Source: http://law.justia.com/cases/federal/appellate-courts/F3/227/352/615173/
Timestamp: 2013-12-10 01:17:42
Document Index: 39944215

Matched Legal Cases: ['§ 304', '§ 3', '§ 1002', '§ 514', '§ 514', '§ 514', '§ 18', '§ 18', '§ 18', '§ 18', '§ 514', '§ 23', '§ 2202', '§ 514', '§ 514', '§ 1144', '§ 514', '§ 304', '§ 304']

227 F.3d 352: Kentucky Association of Health Plans, Inc.; Advantage Care, Inc.; Aetna Health Plans of Ohio, Inc.; Choicecare Health Plans, Inc.; Fhp of Ohio, Inc.; Hmpk, Inc.; Hplan, Inc.; Humana Health Plan, Inc., Plaintiffs-appellants, v. George Nichols, Iii, in His Official Capacity As Commissioner of the Kentucky Department of Insurance,defendant-appellee :: US Court of Appeals Cases :: Justia
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227 F.3d 352: Kentucky Association of Health Plans, Inc.; Advantage Care, Inc.; Aetna Health Plans of Ohio, Inc.; Choicecare Health Plans, Inc.; Fhp of Ohio, Inc.; Hmpk, Inc.; Hplan, Inc.; Humana Health Plan, Inc., Plaintiffs-appellants, v. George Nichols, Iii, in His Official Capacity As Commissioner of the Kentucky Department of Insurance,defendant-appelleeUNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT - 227 F.3d 352
Argued: September 20, 1999Decided and Filed: September 7, 2000
Appeal from the United States District Court for the Eastern District of Kentucky at Frankfort. Nos. 97-00024--Joseph M. Hood, District Judge.[Copyrighted Material Omitted]
Before: KENNEDY and NORRIS, Circuit Judges; HOLSCHUH,* District Judge.
The issue of the potential preemption of §§ 304.17A-270 and 304.17A-171(2) by ERISA is therefore properly before this court4. We review a district court's decision to grant summary judgment de novo, applying the same test as that employed by the district court. Wathen v. General Elec. Co., 115 F.3d 400, 403 (6th Cir. 1997). Summary judgment is proper ifthere is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. See Schachner v. Blue Cross & Blue Shield of Ohio, 77 F.3d 889, 892-93 (6th Cir. 1996).
ERISA is a comprehensive act designed to regulate employee welfare and pension benefit plans, including those that provide "'medical, surgical, or hospital care or benefits' for plan participants or their beneficiaries 'through the purchase of insurance or otherwise.'" New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 650-51, 115 S. Ct. 1671, 1674, 131 L. Ed. 2d 695, 702 (1995) (discussing and quoting ERISA § 3(1), 29 U.S.C. § 1002(1)). To assure that the regulation of employee welfare benefits would remain an area of exclusive federal concern, Congress passed § 514(a) of ERISA, the preemption provision.
Travelers, 514 U.S. at 656-57, 115 S. Ct. at 1677, 131 L. Ed. 2d at 706 (alteration in original) (quoting Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142, 111 S. Ct. 478, 484, 112 L. Ed. 2d 474, 486 (1990)). In discussing the preemption provision, the Court has variously noted its extreme breadth, terming it "clearly expansive," "broad [in] scope," "broadly worded," "deliberately expansive," and "conspicuous for its breadth." California Div. of Labor Standards Enforcement v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 324, 117 S. Ct. 832, 837, 136 L. Ed. 2d 791, 799 (1997) (internal citations omitted) (reviewing past Supreme Court case law addressing the scope of ERISA's preemption provision). The preemption provision, however, is not without limits. As the Court noted in Travelers, § 514(a) preempts all state laws that relate to an employee benefit plan covered by ERISA, but, "[i]f 'relate to' were taken to extend to the furthest stretch of its indeterminancy, then for all practical purposes preemption would never run its course." 514 U.S. at 655, 115 S. Ct. at 1677, 131 L. Ed. 2d at 705.
Thus, to determine whether a law "relates to" an employee benefit plan, the Court has formulated a two part test, under which 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 plan." Dillingham, 519 U.S. at 324, 117 S. Ct. at 837, 136 L. Ed. 2d at 799 (internal quotations and citations omitted) (emphasis added). The district court found, and plaintiffs argue, that the Kentucky AWP provisions both refer to and have a connection with ERISA covered employee benefit plans.6 We analyze each prong of the "relation to" test in turn.
