW As to be engaged in the business of insurance. 8 

Plaintiffs suggestion that by requiring MEW As to form or buy a wholly-owned 

insurance company, Colorado may force the plan to engage in a transaction prohibited by 

ERISA,~ 29 U.S.C. § 1106(a), again asks us to speculate beyond the complaint. 

Colorado's licensing scheme, which merely requires MEW As to be subject to the 

jurisdiction of the division of insurance, cannot be read to include a requirement that a 

7 Nothing in the record suggests that the Benefit Trust will be unable to procure a 

certificate; the cease and desist order merely characterizes the plan's activities as the 

"unauthorized transaction of insurance." 

8 Plaintiff does suggest that by exempting MEW As in existence since 1983, § 

10-3-903 .5(7), Colorado effectively outlaws more recent MEW As from operating in the 

state. A plain reading of§ 10-3-903.5 does not support this proposition. The exemption 

for MEW As that have operated since 1983 does not prohibit more recent MEW As from 

operating in Colorado, it merely requires them to be subject to the jurisdiction and 

examination powers of the Division. 

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MEWA become an entity repugnant to ERISA.9 We are unwilling to preempt Colo. Rev. 

Stat. § 10-3-903.5 based on speculation that at some future point the Division may 

attempt to impose state requirements putting the Benefit Trust in violation of ERISA. 

C. Does Colo. Rev. Stat.§ 10-3-903.5 Create an Irrational Classification? 

Plaintiff argues that Colorado's MEW A regulatory regime creates an irrational 

classification, thus violating the Equal Protection Clause. See Nordlin~r v. Hahn, 505 

U.S. I, 10 (1992) (under rational basis review, "the Equal Protection Clause requires only 

that the classification rationally further a legitimate state interest"). Specifically, he 

complains that MEW As established after 1982 are prohibited from providing benefits as 

MEW As, but must become insurance-type entities. See Colo. Rev. Stat. §10-3-

903.5(7)(c)(l). Defendants defend the classification, arguing that MEW As established 

after 1982 can provide benefits in Colorado, but must submit to the panoply of insurance 

regulation. MEW As established before 1983 are exempted from insurance regulation 

because the MEWA clause amending ERISA was added in 1983. Pub. L. No. 94-473, § 

302(b) (96 Stat. 2613) ( 1983 ). The state therefore justifies the classification as a 

grandfathering provision established to protect the reasonable expectations of plans 

created before states' rights were clarified with respect to MEW As. 

9 In any event, it is unclear to us why ERISA would prevent the Benefit Trust, 

which is an independent trust, from being required to become an insurance entity. ~ 29 

U.S.C. § 1104(a)(l)(A)(ii) (fiduciary may use assets of plan to defray the reasonable 

expenses of administering the plan); Goo~ins, 2 F.3d at 6 (MEWA plan's funds may be 

used to comply with state regulatory expenses). 

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We do not reach the substance of plaintiffs equal protection challenge because 

he lacks Article III standing to raise it. The "constitutional minimum of standing," in 

addition to requiring the plaintiff to allege an actual or imminent invasion of a legally 

protectable interest "fairly traceable" to the challenged action, requires a showing that it is 

'"likely,' as opposed to merely 'speculative,' that the injury will be 'redressed by a 

favorable decision."' Lujan v. Defenders ofWildlife, 504 U.S. 555, 560-61 

(1992)(quoting Simon v. Eastern Ky. Welfare Ri~hts Or~., 426 U.S. 26, 38, 41-43 

(1976)). Based on the complaint, it is clear that any claimed equal protection injury to the 

Benefit Trust plan cannot be "redressed by a favorable decision." 

Subsection (7)(c)(V)(C) ofthe Colorado statute requires MEW As exempt from 

direct insurance regulation, in addition to having been in existence since 1982, to "be 

sponsored and maintained by an association which .... [h ]as been in existence for a 

period of at least ten years." Colo. Rev. Stat.§ 10-3-903.5(7)(c)(V)(C). Plaintiff admits 

the IAEA was formed in 1992, but does not challenge the ten year requirement. Even if 

we were to strike the challenged provision, the Benefit Trust plan still would not fulfill 

the remaining requirements of the Colorado statute, and could not benefit from our 

decision. 10 We thus dismiss this claim for lack of jurisdiction. See Clajon Prod. Corp. v. 

10 Nortbeastem Florida Contractors v. Jacksonville, 113 S. Ct. 2297 (1993) does 

not suggest a different result. In that case, the Court held that a plaintiff challenging 

under the Equal Protection Clause a legal barrier to compete for a government contract, 

need not show that in the absence of the challenged provision he would have been 

(continued ... ) 

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Appellate Case: 95-1163 Document: 01019279374 Date Filed: 06/19/1996 Page: 23 
Petera, 70 F.3d 1566, 1574 (lOth Cir. 1995). 

D. Does Colorado's law requiring MEW As to comply with the 

state's insurance regulations violate the Commerce Clause? 

Plaintiff asserts that Colorado's workmen's compensation laws and insurance laws, 

as applied to prohibit MEW As from doing business in Colorado, violate the dormant 

Commerce Clause because they act to keep multistate MEW As out of Colorado. The 

Commerce Clause provides that "Congress shall have Power ... to regulate Commerce .. 

. among the several States. U.S. Const., Art. I,§ 8, cl. 3. Even absent congressional 

action, the courts may decide that state regulations challenged under the Commerce 

Clause impermissibly burden interstate commerce. See,~' Philadelphia v. New Jersey, 

437 U.S. 617 (1978). The Supreme Court has specifically held that Congress removed all 

Commerce Clause limitations on state regulation of "the business of insurance" by 

passing the McCarran-Ferguson Act. Western and Southern Life Ins. Co. v. State Bd. of 

Equalization, 451 U.S. 648, 653 (1981). Plaintiffs only response is to argue, without 

authority, that ERISA preemption somehow has carved out a new area for the dormant 

Commerce Clause to work. In light of the Supreme Court cases that specifically look to 

10( ••• continued) 

awarded the contract, only that he would have qualified for the QPportunity to bid for it. 

113 S. Ct. at 2303. Here, even ifwe struck down the requirement that the Benefit Trust 

have existed since 1983, the plan still would not have the opportunity to qualify for the 

Colorado exemption for pre-1983 MEW As because its sponsoring association is, by 

plaintiffs own account, less than ten years old. 

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the McCarron-Ferguson Act in interpreting the scope of ERISA preemption,~,~, 

Pilot Life, 481 U.S. at 48-49, it is implausible to suggest that Congress silently intended 

to deny states power to effectuate their insurance laws, while expressly allowing such 

regulation in the ERISA scheme. Because Colo. Rev. Stat.§ 10-3-903.5 regulates the 

"business of insurance" within the meaning of the McCarron-Ferguson Act, it falls 

outside the sphere of exclusive federal regulation reserved by Congress. 

CONCLUSION 

When Congress amended ERISA to include provisions allowing for state MEW A 

regulation, it envisioned that states would regulate these arrangements as insurance. 

Plaintiff complains because Colorado has done just that. The district court properly 

dismissed the complaint, and its judgment is AFFIRMED. 

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