United States Court of Appeals

FOR THE EIGHTH CIRCUIT

______________

No. 97-2221/2226/2229

______________

THE PRUDENTIAL INSURANCE *

COMPANY OF AMERICA, *

PRUDENTIAL HEALTH CARE *

PLAN, INC., d/b/a PRUDENTIAL *

HEALTH CARE PLAN OF *

ARKANSAS, HMO PARTNERS, INC., *

ARKANSAS AFL-CIO, TYSON *

FOODS, INC., and UNITED PAPER- *

WORKERS INTERNATIONAL *

UNION AFL-CIO, CLC, *

*

Plaintiffs-Appellees, * Appeals from the United States

Cross-Appellants, * District Court for the Eastern

* District of Arkansas

v. *

*

NATIONAL PARK MEDICAL *

CENTER, INC., Y. Y. KING, M.D., *

BRYAN W. RUSSELL, D.C., *

GEORGE A. HAAS, O.D., and *

BRYANT ASHLEY, O.D., *

*

Defendants-Appellants. *

 *

STATE OF ARKANSAS, *

 *

Intervenor Defendant - *

Appellee. *
 The HONORABLE MARK W. BENNETT, United States District Judge for the

*

Northern District of Iowa, sitting by designation.

2

___________

Submitted: March 10, 1998

 Filed: September 2, 1998

___________

Before MCMILLIAN and FAGG, Circuit Judges, and BENNETT, District Judge.

*

___________

BENNETT, District Judge.

This case involves the question of whether the Employee Retirement Income

Security Act (ERISA), 29 U.S.C. § 1001 et seq., preempts Arkansas’ so-called “Patient

Protection Act,” Acts 505 and 1193 passed by the Arkansas General Assembly in 1995

(the Arkansas PPA). The Arkansas General Assembly’s goal in passing the PPA was

to ensure “that patients . . . be given the opportunity to see the health care provider of

their choice.” ARK. CODE ANN. § 23-99-202. However, various “health care insurers”

within the meaning of the Arkansas PPA brought this declaratory judgment action

seeking a declaration that the Arkansas PPA is preempted by ERISA.

The precise scope of ERISA preemption of state law has left courts, including

the Supreme Court, deeply troubled. As a panel of this court recently explained,

The Supreme Court has decided sixteen ERISA

preemption cases since the statute was enacted in 1974. See

California Div. of Labor Stds. Enforcement v. Dillingham

Constr., N.A., Inc., [519] U.S. [316], ___, 117 S. Ct. 832,
3

842-43, 136 L. Ed. 2d 791 (1997) (Scalia, J., concurring). Most involved

the proper scope of “relate to” preemption under § 1144(a), and the Court

has struggled, particularly in its more recent decisions, with the inherent

vagueness of that key statutory phrase. Compare New York State Conf.

of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645,

652-661, 115 S. Ct. 1671, 1676-80, 131 L. Ed. 2d 695 (1995), with

Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739, 105 S.

Ct. 2380, 2388, 85 L. Ed. 2d 728 (1985).

Painter v. Golden Rule Ins. Co., 121 F.3d 436, 438-39 (8th Cir. 1997), cert. denied,

___ U.S. ___, ___ S. Ct. ___, 1998 WL 73018 (April 20, 1998). Since the Supreme

Court’s decision in Dillingham, the Court has considered the scope of ERISA

preemption twice more. See Boggs v. Boggs, ___ U.S. ___, 117 S. Ct. 1754 (1997);

De Buono v. NYSLA-ILA Med. & Clinical Servs. Fund, ___ U.S. ___, 117 S. Ct. 1747

(1997). The very question that has so often and so deeply troubled the Supreme Court

is now before this court.

The parties asserting the validity of the Arkansas PPA, appellant healthcare

providers, contend that the result of the Supreme Court’s struggles with “relate to”

preemption in its recent ERISA cases has been a “sea change”—ushered in by the

Court’s decision in Travelers and clarified in Dillingham and De Buono—that has

upended the Court’s prior precedent and has established in its place a whole new

framework of presumptions and analysis for ERISA preemption cases. The parties

asserting preemption of the Arkansas PPA, appellees ERISA plan sponsors,

administrators, insurers, and HMO service providers, contend that the Supreme Court’s

most recent decisions have not worked a revolution in ERISA preemption analysis, but

have instead helped clarify line-drawing at the peripheries, while leaving intact, even

strengthening, the importance of the core concerns and inquiries of preemption analysis
4

articulated in prior precedent. Whether the Supreme Court’s recent opinions constitute

a “sea change” or instead command that we “stay the course” in ERISA preemption

analysis, this court must strive to sail the course the Supreme Court has set.

I. BACKGROUND

A. Factual Background

In 1995, the Arkansas General Assembly passed two acts, Act 505 and Act

1193, that combined to form the so-called “Patient Protection Act,” codified at ARK.

CODE ANN. CH. 23-99. The Arkansas General Assembly’s goal was to ensure 

that patients . . . be given the opportunity to see the health

care provider of their choice. In order to assure the citizens

of the State of Arkansas the right to choose the provider of

their choice, it is the intent of the General Assembly to

provide the opportunity of providers to participate in health

benefit plans.

ARK. CODE ANN. § 23-99-202. Thus, the centerpiece of the legislation was ARK. CODE

ANN. § 23-99-204, which provides as follows:

(a) A health care insurer shall not, directly or

indirectly:

(1)(A) Impose a monetary advantage or penalty

under a health benefit plan that would affect a

beneficiary’s choice among those health care

providers who participate in the health benefit plan

according to the terms offered.

(B) “Monetary advantage or penalty” includes:

(i) a higher co-payment;

(ii) a reduction in reimbursement for services;

and

(iii) promotion of one (1) health care provider

over another by these methods;

(2) Impose upon a beneficiary of health care services
5

under a health benefit plan any co-payment, fee, or

condition that is not equally imposed upon all 

beneficiaries in the same benefit category, class, or copayment level under the health benefit plan when t h e

beneficiary is receiving services from a participating

health care provider pursuant to that health benefit plan;

or

(3) Prohibit or limit a health care provider that is

qualified under § 23-99-203(d) and is willing to

accept the health benefit plan’s operating terms and

conditions, schedule of fees, covered expenses, and

utilization regulations and quality standards, from the

opportunity to participate in that plan.

(b) Nothing in this subchapter shall prevent a health benefit

plan from instituting measures designed to maintain quality

and to control costs, including, but not limited to, the

utilization of a gatekeeper system, as long as such measures

are imposed equally on all providers in the same class.

ARK. CODE ANN. § 23-99-204. This section is known as the “Any Willing Provider”

provision of the Arkansas PPA.

The Arkansas PPA defines many, but not all, of its key terms. “Health care

providers” are defined to include twenty-seven categories of licensed or certified

providers, including physicians and hospitals. ARK. CODE ANN. § 23-99-203(d). A

“health benefit plan” is defined as “any entity or program that provides reimbursement,

including capitation, for health care services.” ARK. CODE ANN. § 23-99-203(c).

“Health care insurer” is defined by the statute to include, but is not limited to, insurance

companies, hospital and medical services corporations, health maintenance

organizations, preferred provider organizations, physician hospital organizations, thirdparty administrators, and prescription benefit management companies authorized to

administer, offer, or provide health benefit plans. ARK. CODE ANN. § 23-99-203(f).
 The State of Arkansas also intervened as a party defendant. However, on appeal, 1

the State of Arkansas has proffered no separate argument in defense of the Arkansas

PPA.

 The HONORABLE JAMES M. MOODY, United States District Judge for the

2

Eastern District of Arkansas.

6

The Arkansas PPA also includes a specific exclusion:

The provisions of the [Arkansas PPA] shall not apply to

self-funded or other health benefit plans that are exempt

from state regulations by virtue of the federal Employee

Retirement Income Security Act of 1974, as amended.

ARK. CODE ANN. § 23-99-209.

The plaintiffs below, appellees here, are “health care insurers” within the

meaning of the Arkansas PPA. They brought this declaratory judgment action seeking

a declaration that the Arkansas PPA is preempted by ERISA and an injunction

prohibiting enforcement of the PPA. The defendants below, appellants here, are

“health care providers” within the meaning of the Arkansas PPA who sought

1

admission to the plaintiffs’ limited preferred provider panels, but were denied

admission on the basis of “no need” findings by the plaintiffs. They sought declaratory

and injunctive relief to enforce the Arkansas PPA.

B. The Decision Below

The parties appeal from a decision of the United States District Court for the

Eastern District of Arkansas, Western Division, as amended, on cross-motions for

2

summary judgment. See Prudential Ins. Co. of Am. v. National Park Medical Ctr.,

Inc., 964 F. Supp. 1285 (E.D. Ark. 1997). In its original decision, filed January 31,

1997, the district court considered whether the Arkansas PPA “relate[s] to” ERISA,
7

such that it is preempted pursuant to ERISA § 514(a), 29 U.S.C. § 1144(a), using the

two-prong analysis employed by the Supreme Court in Shaw v. Delta Air Lines, Inc.,

463 U.S. 85 (1983), and subsequent decisions. The district court concluded, first, that

the state law contains a “reference to” ERISA plans by singling out such plans for

special treatment, in this case, an exemption from the burdens of the Arkansas PPA.