The Supreme Court has provided guidance in several cases as to when a law "refers to" ERISA. In Dillingham the Court summarized its analysis, stating:
[W]e have held preempted a law that "impos[ed] requirements by reference to [ERISA],"District of Columbia v. Washington Bd. of Trade, 506 U.S. 125, 130-31 (1992); 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 (1988); and a common-law cause of action premised on the existence of an ERISA plan, Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 140 (1990). Where a State's law acts immediately and exclusively upon ERISA plans, as in Mackey, or where the existence of ERISA plans is essentialto the law's operation, as in Greater Washington Bd. of Trade and Ingersoll-Rand, that "reference" will result in preemption.
519 U.S. at 324-25, 117 S. Ct. at 837-38, 136 L. Ed. 2d at 799.
In Mackey v. Lanier Collection Agency & Service, Inc., 486 U.S. 825, 108 S. Ct. 2182, 100 L. Ed. 2d 836 (1988), the Court discussed Georgia Code Annotated § 18-4-22.1 (1982), which specifically exempted ERISA plans from Georgia's general garnishment law. The Court noted that even though Georgia's legislature may have enacted § 18-4-22.1 to help effectuate ERISA's underlying purpose, it would still be preempted if it fell within ERISA's preemption provision. Finding that § 18-4-22.1 was indeed preempted, the Court stated:
[A]dhering to our precedents in this area, we hold Ga. Code Ann. § 18-4-22.1, which singles out ERISA employee welfare benefit plans for different treatment under state garnishment procedures, is preempted under § 514(a). The state statute's express reference to ERISA plans suffices to bring it within the federal law's preemptive reach.
Mackey, 486 U.S. at 830, 108 S. Ct. at 2186, 100 L. Ed. 2d at 844. In a footnote, the Court indicated that the "different treatment" was illustrated not just by the express reference to ERISA plans in the statute's language, but also in the disparate treatment accorded to non-ERISA pension and benefit plans under Georgia law. See id. at n.4. The effect was that only ERISA welfare benefit plans were singled out for protection under the statute, an impermissible result.
The district court in the case at bar relied on Mackey in determining whether Kentucky's AWP statutes referred to an ERISA plan. The district court first observed that under Kentucky's statute, "health benefit plans" were defined to include, among other things, "a self-insured plan or plan provided by a multiple employer welfare arrangement, to the extent permitted by ERISA." Based on this language, the court concluded that "it is clear that the AWP statutes 'refer to' ERISA employee benefit plans." In support, the court cited De Buono v. NYSA-ILA Medical & Clinical Services Fund, 520 U.S. 806, 815, 117 S. Ct. 1747, 1752, 138 L. Ed. 2d 21, 30 (1997), which cited Mackey for the principle that a provision that explicitly refers to ERISA in defining the scope of the state law's application is preempted.
The district court noted that the Western District of Kentucky in Community Health Partners, Inc. v. Kentucky, 14 F. Supp. 2d 991 (W.D. Ky. 1998), disagreed with its analysis of the same statute. The Community Health Partners court, relying on language in Dillingham, found that Kentucky's AWP statute did not "refer to" an ERISA plan because the law did not act "immediately and exclusively upon ERISA plans" and because the existence of ERISA plans was not essential to the law's operation. Id. at 995-96. However, the district court in the present case disagreed with the Community Health Partners court, finding that "Mackey makes it clear that when a statute 'singles out ERISA employee benefit plans for different treatment' the statute's 'express reference to ERISA plans suffices to bring it within the federal law's preemptive reach.'" J.A. at 12 n.6.
Other courts have reached similar conclusions. The Eighth Circuit in Prudential Insurance Co. of America v. National Park Medical Center, Inc., 154 F.3d 812 (8th Cir. 1998), found that an Arkansas AWP statute containing language comparable to Kentucky's provisions was preempted due to its reference to employee benefit plans covered by ERISA. The court noted that the law expressly stated its provisions "shall not apply to self-funded or other health benefit plans that are exempt from state regulation by virtue of [ERISA]." Id. at 822. Accordingly, the court determined that § 23-99-209 of the Arkansas Patient Protection Act ("PPA") referred to ERISA plans, as it "undeniablymakes an express reference to ERISA and attempts to exclude from coverage of the PPA at least some ERISA plans. Thus it 'singles out ERISA employee benefit plans for different treatment under state [law], [and therefore] is preempted under § [1144(a)].'" Id. at 824 (quoting Mackey). See also Cigna Health Plan of La., Inc. v. Louisiana, 82 F.3d 642, 647-48 (5th Cir. 1996) (concluding that Louisiana's AWP statute, § 2202(5)(c) of the State's Health Care Cost Control Act, which applied to "group purchasers," referred to ERISA qualified plans by defining "group purchasers" to include entities such as "'Taft-Hartley trusts or employers who establish or participate in self-funded trusts or programs' which 'contract [with health care providers] for the benefit of their . . . employees.'").