In reaching this conclusion, the district court expressly relied on Mackey v. Lanier

Collection Agency & Serv., 486 U.S. 825 (1988), rather than District of Columbia v.

Greater Wash. Bd. of Trade, 506 U.S. 125 (1992).

The district court also concluded that the Arkansas PPA had a “connection with”

ERISA plans such that it was also preempted on this ground. In so doing, the court

employed the seven factors used by this court in Arkansas Blue Cross & Blue Shield

v. St. Mary’s Hosp., Inc., 947 F.2d 1341 (8th Cir. 1991), cert. denied, 504 U.S. 957

(1992). The district court found that the Arkansas PPA negated ERISA plan

provisions; had a significant impact on primary ERISA entities; had a significant impact

on plan structure; had a significant impact on plan administration; and the state law was

inconsistent with ERISA provisions in various respects, although the district court did

not find these inconsistencies particularly significant. One factor on which the district

court found that the Arkansas PPA had insufficient impact to favor preemption was in

direct or acute indirect economic impact. The court also found that the State of

Arkansas had a legitimate interest in regulating health care for its citizens, such that

consideration of whether the state law was an exercise of traditional state power did

not favor preemption.

Considering all of these factors, the district court concluded that the Arkansas

PPA “relates to” ERISA plans by virtue of making a reference to and having a

connection with ERISA plans, and was therefore preempted. The court concluded
8

further that the Arkansas PPA was not “saved” from preemption by the ERISA

“savings” clause, § 514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A), applying another twoprong test employed by the Supreme Court. See Pilot Life Ins. Co. v. Dedeaux, 481

U.S. 41 (1987); Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724 (1985).

First, the court concluded that, as a matter of “common sense,” the Arkansas PPA was

not directed specifically at the insurance industry. Furthermore, relying on factors the

Supreme Court has drawn from cases considering the meaning of the “business of

insurance” under the McCarran-Ferguson Act, the district court concluded that the

Arkansas PPA does not regulate the business of insurance by transferring or spreading

a policyholder’s risk; affects only indirectly the relationship between the insured and

the insurer, by affecting the relationship between the insurer and health care providers;

and was not limited solely to entities within the insurance industry. Thus, the Arkansas

PPA did not fulfill either of the prongs of the ERISA “savings” clause test, and hence

was indeed preempted.

The district court also found that the Arkansas PPA was preempted by the

Federal Health Maintenance Organization Act, 42 U.S.C. § 300e-10. In light of these

conclusions, the court found that the remaining issues—whether the Arkansas PPA was

preempted by the Federal Employment Health Benefit Act, 5 U.S.C. § 8901-8914, and

the plaintiffs’ claims pursuant to 42 U.S.C. § 1983—were moot. The court therefore

granted summary judgment in favor of the plaintiffs, permanently enjoined the

defendants from enforcing the PPA, and denied the defendants’ and intervenors’ crossmotions for summary judgment.

In an amended order dated March 14, 1997, and filed on March 17, 1997, the

district court held that the Arkansas PPA is preempted by ERISA only “‘insofar as

[it] . . . relate[s] to any employee benefit plan described in section 1003(a). . . .’” 
9

Amended Order of March 14, 1997 (quoting 29 U.S.C. § 1144(a)). Similarly, the court

ordered that the defendants are permanently enjoined from enforcing the Arkansas PPA

only “‘insofar as [it] . . . relate[s] to any employee benefit plan described in section

1003(a). . . .’” Id. (quoting 29 U.S.C. § 1144(a)).

The appellant health care providers have appealed the district court’s conclusions

that the Arkansas PPA is preempted by ERISA and not “saved” from preemption as a

law that regulates insurance. Prudential Insurance Company of America crossappealed the district court’s amendment of the original order granting summary

judgment.

II. LEGAL ANALYSIS

A. Standards For Summary Judgment

This court has often stated that it will review the grant or denial of summary

judgment de novo, applying the same standards used by the district court. See, e.g.,

Union Pac. R.R. Co. v. Beckham, 138 F.3d 325, 329 (8th Cir. 1998); Kneibert v.

Thomson Newspapers, Mich., Inc., 129 F.3d 444, 451 (8th Cir. 1997); Snow v.

Ridgeview Med. Ctr., 128 F.3d 1201, 1205 (8th Cir. 1997). Summary judgment is

appropriate only if, after viewing the facts and the inferences to be drawn from them

in the light most favorable to the nonmoving party, the record shows that there is no

genuine issue of material fact and that the moving party is entitled to judgment as a

matter of law. FED. R. CIV. P. 56(c); Matsushita Elec. Indus. Co. v. Zenith Radio

Corp., 475 U.S. 574, 587 (1986); Beckham, 138 F.3d at 329; Kneibert, 129 F.3d at

451; Snow, 128 F.3d at 1205. More specifically, “‘[w]e review the District Court’s

decision on ERISA preemption de novo because it is a question of federal law

involving statutory interpretation.’” Wilson v. Zoellner, 114 F.3d 713, 715 (8th Cir.
 Gordius, King of Phrygia, tied his chariot to a hitching post before the temple of 3

an oracle with an intricate knot, which, it was prophesied, none but the future ruler of

all Asia could untie. See, e.g., Funk and Wagnalls Standard Dictionary of Folklore,

Mythology, and Legend 460 (Maria Leach, ed., Funk & Wagnalls, 1972); Bulfinch’s

Mythology 44 (Richard P. Martin, ed., 1991). In the course of his conquests,

Alexander the Great came to Phrygia, and, frustrated with his inability to untangle the

“Gordian knot,” simply sliced through it with his sword. His subsequent success in his

Asian campaign has been taken to mean that his solution to the “Gordian knot” fulfilled

the prophesy. See, e.g., Funk and Wagnalls Standard Dictionary of Folklore,

Mythology, and Legend 460 (Maria Leach, ed., Funk & Wagnalls, 1972); Bulfinch’s

Mythology 44 (Richard P. Martin, ed., 1991). However, this court does not have the

luxury of applying a sword to the problem of interpretation of the scope of ERISA

preemption, no matter how troubled this and other courts may be by the question.

 In Painter, this court noted that, in addition to or instead of “relate to” preemption, 4

some ERISA cases involve the distinct question of conflict

preemption—whether a state law is preempted because it

conflicts with a specific portion of the complex ERISA

statute. If there is a conflict, state law is preempted,

whether or not “the statutory phrase ‘relate to’ provides

(continued...)

10

1997) (quoting In Home Health, Inc., v. Prudential Ins. Co., 101 F.3d 600, 604 (8th

Cir. 1996)).

B. ERISA Preemption

The court must now attempt to unravel the Gordian knot of the scope of ERISA

“relate to” preemption, the question that has so troubled the courts of appeals and the 3

Supreme Court. See Painter v. Golden Rule Ins. Co., 121 F.3d 436, 438-39 (8th Cir.

1997) (noting the Supreme Court’s struggles with the scope of “relate to” preemption

under § 1144(a)), cert. denied, ___ U.S. ___, ___ S. Ct. ___, 1998 WL 73018 (April

20, 1998). Pursuant to the express preemption provision of ERISA, section 514(a), 4
 (...continued) 4

further and additional support for the pre-emption claim.”

Boggs v. Boggs, ___ U.S. ___, ___, 117 S. Ct. 1754, 1761,

138 L. Ed. 2d 45 (1997).

Painter, 121 F.3d at 439 (emphasis in the original). In Painter, in the court’s view, the

case before it was one of “conflict preemption.” Id. However, neither the parties nor

the district court in the case presently before this court ever suggested the applicability

of “conflict preemption.” Thus, we will consider only the “relate to” species of ERISA

preemption here.

 This provision of ERISA states, in its entirety, as follows: 5

Except as provided in subsection (b) of this 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. This section shall take

effect on January 1, 1975.

29 U.S.C. § 1144(a).

11

codified at 29 U.S.C. § 1144(a), the Arkansas PPA, like any other state law, is

preempted “insofar as [it] may now or hereafter relate to any [ERISA] employee

benefit plan.” But does the Arkansas PPA “relate to” ERISA in a prohibited way? 5

Congress included the express preemption clause of § 1144(a) in ERISA to

provide for “‘the displacement of State action in the field of private employee benefit

programs.’” Wilson, 114 F.3d at 716 (quoting Morstein v. National Ins. Servs., Inc.,

93 F.3d 715, 719 n.6 (11th Cir. 1996) (en banc), cert. denied, ___ U.S. ___, 117 S. Ct.

769 (1997), which in turn quotes 120 Cong. Rec. 29,942 (1974) (comments of Senator

Javits)). Yet, Congress did not define what it meant by state laws that “relate to” an

ERISA benefit plan anywhere in the statute. 

As this court noted in Wilson,
12

In analyzing this clause, the Supreme Court has “long

acknowledged that ERISA’s pre-emption provision is

clearly expansive.” California Division of Labor Standards

Enforcement v. Dillingham Constr., [519] U.S. [316], ___,

117 S. Ct. 832, 837, 136 L. Ed. 2d 791 (1997) (quotations

and citations omitted). The Supreme Court has variously

described the ERISA preemption clause as having “a broad

scope, and an expansive sweep, and [as being] broadly

worded, deliberately expansive, and conspicuous for its

breadth.” Id. (quotations and citations omitted).

Wilson, 114 F.3d at 716. However, the Supreme Court has also made clear,

particularly in its most recent decisions, that the ERISA preemption clause cannot be

read “to ‘extend to the furthest stretch of its indeterminacy.’” De Buono, ___ U.S. at

___, 117 S. Ct. at 1751 (quoting Travelers, 514 U.S. at 655).

In addition to recognizing these general principles, the Supreme Court has also

provided more concrete guidance on the scope of “relate to” preemption by formulating

a two-part inquiry to determine whether a state law “relate[s] to” an employee benefit

plan covered by ERISA. See Dillingham, 519 U.S. at ___, 117 S. Ct. at 837; Wilson,

114 F.3d at 716.

A “law ‘relate[s] to’ a covered employee benefit plan for

purposes of § 514(a) ‘if it [1] has a connection with or

[2] reference to such a plan.’” District of Columbia v.

Greater Washington Bd. of Trade, 506 U.S. 125, 129, 113

S. Ct. 580, 583, 121 L. Ed. 2d 513 (1992) (quoting Shaw v.

Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S. Ct. 2890,

2899-2900, 77 L. Ed. 2d 490 (1983)).

Dillingham, 519 U.S. at ___, 117 S. Ct. at 837; accord Travelers, 514 U.S. at 656;

Wilson, 114 F.3d at 716. The nature of this two-prong inquiry must be explored in

more detail.
13

1. The effect of Travelers

The critical question put by the parties in this case is the effect of the Supreme

Court’s decision in New York State Conf. of Blue Cross & Blue Shield Plans v.

Travelers Ins. Co., 514 U.S. 645 (1995), upon this two-prong ERISA preemption

analysis. The appellants suggest that Travelers largely supplanted the entire two-prong

inquiry, replacing it with a “starting presumption” that state laws will not be preempted,

and relying on determinations of congressional intent to preempt only those laws that

are of the type Congress intended ERISA to preempt. This inquiry, appellants assert,

depends upon the purpose and effects of the state statute. The appellees counter that

Travelers and its progeny have only put limits on the broadest scope of ERISA

preemption without altering the essential inquiries stated in prior precedent.

In Travelers, the Supreme Court considered whether ERISA preempted “[a]

New York statute [that] require[d] hospitals to collect surcharges from patients covered

by a commercial insurer but not from patients insured by a Blue Cross/Blue Shield plan,

and [that also] subject[ed] certain health maintenance organizations (HMOs) to

surcharges that var[ied] with the number of Medicaid recipients each enroll[ed].”

Travelers, 514 U.S. at 649. As appellants contend, the Court did begin its discussion

of the preemption issue by noting that “we have never assumed lightly that Congress

has derogated state regulation, but instead have addressed claims of pre-emption with

the starting presumption that Congress does not intend to supplant state law.” Id. at

654. The Court also reiterated the assumption that Congress did not intend to bar state

action in fields of traditional state regulation or historic police powers. Id. at 655.

Appellants focus particularly on the following passage:

Since pre-emption claims turn on Congress’s intent,

Cipollone [v. Liggett Group, Inc., 505 U.S. 504], ___, 112

S. Ct., at 2617-18; Shaw, supra, at 95, 103 S. Ct., at 2898,
14

we begin as we do in any exercise of statutory construction with the text

of the provision in question, and move on, as need be, to the structure and

purpose of the Act in which it occurs. See, e.g., Ingersoll-Rand, 498

U.S., at 138, 111 S. Ct., at 482. The governing text of ERISA is clearly

expansive. Section 514(a) [29 U.S.C. § 1144(a)] marks for pre-emption

“all state laws insofar as they . . . relate to any employee benefit plan”

covered by ERISA, and one might be excused for wondering, at first

blush, whether the words of limitation (“insofar as they . . . relate”) do

much limiting. If “relate to” were taken to extend to the furthest stretch

of indeterminacy, then for all practical purposes pre-emption would never

run its course, for “[r]eally, universally, relations stop nowhere,” H.

James, Roderick Hudson xli (New York ed., World’s Classics 1980). But

that, of course, would be to read Congress’s words of limitation as mere

sham, and to read the presumption against pre-emption out of the law

whenever Congress speaks to the matter with generality. That said, we

have to recognize that our prior attempt to construe the phrase “relate

to” does not give us much help drawing the line here.

Travelers, 514 U.S. at 655 (emphasis added). The appellants contend that the

highlighted statement shows that the Supreme Court’s decision in Travelers constituted

a “sea change” in ERISA preemption analysis.

However, we do not read Travelers to reject all of its prior precedent on the

scope of ERISA preemption or as a wholesale rejection of the mode of analysis

employed in the Court’s prior precedent. Although in Travelers the Court found its

prior attempts to construe the phrase “relate to” did not give it much help drawing the

line in that particular case, id. (“[W]e have to recognize that our prior attempt to

construe the phrase ‘relate to’ does not give us much help drawing the line here”;

emphasis added), the Court’s analysis in Travelers nonetheless began with precisely
15

the two-prong inquiry established years before in Shaw v. Delta Air Lines, Inc., 463

U.S. 85 (1983). Travelers, 514 U.S. at 656 (“In Shaw, we explained that ‘[a] law

“relates to” an employee benefit plan, in the normal sense of the phrase, if it has a

connection with or reference to such a plan.’ 463 U.S., at 96-97, 103 S. Ct., at

2900.”).

The Court quickly dispensed with the applicability of the “reference to” prong

of the inquiry in the case before it, however:

The latter alternative, at least, can be ruled out. The

surcharges are imposed upon patients and HMOs, regardless

of whether the commercial coverage or membership,

respectively, is ultimately secured by an ERISA plan,

private purchase, or otherwise, with the consequence that

the surcharge statutes cannot be said to make “reference to”

ERISA plans in any manner. Cf. Greater Wash. Bd. of

Trade, 506 U.S., at ___, 113 S. Ct., at 583 (striking down

District of Columbia law that “specifically refers to welfare

benefit plans regulated by ERISA and on that basis alone is

pre-empted”).

Travelers, 514 U.S. at 656. Thus, the “reference to” inquiry was unhelpful in that

case, because that alternative could be so completely “ruled out.” Id.

This conclusion, however, still left the Court with the second prong of the

inquiry, the “connection with” prong. Id. It was with respect to this prong of the

inquiry that the decision in Travelers arguably changed the direction of or emphasis in

ERISA preemption analysis, because the Court found that as to the “connection with”

prong,

an uncritical literalism is no more help than in trying to

construe “relate to.” For the same reasons that infinite

relations cannot be the measure of pre-emption, neither can

infinite connections. We simply must go beyond the
16

unhelpful text and the frustrating difficulty of defining its key term, and

look instead to the objectives of the ERISA statute as a guide to the scope

of the state law that Congress understood would survive.

Id. Thus, where there was no “reference to” ERISA in the state law, the court’s further

preemption inquiry was governed by the objectives of the ERISA statute as a guide to

what state laws Congress intended to preempt.

The Court’s subsequent decisions also do not indicate a wholesale abandonment

of prior precedent concerning the “reference to” prong of the inquiry. For example, in

Dillingham, the Court again stated the two-part inquiry for ERISA “relate to”

preemption cases. Dillingham, ___ U.S. at ___, 117 S. Ct. at 837. The Court’s

explanation of the “reference to” prong of the analysis relied entirely on pre-Travelers

precedent:

Under the [“reference to”] inquiry, we have held pre-empted

a law that “impos[ed] requirements by reference to [ERISA]

covered programs,” Greater Washington Bd. of Trade,

supra, at 130-31, 113 S. Ct., at 584; a law that specifically

exempted ERISA plans from an otherwise generally

applicable garnishment provision, Mackey v. Lanier

Collection Agency & Service, Inc., 486 U.S. 825, 828, n.2,

829-830, 108 S. Ct. 2182, 2184, n.2, 2185-2186, 100 L. Ed.