Although in the recent case of Washington Physicians Service Association v. Gregoire, 147 F.3d 1039 (9th Cir. 1998), cert. denied, 525 U.S. 1141, 119 S. Ct. 1033, 143 L. Ed. 2d 42 (1999), the court found that Washington's "every category of provider" statute did not contain a "reference to" or "connection with" employee benefit plans, the statute at issue is distinguishable from Kentucky's AWP laws. The court noted that by the statute's definition, "health carrier" only included disability insurers, health care service contractors, or health maintenance organizations. See id. at 1043. Employer-sponsored, self-funded plans were excluded not by a provision of the act, but rather by limiting the act's application to only the mentioned entities. As a result, the act contained no reference whatsoever to ERISA-covered employee benefit plans.
While a mere reference to an ERISA plan, without more, may not be enough to cause preemption, Supreme Court precedent shows that if such a reference is combined with some effect on those plans, such as singling them out for different treatment, preemption will result. See, e.g., Mackey, 486 U.S. at 830 n.4, 108 S. Ct. at 2186, 100 L. Ed. 2d at 844; cf. District of Columbia v. Greater Washington Bd. of Trade, 506 U.S. 125, 113 S. Ct. 580, 121 L. Ed. 2d 513 (1992) (finding that a state law that imposes requirements merely by reference to ERISA is preempted).
We conclude that Kentucky's AWP statutes "relate to" ERISA plans and are therefore preempted, unless they are found to be statutes that regulate "insurance" under the savings clause of § 514(b)(2)(A). This conclusion also involves consideration of the "deemer" clause, § 514(b) (2)(B), which ensures that ERISA employee benefit plans are not deemed to be engaged in the business of insurance in applying the savings clause. Under the deemer clause, state insurance laws that apply directly to ERISA self-insured plans do not fall within the savings clause and thus are preempted. Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 105 S. Ct. 2380, 85 L. Ed. 2d 728 (1985); FMC Corp. v. Holliday, 498 U.S. 52, 111 S. Ct. 403, 112 L. Ed. 2d 356 (1990).
The Kentucky legislature, aware of its inability to regulate self-insured ERISA plans, sought to include such plans - as well as multiple employer welfare arrangements (MEWAs) - only "to the extent permitted by ERISA." The effect of this provision is to exclude self-insured ERISA plans from coverage of the statute by virtue of the deemer clause and to include MEWAs only to the extent state regulation is permitted under 29 U.S.C. § 1144(B)(6)7. In Community Health Partners v. Commonwealth of Kentucky, 14 F. Supp. 2d 991 (W.D. Ky. 1998), District Judge McKinley pointed this out in his opinion:
The fact that the Kentucky legislature chose to allow for regulation of MEWAs and self-insured plans "to the extent permitted by ERISA" suggests that the legislature was well aware of thepreemptive force of ERISA. As noted by Defendant, the phrase appears merely to restate the "deemer clause" by exempting self-insured ERISA plans from the scope of the AWP statute. The "deemer clause" prevents a state law from "deeming" an employee benefit plan to be an insurance company for the purpose of any law purporting to regulate the business of insurance. 29 U.S.C. 1144 (b)(2)(B). The deemer clause thus effectively prevents states from subjecting self-insured plans to state insurance regulation. On the other hand, insured plans - plans that purchase insurance - are subject to state laws regulating the insurance industry. See Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 732, 105 S. Ct. 2380, 85 L. Ed. 2d 728 (1985).
Id. at 995 n.4.
As the Supreme Court noted in UNUM Life Insurance Co. v. Ward, 526 U.S. 358, 367 n.2, 119 S. Ct. 1380, 1386, 143 L. Ed. 2d 462, 472 (1999):
Self-insured ERISA plans ... are generally sheltered from state insurance regulation.