2d 836 (1988); and a common-law cause of action premised

on the existence of an ERISA plan, Ingersoll-Rand Co.,

supra, at 140, 111 S. Ct., at 483-484. Where a State’s law

acts immediately and exclusively upon ERISA plans, as in

Mackey, or where the existence of ERISA plans is essential

to the law’s operation, as in Greater Washington Bd. of

Trade and Ingersoll-Rand, that “reference” will result in

pre-emption.

Dillingham, 117 S. Ct. at 837-38. Without once referring to the decision in Travelers

or to a presumption against preemption, the Court in Dillingham concluded that the
17

California apprentice wage law at issue in that case did not make a prohibited

“reference to” ERISA, because approved apprenticeship programs did not necessarily

need to be ERISA plans. Id. at 838. Apparently, nowhere did the California act make

an express reference to ERISA. Furthermore, 

[The California apprentice wage law] “functions irrespective

of . . . the existence of an ERISA plan.” An apprenticeship

program meeting the substantive standards set forth in the

Fitzgerald Act regulations can be approved whether or not

its funding apparatus is of a kind as to bring it under ERISA.

[The California law] is indifferent to the funding, and

attendant ERISA coverage, of apprenticeship programs.

Accordingly, California’s prevailing wage statute does not

make reference to ERISA plans.

Dillingham, ___ U.S. at ___, 117 S. Ct. at 839.

It was when the Court turned to analysis of the “connection with” prong of the

inquiry that the standards stated in Travelers, and specific citation of that authority,

figured prominently. Id. at 839-42. Indeed, it was only when the Court turned from

the “reference to” prong of the inquiry to the “connection with” prong that it noted that

Travelers had refocused the inquiry:

A law that does not refer to ERISA plans may yet be preempted if it has a “connection with” ERISA plans. Two

terms ago, we recognized that an “uncritical literalism” in

applying this standard offered scant utility in determining

Congress’ intent as to the extent of § [1144(a)]’s reach.”

Travelers, 514 U.S., at [656], 115 S. Ct., at 1677. Rather,

to determine whether a state law has the forbidden

connection, we look both to “the objectives of the ERISA

statute as a guide to the scope of the state law that Congress

understood would survive,” ibid., as well as to the nature of

the effect of the state law on ERISA plans, id., at ___, 115

S. Ct., at 1677.
18

Dillingham, ___ U.S. at ___, 117 S. Ct. at 838. Thus, while the Court in Dillingham

recognized a significant change in the mode of analysis under the “connection with”

prong of the inquiry in Travelers, it saw no such change in the analysis under the

“reference to” prong.

Furthermore, in De Buono, although the Court explained that the decision in

Travelers had “unequivocally concluded” that the “relate to” language was not

“intended to modify ‘the starting presumption that Congress does not intend to supplant

state law,’” De Buono, ___ U.S. at ___, 117 S. Ct. at 1751 (quoting Travelers, 514

U.S. at 654), the Court still identified as among the types of state laws that Congress

intended to supersede “one[s] in which the state statute contains provisions that

expressly refer to ERISA or ERISA plans.” Id. at 1752 & n.15 (citing Mackey, 486

U.S. at 828-30, and Greater Wash. Bd. of Trade, 506 U.S. at 130-31, and finding the

law in question in that case was not one that “contains provisions that expressly refer

to ERISA or ERISA plans”).

Thus, we conclude that although Travelers certainly reaffirmed—in the context

of ERISA preemption—the importance of the presumption that Congress did not intend

to supplant state law unless that intention was clear, that refocusing of the preemption

inquiry was specifically in the context of the “connection with” prong of the inquiry.

Nothing in Travelers or its recent progeny supplants the “reference to” prong of the

ERISA preemption analysis as stated in pre-Travelers precedent, specifically Mackey

and Greater Washington Board of Trade. To put it another way, we believe that the

presumption that Congress does not intend to supplant state law is necessarily

overcome when the state law has an inappropriate “reference to” ERISA or ERISA

plans, as such an improper reference is defined in pre-Travelers precedent. See
19

Travelers, 514 U.S. at 655-56; accord De Buono, ___ U.S. at ___, 117 S. Ct. at 1752

& n.15; Dillingham, ___ U.S. at ___, 117 S. Ct. at 839. Therefore, we turn to the

question of whether the Arkansas PPA has a prohibited “reference to” ERISA or

ERISA plans.

2. “Reference to” ERISA in the Arkansas PPA

A state law has a prohibited “reference to” ERISA or ERISA plans when that

law (1) “‘impos[es] requirements by reference to [ERISA] covered programs,’”

Dillingham, ___ U.S. at ___, 117 S. Ct. at 837 (quoting Greater Wash. Bd. of Trade,

506 U.S. at 130-31); (2) “specifically exempt[s] ERISA plans from an otherwise

generally applicable [statute],” id. (citing Mackey, 486 U.S. at 828 n.2); or (3) premises

a cause of action on the existence of an ERISA plan, id. (citing Ingersoll-Rand, 498

U.S. at 140). Thus, “[w]here a State’s law acts immediately and exclusively upon

ERISA plans, as in Mackey, or where the existence of ERISA plans is essential to the

law’s operation, as in Greater Washington Board of Trade and Ingersoll-Rand, that

“reference” will result in pre-emption.” Id. at 837-38; accord Wilson, 114 F.3d at 716-

17.

The appellants contend that the Arkansas PPA makes no forbidden “reference

to” ERISA, although it expressly states that its provisions “shall not apply to selffunded or other health benefit plans that are exempt from state regulation by virtue of

the federal Employee Retirement Income Security Act of 1974, as amended.” ARK.

CODE ANN. § 23-99-209. First, they contend that the Arkansas PPA exempts only selffunded ERISA plans, not insured ERISA plans, and hence merely restates ERISA’s socalled “deemer clause.” The “deemer clause” states that no self-funded ERISA plan

“shall be deemed to be an insurance company or other insurer . . . for purposes of any

law of any State purporting to regulate insurance companies, insurance contracts,
20

banks, trust companies, or investment companies.” 29 U.S.C. § 1144(b)(2)(B). They

contend further that the Arkansas PPA does not single out any plans, ERISA or nonERISA, because the PPA does not regulate plans at all, but only insurers.

Appellees counter that the express exemption for plans regulated by ERISA in

the Arkansas PPA is not limited solely to self-funded ERISA plans, because it also

specifically encompasses “other health benefit plans.” Further, they contend that ARK.

CODE ANN. § 23-99-209 does not parallel ERISA’s “deemer clause,” because it plainly

is not limited to insurance companies or insured relationships. In any event, they

contend that the Arkansas PPA has a forbidden “reference to” ERISA, because in § 23-

99-209, the Arkansas PPA singles out ERISA plans for special treatment. Finally, they

contend that throughout the Arkansas PPA, statutory provisions belie the assertion that

the act only regulates insurers, not plans.

In Wilson, this court applied the considerations identified in Dillingham to the

question of whether the Missouri common-law tort of negligent misrepresentation

contained a forbidden “reference to” ERISA, revisiting its prior holding in In Home

Health, Inc. v. Prudential Ins. Co., 101 F.3d 600 (8th Cir. 1996):

Upon considering th[e] elements of the tort, we concluded

“that the state common law on negligent misrepresentation

is of general application. It does not actually or implicitly

refer to ERISA plans. The state law on

misrepresentation . . . is of general application as it makes

no reference to and functions irrespective of the existence of

an ERISA plan.” [In Home Health, 101 F.3d] at 605 n.6

(quotations and citations omitted). Because “the existence

of ERISA plans is not essential to the operation of Missouri

state common-law tort of negligent misrepresentation,

Dillingham, ___ U.S. at ___, 117 S. Ct. at 838, and because

the tort of negligent misrepresentation does not “impos[e]

requirements by reference to ERISA covered programs,” id.
21

at ___, 117 S. Ct. at 837 (quotations, citations, and alterations omitted),

nor “acts immediately and exclusively upon ERISA plans,” id. at ___,

117 S. Ct. at 838, Wilson’s tort action for negligent misrepresentation

against Zoellner is not preempted by ERISA on the basis of any reference

to ERISA.

Wilson, 114 F.3d at 717.

Unlike the common-law tort action at issue in Wilson, however, the Arkansas

PPA does, both actually and implicitly, refer to ERISA plans. Id. Again, the Arkansas

PPA expressly states that its provisions “shall not apply to self-funded or other health

benefit plans that are exempt from state regulation by virtue of the federal Employee

Retirement Income Security Act of 1974, as amended.” ARK. CODE ANN. § 23-99-209.

In keeping with post-Travelers precedent, and the pre-Travelers precedent specifically

embraced in Travelers and its progeny, this reference to ERISA is sufficient to preempt

the Arkansas PPA.

In Mackey, the Supreme Court held that a Georgia garnishment statute that

“singles out ERISA employee welfare benefit plans for different treatment under state

garnishment procedures, is pre-empted under § [1144(a)].” Mackey, 486 U.S. at 830.

The Court stated, “The state statute’s express reference to ERISA plans suffices to

bring it within the federal law’s pre-emptive reach.” Id. Next, in Ingersoll-Rand, the

Supreme Court considered whether ERISA preempted a Texas law authorizing a cause

of action for wrongful discharge to avoid making contributions to an employee’s

pension fund. Ingersoll-Rand, 498 U.S. at 135. In that case, the Court reaffirmed

Mackey’s recognition that “‘we have virtually taken it for granted that state laws which

are “specifically designed to affect employee benefit plans” are pre-empted under

§ [1144(a)].’” Ingersoll-Rand, 498 U.S. at 140 (quoting Mackey, 486 U.S. at 829). 
22

The Court explained, “In Mackey the statute’s express reference to ERISA plans

established that it was so designed; consequently, it was pre-empted.” Id. The Court

then held that the Texas common-law cause of action it was asked to consider was

preempted, because “there simply is no cause of action if there is no plan.” Id. In

Greater Washington Board of Trade, the Court took the “reference to” analysis one

step further, finding that a District of Columbia law that specifically referred to benefit

plans that were regulated by ERISA was preempted “on that basis alone.” Greater

Wash. Bd. of Trade, 506 U.S. at 130. The Court reasoned thus:

The health insurance coverage that [the District of Columbia

law] requires employers to provide for eligible employees is

measured by reference to “the existing health insurance

coverage” provided by the employer and “shall be at the

same benefit level.” D.C. Code Ann. § (a-1)(1) and (3)

(Supp. 1992). The employee’s “existing health insurance

coverage,” in turn, is a welfare benefit plan under ERISA

§ 3(a), because it involves a fund or program maintained by

an employer for the purpose of providing health benefits for

the employee “through the purchase of insurance or

otherwise.” § 3(a), 29 U.S.C. § 1002(1). Such employersponsored health insurance programs are subject to ERISA

regulation, see § 4(a), 29 U.S.C. § 1003(a), and any state

law imposing requirements by reference to such covered

programs must yield to ERISA.

Id. at 130-31. These precedents require the conclusion that the Arkansas PPA is

preempted.

First, § 23-99-209 of the Arkansas PPA undeniably makes an express reference

to ERISA and attempts to exclude from coverage of the PPA at least some ERISA
 We find it unnecessary to address the appellants’ argument that the Arkansas PPA 6

attempts to exclude from its coverage only self-funded ERISA plans; it suffices, as we

read Supreme Court precedent, that the Arkansas PPA attempts to exempt any ERISA

plans.

23

plans. Thus, it “singles out ERISA employee welfare benefit plans for different

6

treatment under state [law], [and therefore] is pre-empted under § [1144(a)].” Mackey,

486 U.S. at 830. As in Mackey, “[t]he state statute’s express reference to ERISA plans

suffices to bring it within the federal law’s pre-emptive reach.” Id. The Arkansas PPA

is “‘”specifically designed to affect employee benefit plans,”’” even if the effect is to

exclude them from coverage of the PPA, and thus the PPA “‘[is] pre-empted under

§ [1144(a)].’” Ingersoll-Rand, 498 U.S. at 140 (quoting Mackey, 486 U.S. at 829).

To put it another way, the Arkansas PPA “specifically exempt[s] ERISA plans from an

otherwise generally applicable [statute],” and it is consequently preempted.

Dillingham, ___ U.S. at ___, 117 S. Ct. at 837 (citing Mackey, 486 U.S. at 828 n.2).

Even if it were true that § 23-99-209 of the Arkansas PPA merely reflects

ERISA’s “deemer clause,” an assertion we find unpersuasive, that would be immaterial

to our conclusion that § 23-99-209’s express reference to ERISA plans “bring[s] it

within the federal law’s pre-emptive reach.” Mackey, 486 U.S. at 830. The fact that

a state law is enacted to help effectuate ERISA’s provisions or is in accord with

ERISA’s dictates “is not enough to save the state law from pre-emption.” Id. at 829.

“‘The pre-emption provision [of ERISA] . . . displace[s] all state laws that fall within

its sphere, even including state laws that are consistent with ERISA’s substantive

requirements.’” Id. (quoting Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S.

724, 739 (1985)); accord Greater Wash. Bd. of Trade, 506 U.S. at 130 (also citing

Metropolitan Life Ins. Co., 471 U.S. at 739); Ingersoll-Rand, 498 U.S. at 139 (“Pre-
24

emption is also not precluded simply because a state law is consistent with ERISA’s

substantive requirements,” also citing Metropolitan Life Ins. Co., 471 U.S. at 739). In

short, “legislative ‘good intentions’ do not save a state law within the broad preemptive scope of § [1144(a)].” Id. at 830.

Second, appellants’ contentions notwithstanding, the Arkansas PPA has several

provisions that make implicit reference to ERISA, see Wilson, 114 F.3d at 717

(considering both actual and implicit reference to ERISA or ERISA plans), through

regulation of “health benefit plans” that are necessarily subject to ERISA regulation.

Cf. Greater Wash. Bd. of Trade, 506 U.S. at 130-31. For example, the Arkansas PPA

provides that “[i]t is a violation of this subchapter for any health care insurer or other

person or entity to provide any health benefit plan providing for health care services

that does not conform to this chapter.” ARK. CODE ANN. § 23-99-206 (emphasis

added). Similarly, the Arkansas PPA was intended “to provide the opportunity of

providers to participate in health benefit plans,” ARK. CODE ANN. § 23-99-202

(emphasis added), and the Act states that “[n]othing in this subchapter shall prevent a

health benefit plan from instituting measures designed to maintain quality and to

control costs . . . so long as such measures are imposed equally on all providers in the

same class.” ARK. CODE ANN. § 23-99-204(b) (emphasis added). Thus, it cannot be

said that the Arkansas PPA “functions irrespective of . . . the existence of an ERISA

plan.” Dillingham, ___ U.S. at ___, 117 S. Ct. at 839; Wilson, 114 F.3d at 717; In

Home Health, 101 F.3d at 605 n.6. Rather, the Arkansas PPA is “specifically designed

to affect employee benefit plans,” Ingersoll-Rand, 498 U.S. at 140 (quoting Mackey,

486 U.S. at 829), it “‘impos[es] requirements by reference to [ERISA] covered

programs,’” Dillingham, ___ U.S. at ___, 117 S. Ct. at 837 (quoting Greater Wash.
25

Bd. of Trade, 506 U.S. at 130-31), and “the existence of ERISA plans is essential to

the law’s operation.” Id. at 837-38; accord Wilson, 114 F.3d at 716-17. 

Finally, by letter pursuant to FED. R. APP. P. 28(j), the appellants recently

brought to the court’s attention the decision of the Ninth Circuit Court of Appeals in

Washington Physicians Serv. Ass’n v. Gregoire, ___ F.3d ___, 1998 WL 318759 (9th

Cir. June 18, 1998), which they assert directly relates to their argument that the

Arkansas PPA regulates health care insurers, not health benefit plans. In Gregoire, the

Ninth Circuit Court of Appeals concluded that Washington’s so-called “Alternative

Provider Statute” was not preempted by ERISA. Gregoire, ___ F.3d at ___, 1998 WL

318759 at *1. The court found that the Washington statute did not “relate to” ERISA

plans in the most obvious way by referring to or acting directly upon such plans. Id.

at ___, 1998 WL 318759 at *3. However, unlike the Arkansas statute, which is not so

restricted, as explained above, the Washington statute made clear that the term “health

plans” referred only to plans offered by a “health carrier,” not a benefit plan offered by

an employer, and defined “health carrier” to include only a disability insurer, a health

care service contractor, or an HMO, and excluded employer-sponsored, self-funded

health plans. Id. Nor did the Washington act make the kind of express attempt to

exclude ERISA-regulated plans found in the Arkansas PPA in ARK. CODE ANN. § 23-

99-209, because it simply identified the very narrow “health plans” to which it referred,

which were not ERISA-regulated plans, even though the way the Washington act was

drawn was “quite obviously intended to save the Act from ERISA preemption.” Id.

Indeed, the Ninth Circuit Court of Appeals recognized that the narrow language of the

Washington act distinguished the case “from the numerous cases that have found a

‘reference’ to ERISA plans in a state’s regulation of health plans,” in which “the state

laws . . . all included ERISA plans in the definition of ‘health plan’ or otherwise
26

expressly referred to ERISA plans.” Id. at ___, 1998 WL 318759 at *4. Thus,

“[b]ecause the [Washington] Act is different from these other state laws in that it does

not expressly refer to ERISA plans and does not operate directly on them,” the Ninth

Circuit Court of Appeals did “not find this string of precedent relevant,” and held “that

the [Washington] Act does not have a ‘reference’ to ERISA plans.” Id. Again, this

court holds that the Arkansas PPA does have both express and implicit references to

ERISA plans.