The Kentucky Act provides that shelter by its exclusion of ERISA self-insured plans from its coverage, but its reference to ERISA plans and its exclusion of self-insured ERISA plans from its coverage clearly bring the statute within the "refer to" prong of the "relate to" analysis.
While the fact that the Kentucky statutes "refer to" ERISA employee benefit plans is enough to potentially preempt them on that basis alone, their "connection with" such plans offers an alternative basis for such preemption. Analysis under the "connection with" prong has changed somewhat after the Supreme Court's opinion in New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance Co., 514 U.S. 645, 115 S. Ct. 1671, 131 L. Ed. 2d 695 (1995)8. The Travelers Court discussed whether ERISA's preemption provision altered the starting presumption that Congress does not intend to supplant state law. See id. at 654-55, 115 S. Ct. at 1676-77, 131 L. Ed. 2d at 704. While observing that this presumption remained unaltered, the Court recognized that its prior attempts to construe "relate to" did not provide much help drawing the line as to what should be preempted. See id. at 655, 115 S. Ct. at 1677, 131 L. Ed. 2d at 705. The Court concluded that in order to determine whether the normal presumption against preemption has been overcome in a particular case, it "must go beyond the unhelpful text and the frustrating difficulty of defining [§ 514 (a)'s] 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. at 656, 115 S. Ct. at 1677, 131 L. Ed. 2d at 705. The Court found that the "basic thrust" of the clause was "to avoid a multiplicity of regulation in order to permit the nationally uniform administration of employee benefit plans," and observed that under its past case law it had found ERISA to preempt state laws that mandated employee benefit structures or their administration. Id. at 657-58, 115 S. Ct. at 1677-78, 131 L. Ed. 2d at 706. The use of this approach for "connection with" analysis was subsequently endorsed and used by the Court both in Dillingham and De Buono and recognized by this circuit inDavies v. Centennial Life Insurance Co., 128 F.3d 934 (6th Cir. 1997).9
Using the Travelers "connection with" analysis, the district court in the case at bar determined that Kentucky's AWP laws had a connection with ERISA plans. The court found that while the law did not operate directly on ERISA plans, it effectively required benefit plans to purchase benefits of a certain structure, thereby bearing indirectly but substantially on all insured plans. As a result, the court concluded that the AWP statutes did more than just indirectly affect the cost of ERISA plans; the AWP statutes mandated benefit structures.
Two other district courts in Kentucky recently drew the same conclusion while addressing the same statute. In Community Health Partners, Inc. v. Kentucky, 14 F. Supp. 2d 991, 1000-01 (W.D. Ky. 1998), the court found Kentucky's AWP provision, located then at § 304.17A-110(3), to be similar in effect to the mandated benefit law in Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S. 724, 105 S. Ct. 2380, 85 L. Ed. 2d 728 (1985). In Metropolitan, the Supreme Court held that the Massachusetts mandated benefit law "related to" ERISA plans because the statute bore indirectly, but substantially, on all insured employee benefit plans by effectively requiring the plans to purchase mental health benefits when purchasing a certain kind of common insurance policy. See id. at 739, 105 S. Ct. at 2388, 85 L. Ed. 2d at 740. Similarly, the Community Health Partners court believed that the AWP law effectively mandated the benefit structure of ERISA plans and regulated the relationship between traditional ERISA entities, i.e., the plan, the employer, and the plan fiduciaries and beneficiaries. 14 F. Supp. 2d at 997.
A recent memorandum opinion, Ward v. Alternative Health Delivery Systems, Inc., 55 F. Supp. 2d 694 (W.D. Ky. 1999), held that § 304.17A-171, which contains regulations of a health benefit plan's use of chiropractic services, including an AWP provision, was preempted by ERISA due to its connection with employee benefit plans. Id. at 701. The judge found that:
By specifically prohibiting health organizations from offering networks with limited chiropractic providers, the statute mandates the plan's structure. Moreover, the statute also dictates that all covered participants shall have access to the chiropractor of their choice. This too dictates a certain structure to which an employer's health care plan must succumb. As such this claim also falls within the realm of ERISA preemption.
Some academic literature has suggested that the Supreme Court's post-Travelers case law may represent a "sea change" in the "relation to" analysis; however, neither the Court's nor the circuits' opinions yet confirm this assertion.10 The two appellate courts that have addressed the issue since Trave