Thus, the Arkansas PPA makes impermissible “reference to” ERISA or ERISA

plans, and as such is preempted by 29 U.S.C. § 1144(a). Dillingham, ___ U.S. at ___,

117 S. Ct. at 837-38; accord Wilson, 114 F.3d at 716-17. Because the PPA is

preempted under the “reference to” prong of the ERISA preemption analysis, we find

it unnecessary to reach the question of whether it is also preempted under the

“connection with” prong. However, having concluded that the Arkansas PPA is

preempted, we turn to the question of whether it is nonetheless “saved” from ERISA

preemption as a state law that regulates insurance.

C. The “Savings” Clause

Although the Arkansas PPA would otherwise be preempted, it will escape the

effects of that preemption if it falls within ERISA’s so-called “savings” clause,

§ 514(b)(2)(A), codified at 29 U.S.C. § 1144(b)(2)(A). See, e.g., Pilot Life Ins. Co.

v. Dedeaux, 481 U.S. 41, 45 (1987) (“To summarize the pure mechanics of [§ 514(a)

and § 514(b)]: If a state law ‘relate[s] to . . . employee benefit plan[s],’ it is preempted. § 514(a). The saving clause excepts from the pre-emption clause laws that

‘regulat[e] insurance.’ § 514(b)(2)(A).”); Metropolitan Life Ins. Co., 471 U.S. at 733

(“While § 514(a) of ERISA broadly pre-empts state laws that relate to an employee-
27

benefit plan, that pre-emption is substantially qualified by an ‘insurance savings

clause,’ § 514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A). . . .”); United of Omaha v.

Business Men’s Assur. Co., 104 F.3d 1034, 1039 (8th Cir. 1997). The “savings”

clause provides that “[n]othing in this subchapter shall be construed to exempt or

relieve any person from any law of any State which regulates insurance . . . .” 29

U.S.C. § 1144(b)(2)(A); see also Metropolitan Life Ins. Co., 471 U.S. at 733; United

of Omaha, 104 F.3d at 1039 (“The savings clause excepts from preemption certain

categories of state law, including state law that regulates insurance.”).

The appellants contend that the district court erred when it held that the Arkansas

PPA was not “saved” from ERISA preemption, because the PPA did not “regulate

insurance.” They contend that the court’s error arose from its failure to follow United

States Dep’t of Treasury v. Fabe, 508 U.S. 491 (1993), which they assert is the

Supreme Court’s most recent decision addressing the manner in which courts are to

determine whether a state law regulates insurance. They argue that Fabe departed from

rigid application of the tests found in Group Life & Health Ins. Co. v. Royal Drug Co.,

440 U.S. 205 (1979), Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119 (1982), and

Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724 (1985), instead applying a

broad interpretation of which state laws regulate the “business of insurance” outside

of the antitrust arena. They assert that under this broad interpretation, the Arkansas

PPA is unequivocally a law affecting the “business of insurance,” and as such is saved

from ERISA preemption.

The appellees once again disagree with the appellants’ assertion that the rules

have changed. They argue that Fabe is factually unrelated and legally irrelevant to the

question of the scope of the ERISA savings clause. They point out that the definition

of “health care insurer” under the Arkansas PPA is definitely not limited to “insurance
28

companies” and that as a matter of both common sense and application of the factors

cited in Royal Drug, Pireno, and Metropolitan Life Insurance, the Arkansas PPA is not

a law regulating insurance. Therefore, they argue that the district court correctly held

that the Arkansas PPA is not “saved” from preemption.

Whatever its import for the present case, Fabe is not a case directly considering

the scope of the ERISA “savings” clause; rather, it was a case considering whether an

Ohio law establishing priority of claims for an insolvent insurance company was

exempt by virtue of the McCarran-Ferguson Act from preemption by the federal

priority statute, 31 U.S.C. § 3713. Fabe, 508 U.S. at 493. Therefore, we look first to

Supreme Court decisions specifically interpreting the scope of the ERISA “savings”

clause.

1. Scope of the ERISA “savings” clause

The Supreme Court first considered the scope of the ERISA “savings” clause in

Metropolitan Life:

[T]he sphere in which § 514(a) operates [to preempt

state law] was explicitly limited by § 514(b)(2). The

insurance saving clause preserves any state law “which

regulates insurance, banking, or securities.” The two preemption sections, while clear enough on their faces, perhaps

are not a model of legislative drafting, for while the general

pre-emption clause broadly pre-empts state law, the saving

clause appears broadly to preserve the States’ lawmaking

power over much of the same regulation. While Congress

occasionally decides to return to the States what it has

previously taken away, it does not normally do both at the

same time.

Metropolitan Life Ins. Co., 471 U.S. at 739-40. In determining the proper scope of the

savings clause, the Court began by taking a “common-sense” view of the question of

whether a state law was one “which regulates insurance.” Id. at 740. The Court then
29

drew upon cases interpreting the scope of the McCarran-Ferguson Act, which had

identified three criteria relevant to determining whether a particular practice falls within

that Act’s reference to the “business of insurance.” Id. at 743. The three criteria

suggested by those cases were the following:

“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.” Union

Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129, 102 S. Ct.

3002, 3008, 73 L. Ed. 2d 647 (1982) (emphasis in the

original). See also Group Life & Health Ins. Co. v. Royal

Drug Co., 440 U.S. 205 (1979).

Metropolitan Life Ins. Co., 471 U.S. at 743. The Court noted further that the focus of

the statutory term under the McCarran-Ferguson Act was “‘the relationship between

the insurance company and the policyholder.’” Id. at 744 (quoting SEC v. National

Sec., Inc., 393 U.S. 453, 460 (1969)).

These principles were reaffirmed two years later in Pilot Life Ins. Co. v.

Dedeaux, 481 U.S. 41, 48-49 (1987) (citing Metropolitan Life Ins. Co., 471 U.S. at

740). In that case, the Court explained further that “[a] common-sense view of the

word ‘regulates’ would lead to the conclusion that in order to regulate insurance, a law

must not just have an impact on the insurance industry, but must be specifically directed

toward that industry.” Id. at 50. Even though the Mississippi Supreme Court had

identified the state law in question in that case, the Mississippi common law of bad

faith, with the insurance industry, “the roots of this law are firmly planted in the general

principles of Mississippi tort and contract law.” Id. at 50. Turning to the McCarranFerguson factors, the Court concluded that the Mississippi law did not “effect a
30

spreading of policyholder risk.” Id. Although the state common law did concern “the

policy relationship between the insurer and the insured,” the Court found that “[t]he

connection to the insurer-insured relationship is attenuated at best,” because it did not

“define the terms of the relationship between the insurer and the insured,” and hence

was “no more ‘integral’ to the insurer-insured relationship than any State’s general

contract law is integral to a contract made in that State.” Id. at 50-51. Finally, because

the state common-law had developed from general principles of tort and contract law

available in any breach-of-contract case, it was not limited to entities within the

insurance industry. Id. at 51. In addition to the factors stated in Metropolitan Life, the

Court also considered the role of the savings clause in ERISA as a whole, concluding

that, because the common-law cause of action addressed remedies for improper

processing of a claim for benefits, the understanding of the savings clause “must be

informed by the legislative intent concerning” comparable portions of the ERISA

statute, its enforcement provisions. Id. at 51-52. The Court concluded that it was not

the intent of Congress to “save” from preemption conflicting remedies provisions of

state law. Id. at 53-56.

The appellants assert that United States Dep’t of Treasury v. Fabe, 508 U.S. 491

(1993), changed this analysis, because it changed the way in which courts are to

determine which state laws regulate insurance under the McCarran-Ferguson Act. In

Fabe, the Court noted that Royal Drug and Pireno—the cases from which the Court

in Metropolitan Life had drawn the three factors for determining what is the “business

of insurance” within the meaning of the ERISA savings clause—both involved the

scope of the “antitrust immunity” located in the second clause of § 2(b) of the

McCarran-Ferguson Act, 15 U.S.C. § 1012(b), rather than the first clause, which

commits to the states laws “enacted . . . for the purpose of regulating the business of
 The two clauses of the McCarran-Ferguson Act to which the Court referred state 7

the following:

No Act of Congress shall be construed to invalidate,

impair, or supersede any law enacted by any State for the

purpose of regulating the business of insurance, or which

imposes a fee or tax upon such business, unless such Act

specifically relates to the business of insurance: Provided,

That after June 30, 1948 the [antitrust acts], shall be

applicable to the business of insurance to the extent that

such business is not regulated by State law.

15 U.S.C. § 1012(b) (emphasis added).

31

insurance.” Fabe, 508 U.S. at 504. The Court concluded that the first clause was

7

“not so narrowly circumscribed,” because the Court refused to equate “laws

‘enacted . . . for the purpose of regulating the business of insurance’ with the ‘business

of insurance’ itself.” Id. The Court concluded further that laws “enacted . . . for the

purpose of regulating the business of insurance” “necessarily encompasses more than

just the ‘business of insurance.’” Id. at 505.

While it is not for us to quibble with the Supreme Court’s interpretation of the

McCarran-Ferguson Act in Fabe, we can observe that that decision’s interpretation of

laws “enacted . . . for the purpose of regulating the business of insurance” in the

McCarran-Ferguson Act, 15 U.S.C. § 1012(b), does not supplant that Court’s own

interpretation of the meaning of “business of insurance” or “law of any State which

regulates insurance” in the ERISA savings clause. 29 U.S.C. § 1144(b)(2)(A). We

decline to adopt Fabe’s interpretation of laws “enacted . . . for the purpose of

regulating the business of insurance” in the McCarran-Ferguson Act, 15 U.S.C.

§ 1012(b), as necessarily the interpretation the Supreme Court would adopt for the

ERISA savings clause if it were now given the opportunity to rethink Metropolitan
 The Supreme Court did not address the interpretation of the savings clause in its 8

recent ERISA decisions interpreting the preemption clause.

32

Life. The Supreme Court has already expressly interpreted the meaning of the

8

pertinent terms of the ERISA savings clause, and it is that interpretation we will apply

here.

As this court explained in its most recent decision addressing the scope of the

ERISA “savings” clause,

The Supreme Court has explained that a state law “regulates

insurance” if (1) it is directed specifically toward the

insurance industry and (2) it applies to the “business of

insurance” within the meaning of the McCarran-Ferguson

Act, which gives to the states the authority to regulate the

business of insurance, see 15 U.S.C. §§ 1011-1015. Pilot

Life, 481 U.S. at 48, 107 S. Ct. at 1553; Metropolitan Life,

471 U.S. at 742-43, 105 S. Ct. at 2390-91; Baxter v. Lynn,

886 F.2d 182, 185 (8th Cir. 1989). A law applies to the

business of insurance under the McCarran-Ferguson Act if

it (1) has the effect of transferring or spreading the

policyholder’s risk; (2) is an integral part of the policy

relationship between the insurer and the insured; and (3) is

limited to entities within the insurance industry.

Metropolitan Life, 471 U.S. at 743, 105 S. Ct. at 2391.

United of Omaha, 104 F.3d at 1039-40. Thus, several years after Fabe, this court

applied precisely the same test to the scope of the “savings” clause as it had applied

before Fabe. Indeed, we can find no decisions of our sister Circuit Courts of Appeals

abandoning Metropolitan Life in favor of an analysis of the meaning of “business of

insurance” under Fabe in ERISA “savings” clause cases in the four years, and myriad

ERISA preemption cases, since Fabe was decided.
33

2. Applicability of the ERISA “savings” clause to the Arkansas PPA

Contrary to appellants’ assertions, we conclude that the district court correctly

held that the Arkansas PPA is not “saved” from preemption by the ERISA savings

clause. First, the Arkansas PPA is not a state law that “regulates insurance” under a

common-sense approach, Metropolitan Life Ins. Co., 471 U.S. at 740, because it is not

a law that is “specifically directed toward that industry.” Pilot Life Ins. Co., 481 U.S.

at 50; United of Omaha, 104 F.3d at 1039. Rather, as the district court found, it was

the intent of the Arkansas General Assembly in enacting the Arkansas PPA “to provide

the opportunity of providers to participate in health benefit plans.” ARK. CODE ANN.

§ 23-99-202. Furthermore, the statutory term “health benefit plans” includes far more

than just insurance or the insurance industry, because the Arkansas PPA defines that

term to include “any entity or program that provides reimbursement, including

capitation, for health care services.” ARK. CODE ANN. § 23-99-203(c). An act that

purports to regulate “health benefit plans” defined so broadly as to include employers

and administrators of self-insured plans, as well as traditional insurance, simply does

not fit within a common-sense view of a law directed specifically toward the insurance

industry. Pilot Life Ins. Co., 481 U.S. at 50; United of Omaha, 104 F.3d at 1039.

Even if we were to accept appellants’ argument that the Arkansas PPA regulates

“health care insurers,” as defined, rather than “health benefit plans,” it is clear that the

statutory term “health care insurers” also goes well beyond the scope of the insurance

industry, because it is defined by the statute to include, but not be limited to, insurance

companies, hospital and medical services corporations, health maintenance

organizations, preferred provider organizations, physician hospital organizations, thirdparty administrators, and prescription benefit management companies authorized to

administer, offer, or provide health benefit plans. ARK. CODE ANN. § 23-99-203(f). 
34

Again, this scope of the Arkansas PPA must be contrasted with the narrowly drawn act

at issue in Gregoire upon which the appellants rely. Compare Gregoire, ___ F.3d at

___, 1998 WL 318759 at *5 (the Washington law was “specifically directed” toward

the insurance industry, “because it operates directly on HMOs and [Health Care

Service Contractors], entities engaged in the business of health insurance”).

Appellants’ argument that the Arkansas PPA has been codified as part of the

Arkansas insurance code is unpersuasive, because the law reaches so far beyond the

insurance industry. Cf. Pilot Life Ins. Co., 481 U.S. at 50 (even though the Mississippi

Supreme Court had identified the state law in question with the insurance industry, “the

roots of this law are firmly planted in the general principles of Mississippi tort and

contract law.”). Furthermore, the Arkansas PPA is not simply an “innovative”

insurance law, as appellants contend, citing Metropolitan Life, 471 U.S. at 741 (nothing

in the “deemer clause” purports to distinguish between “traditional” and “innovative”

insurance laws); it is not a law directed at the insurance industry at all, but a law

directed at regulation of broadly defined health benefit plans, only some of which fall

within the insurance industry.

Nor does the Arkansas PPA satisfy any of the McCarran-Ferguson factors

identified in Metropolitan Life. First, it plainly does not have the effect of transferring

or spreading the policyholder’s risk. Metropolitan Life, 471 U.S. at 743; United of

Omaha, 104 F.3d at 1040; and compare Gregoire, ___ F.3d at ___, 1998 WL 318759

at *6-*7 (concluding that the Washington act did transfer or spread the policyholder’s

risk by mandating coverage of additional treatments or conditions). Appellants do not

argue to the contrary, asserting instead that failure to meet any one of the McCarranFerguson factors is not dispositive. However, the Arkansas PPA also is not an integral

part of the policy relationship between the insurer and the insured. Id.; United of
35

Omaha, 104 F.3d at 1040. If not preempted, it might be an integral part of the

relationship between the insurer and a third-party to the insured-insurer relationship,

the health care provider. See ARK. CODE ANN. § 23-99-206 (making it a violation of

the PPA for any provider participation provisions of health benefit plans not to conform

to the PPA). As with the Mississippi law in Pilot Life, the Arkansas PPA’s

“connection to the insurer-insured relationship is attenuated at best,” because it does

not “define the terms of the relationship between the insurer and the insured,” but only

the terms of the relationship between the insurer and a third party, and hence is “no

more ‘integral’ to the insurer-insured relationship” than any contract an insurer might

make with any other third party. Pilot Life, 481 U.S. at 50-51; and compare Gregoire,

___ F.3d at ___, 1998 WL 318759 at *6 (rejecting the argument that the Washington

act regulated only the relationship between the carrier and provider, rather than the

relationship between the carrier and the insured, because the Washington act “confers

a benefit on insureds by expanding the treatments that their health carriers must provide

or pay for,” and contrasting this act with “any willing provider” statutes, which “do not

expand the conditions covered by the policy, nor . . . expand the types of treatments

available under the policy,” but only “require[] a health carrier to allow an insured to

see any doctor willing to abide by the terms of the insurance plan and willing to provide

only those treatments specified in the plan.”).

Finally, the Arkansas PPA is not limited to entities within the insurance industry.

Metropolitan Life, 471 U.S. at 743, 105 S. Ct. at 2391. As noted above, the Arkansas

PPA defines “health benefit plans,” the terms of which must comply with the PPA, to

include “any entity or program that provides reimbursement, including capitation, for

health care services.” ARK. CODE ANN. § 23-99-203(c). It defines “health care

insurers” as including, but not being limited to, insurance companies, hospital and
36

medical services corporations, health maintenance organizations, preferred provider

organizations, physician hospital organizations, third-party administrators, and

prescription benefit management companies authorized to administer, offer, or provide

health benefit plans. ARK. CODE ANN. § 23-99-203(f). An act that purports to regulate

“health benefit plans” and “health care insurers” defined so broadly as to include

entities well outside the insurance industry plainly is not limited to entities within the

insurance industry. Compare Gregoire, ___ F.3d at ___, 1998 WL 318759 at *8 (the

Washington Act did not reach entities beyond those in the insurance industry).

Thus, the district court correctly held that the Arkansas PPA is preempted by

ERISA under 29 U.S.C. § 1144(a), and is not saved from that preemption under 29

U.S.C. § 1144(b)(2)(A), the ERISA “savings” clause. We believe that this conclusion

is compelled by applicable precedent. Although we recognize that various courts have

expressed concern about the scope of ERISA preemption, it is for Congress, not the

courts, to reassess ERISA in light of modern insurance practices and the national

debate over health care. See, e.g., Kuhl v. Lincoln Nat’l Health Plan of Kansas City,

Inc., 999 F.2d 298, 304 (8th Cir. 1993) (Judge Beam observed that although it may

well be true that Congress had not foreseen certain scenarios “when it enacted a

preemption clause so broad that it relieves ERISA-regulated plans of most tort

liability . . . modification of ERISA in light of questionable modern insurance practices

must be the job of Congress, not the courts”); accord Bast v. Prudential Ins. Co. of

Am., ___ F.3d ___, ___, 1998 WL 279217, *9 (9th Cir. June 2, 1998) (Judge

Thompson held that the district court properly concluded that state law claims were

preempted by ERISA, remarking, “The Basts’ state law claims are preempted by

ERISA, and ERISA provides no remedy. Unfortunately, without action by Congress,

there is nothing we can do to help the Basts and others who may find themselves in this
37

same unfortunate situation.”); Texas Pharmacy Ass’n v. The Prudential Ins. Co. of

Am., 105 F.3d 1035, 1039-40 (5th Cir. 1997) (Judge Reavley wrote, “There is room

to doubt if ERISA’s drafters intended that it would preempt any-willing-provider

statutes. We nevertheless conclude that the result in this case is compelled by the

unmistakable breadth of ERISA preemption recognized by the Supreme Court. A

different result will require further guidance from the Supreme Court or further action

from Congress.”);Cannon v. Group Health Serv. of Okla., Inc., 77 F.3d 1270, 1271

(10th Cir. 1996) (Judge Porfilio held that claims against an insurer were preempted by

ERISA, stating, “Although moved by the tragic circumstances of this case and the

seemingly needless loss of life that resulted, we conclude the law gives us no choice

but to affirm.”); Tolton v. American Biodyne, Inc., 48 F.3d 937, 943 (6th Cir. 1995)

(Judge Kennedy noted that “[o]ne consequence of ERISA preemption, therefore, is that

plan beneficiaries or participants bringing certain types of state actions—such as

wrongful death—may be left without a meaningful remedy”); Turner v. Fallon

Community Health Plan, Inc., 953 F. Supp. 419, 424 (D. Mass. 1997) (Judge Gorton

observed that “[p]laintiff’s state common law claims are preempted by the broadly

sweeping arm of ERISA. Plaintiff is left without any meaningful remedy even if he

were to establish that Fallon wrongfully refused to provide the . . . treatment his wife

urgently sought. Notwithstanding the merits of plaintiff’s argument, this Court cannot

legislate by judicial decree nor apply a statute, such as ERISA, other than as drafted

by Congress.”); Pomeroy v. Johns Hopkins Med. Servs., Inc., 868 F. Supp. 110, 116

(D. Md. 1994) (Judge Garbis stated, “Ultimately, whether the ERISA civil enforcement

provisions must be reexamined and reformed in light of modern health care is an issue

which must be addressed and resolved by the legislature rather than the courts.”).
38

D. The Extent To Which The Arkansas PPA Is Preempted

Because we conclude that the Arkansas PPA is preempted by ERISA and not

saved by the “savings” clause, we must address the cross-appeal of Prudential

Insurance Company of America that the district court erred by amending its grant of

summary judgment in favor of appellees to state that the Arkansas PPA is

unenforceable only “insofar as” it relates to ERISA plans. Prudential contends that the

amendment creates a state statute that was never enacted or considered by the

Arkansas legislature. Prudential argues that the “savings” clause requirement that the

statute be limited to entities within the insurance industry would be meaningless if the

court could simply sever out portions of the statute that applied to non-insurance

entities. They contend instead that the Arkansas PPA is preempted in its entirety. The

appellants initially agreed that the district court’s amended judgment is inadequate,

because it begs the question of the extent to which the Arkansas PPA is preempted and

does not consider the preemptive effect of other statutes. However, in their reply brief,

they contend that the district court properly amended its order in light of severability

clauses in both of the acts that became the Arkansas PPA.

As Prudential has asserted, in Texas Pharmacy Ass’n v. Prudential Ins. Co., 105

F.3d 1035 (5th Cir. 1997), cert. denied, ___ U.S. ___, 118 S. Ct. 75 (1997), the Fifth

Circuit Court of Appeals held that a Texas law containing an “any willing provider”

provision was preempted in its entirety by ERISA. Texas Pharmacy Ass’n, 105 F.3d

at 1039. That court wrote,

The TPA [Texas Pharmacy Association], in the final

footnote of its brief, suggests that if the statute is preempted

because it does not apply exclusively to insurers, then we

should find preemption only insofar as the statute regulates

non-insurers. Stated another way, the TPA suggests that the

preempted portions of the statute are severable. We reject
39

this argument for three reasons. First, [CIGNA Healthplan

of Louisiana v. Louisiana, 82 F.3d 642 (5th Cir.), cert.

denied, ___ U.S. ___, 117 S. Ct. 387 (1996),] implicitly

rejected this argument. It did not hold the statute valid as to

PPOs offered by or affiliated with insurers. Second, our

court has recognized as an independent requirement for the

applicability of the savings clause that the state statute “be

limited to entities within the insurance industry.” This

requirement would be meaningless if a court could simply

sever out those portions of the statute which applied to

noninsurance entities.

Third, the Texas statute is not severable because it so

states.

Texas Pharmacy Ass’n, 105 F.3d at 1039 (footnote citations omitted). They urge us

to follow the Fifth Circuit Court of Appeals and hold that the Arkansas PPA is

preempted in its entirety, rather than to engage in the process of determining whether

PPOs offered by or affiliated with insurers may still be controlled by the Arkansas PPA.

However, as appellants have noted, also citing Texas Pharmacy Ass’n, 105 F.3d

at 1039, severability is a matter of state law. Appellants point out that, unlike the

Texas act in Texas Pharmacy—which specifically stated that it was not severable,

Texas Pharmacy Ass’n, 105 F.3d at 1039—the two legislative acts that combined to

form the Arkansas PPA do contain severability clauses. Those clauses state “[i]n the

event any portion of this act is found to be in violation of federal law or in conflict

therewith, or held to be unconstitutional, that portion shall hereby be repealed and all

other portions of this act shall remain in force.” Act 1193 of 1995, § 9; Act 505 of

1995, § 12. Furthermore, these acts provide that “[i]f any provision of this act or the

application hereof to any person or circumstance is held invalid, such invalidity shall

not affect other provisions or applications of the act which can be given effect without
40

the invalid provision or application, and to this end the provisions of this act are

declared to be severable.” Act 1193 of 1995, § 7; Act 505 of 1995, § 10.

We conclude that, even recognizing the Arkansas General Assembly’s intention

that the Arkansas PPA be severable, because of the grounds on which we have

concluded that the act is preempted by ERISA, it is preempted in its entirety. The

Arkansas PPA is not preempted because some discrete portion of it is in “conflict” with

federal law or “unconstitutional.” See Act 1193 of 1995, § 9; Act 505 of 1995, § 12.

Nor is preemption here a question of “any provision of this act or any application

hereof to any person or circumstance” being “invalid.” Act 1193 of 1995, § 7; Act 505

of 1995, § 10. Rather, as explained above, the Arkansas PPA is invalid because the

act makes improper references to ERISA. Those references—notably the improper

reference that attempts to exclude from the Arkansas PPA “self-funded or other health

benefit plans that are exempt from state regulation by virtue of the federal Employee

Retirement Income Security Act of 1974, as amended,” ARK. CODE ANN. § 23-99-

209—permeate and are fundamental to each and every provision of the Arkansas PPA.

Thus, there is no severable portion of the Arkansas PPA that can be removed from the

act, while other portions are given effect, and the Arkansas PPA is preempted in its

entirety. The district court erred in holding to the contrary.

III. CONCLUSION

Like the district court, we conclude that the Arkansas PPA is preempted,

because this state law has an improper “reference to” ERISA or ERISA plans, and the

state law is not “saved” from preemption, because it is not a state law that “regulates

insurance.” Consequently, we affirm the district court’s order of January 31, 1997,

granting summary judgment in favor of appellees and denying appellants’ cross-motion
41

for summary judgment. However, we reverse the district court’s amendment of its

judgment in its order of March 14, 1997, which found the Arkansas PPA preempted

only “insofar as” it relates to ERISA plans. We hold instead that the Arkansas PPA is

preempted in its entirety and that appellees are entitled to injunctive relief permanently

enjoining appellants from enforcing the Arkansas PPA in its entirety.

Therefore, the orders of the district court are affirmed in part, reversed in part,

and this case is remanded to the district court with directions to enter judgment in

accord with this decision. 

A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT