Court Opinion

ID: 8978429
Source: CourtListenerOpinion
Date Created: 2022-11-27 11:07:55.643695+00
Date Added: 2024-06-11T17:10:36.268303
License: Public Domain

JOHN R. BROWN, Circuit Judge,
dissenting:

Prologue

I agree with the court that the plan does not cover newborns. Consequently the *1356plan is not liable to the Browns. My real point of difference is that, in-my point of view, under Texas law,1 the policy issued by NALAC is a group policy of accident or sickness insurance thus triggering Texas’s mandatory coverage of newborns. Thus NALAC, independent of the plan, is liable to the Browns under its insurance policy.
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The court’s opinion2 allows insurance companies, authorized to carry on the business of insurance in Texas, which issue policies insuring employee benefit plans, to avoid the operation of the Texas Insurance Code and its mandatory coverage provisions. The court permits this result by characterizing the NALAC policy at issue here as a stop-loss policy. It then holds that this stop-loss policy is not an individual or group policy of accident or sickness insurance even though it acknowledges that the policy indirectly covers accident and sickness losses.
The court makes an attempt to close the loophole its opinion creates by saying it has looked beyond form to substance. It goes on to say that a stop-loss policy which has a stop-loss point of $500 would be treated differently from the policy at issue here, which had an attachment point of $30,000. In other words, a $500 stop-loss policy is insurance while a $30,000 stop-loss policy is not.
The framework thus derived is unacceptable on the facts of this case, contrary to the substance of the Texas Insurance Code, and unworkable as a standard for future cases. For these reasons, I must respectfully dissent.

ERISA Saves State Regulation of Insurance Companies and Contracts

ERISA’s broad pre-emption provision provides that:
Except as provided in subsection (b) of this section, the provisions of this sub-chapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title.
29 U.S.C. § 1144(a), ERISA § 514(a). However this pre-emption provision is modified by § 514(b), the “insurance savings clause,” which provides in pertinent part:
Except as provided in subparagraph (B), nothing in this subchapter shall be construed to exempt or relieve any person from any law of any state which regulates insurance, banking, or securities.
29 U.S.C. § 1144(b)(2)(A). Subparagraph (B) is the “deemer clause” which exempts plans from the operation of state laws regulating insurance. See Metropolitan, 471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985).
This statutory scheme and Metropolitan pre-empt any state law from regulating the content of the Tuneup Masters Group Insurance Benefits Plan. Thus the Plan was not required to provide coverage for newborns and it is not structurally defective for failing to do so. I agree with the court that the plan itself does not provide any coverage for newborns. I agree also, that the plan cannot be held liable for its failure to include such coverage.3 The Browns are not entitled to any recovery against the *1357plan. Thus the district court’s entry of summary judgment in favor of the plan was correct.
However, the plan and the policy may be treated differently. The insurance savings clause leaves NALAC, an insurance company, subject to state law. It is not freed from compliance with Texas’s mandated-benefits laws by the pre-emption or deemer clauses in ERISA. Metropolitan, 471 U.S. at 740-41, 105 S.Ct. at 2389, 85 L.Ed.2d at 741.

Texas Law Requires Newborn Coverage

Article 3.70-2(E) requires that
[n]o individual policy or group policy of accident or sickness insurance, ... which provides for accident and sickness coverage of additional newborn children or maternity benefits, may be issued ... if it contains any provision excluding or limiting the initial coverage of a newborn infant for a period of time, or limitations or exclusions for congenital defects of a newborn child.
Tex.Ins.Code Ann. art. 3.70-2(E) (Vernon 1981).4 The court takes the position that the NALAC policy, which it characterizes as a stop-loss policy, is not an “individual or group policy of accident or sickness insurance,” and therefore that it need not comply with Art. 3.70-2(E).
The Metropolitan Court informs us that:
nothing in § 514(b)(2)(A), or in the “deemer clause” which modifies it, purports to distinguish between traditional and innovative insurance laws. The presumption is against pre-emption, and we are not inclined to read limitations into federal statutes in order to enlarge their pre-emptive scope. Further, there is no indication in the legislative history that Congress had such a distinction in mind.... In short, the plain language of the saving clause, its relationship to the other ERISA pre-emption provisions, and the traditional understanding of insurance regulation, all lead us to the conclusion that mandated benefit laws ... are saved from preemption by the operation of the saving clause.
Metropolitan, 471 U.S. at 741-44, 105 S.Ct. at 2389-91, 85 L.Ed.2d at 741-43 (emphasis added). This is a clear indication that mandated benefit laws, like Art. 3.70-2(E), are fully applicable to insurance policies and are not pre-empted by ERISA.

“Stop-loss” Coverage Insures a Plan

Unlike the court, and as my principal point of difference, I believe that, as a matter of Texas, not ERISA, law the NA-LAC policy is an insurance policy subject to the mandated benefit provision of Art. 3.70-2(E).5 As the court points out, Texas *1358law defines “accident and sickness insurance” very broadly as “any policy or contract providing insurance against loss resulting from sickness or from bodily injury or death by accident or both.” Tex.Ins. Code Ann. art. 3.70-l(B)(3) (Vernon 1981). The NALAC policy provides such coverage. The plan reimburses employees for “eligible expenses” which are listed in a schedule of benefits. This schedule includes many surgical procedures and other treatments that become necessary because of sickness or bodily injury.
It is of no importance that NALAC makes its payments to the plan, and not to the individual receiving the benefits. Once the Texas mandatory provision (Art. 3.70-2(E)) broadens the policy’s coverage to encompass newborns, the parents are obvious third party beneficiaries of the policy. NA-LAC is the source of funds, and NALAC’s obligation to pay arises from the sickness or accident of a covered person. Thus NA-LAC’s policy is one of “sickness or accident insurance” and by operation of mandatory Texas law covers newborns.

NALAC’s Policy Was a “Group Policy’’ Under Texas Law

The court further contends that the NA-LAC policy is not an “individual policy or group policy,” so NALAC does not have to comply with Article 3.70-2(E). Once again, I disagree. On my reading of the Texas statute, the NALAC policy has all the earmarks of a group insurance policy. By protecting the plan, NALAC is protecting sick and injured individuals of a defined group — the employees of Tuneup Masters.6 The policy specifically refers to and relates to the plan. It is a “group policy” because it is
(1) ... a policy issued to an employer or trustees of a fund established by an employer, who shall be deemed the policyholder, insuring employees of such employer for the benefit of persons other than the employer.
Tex.Ins.Code Ann. art. 3.51-6, sec. 1(a)(1) (Vernon 1990).
Thus I would hold that NALAC’s so-called “stop-loss” policy is a group policy of accident and sickness insurance under Texas law. It is therefore statutorily modified to provide the newborn benefits mandated by Art. 3.70-2(E). The medical expenses incurred by the Browns’ two infant children are covered. I would find the Browns entitled to recovery against NALAC which was sued as a named defendant in addition to the plan.7 I would further hold that a $30,000 deductible on this coverage would make it invalid as contrary to the clearly expressed requirement in Texas of mandatory newborn coverage.

If in Doubt, Certainty is at Hand

Finally, if I am wrong on my reading of Texas law, we could and should secure an *1359answer from the only court that can give us a definitive answer to this question of state law. We should certify the state law question to the Supreme Court of Texas.8
Because the court’s opinion creates a system whereby insurance companies may avoid the operation of the Texas Insurance Code, I must respectfully dissent.

. I claim no superior prescience to that of my colleagues, each of whom was a distinguished Texas practitioner and jurist, one of whom was a long time Justice on the court I urge be importuned if I am wrong or doubtfully correct on my reading of Texas law.

. References to "the court” or "the court's opinion” are primarily to the opinion of Judge Higginbotham. However, my dissent goes as well to Judge Reavley’s short concurrence which I disagree with' because (i) this case presents serious questions of both ERISA and Texas law, and (ii) I believe the Texas statute does rewrite NALAC’s policy to include the mandated newborn coverage.

.See, e.g., Metropolitan, 471 U.S. at 732-33, 105 S.Ct. at 2386-87, 85 L.Ed.2d at 735-36 ("[ERISA] does not regulate the substantive content of welfare-benefit plans.); Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 91, 103 S.Ct. 2890, 2896, 77 L.Ed.2d 490, 497 (1983) ("ERISA does not mandate that employers provide any particular benefits.”).

. Justice Blackmun informs us that “over the last 15 years all 50 States have required that coverage of infants begin at birth, rather than at some time shortly after birth, as had been the practice in the unregulated market.” Metropolitan, 471 U.S. at 729, 105 S.Ct. at 2384, 85 L.Ed.2d at 733.

. The only circuits which have addressed the specific question of whether a plan which purchases stop-loss insurance is an “insured” plan under Metropolitan such that a state’s mandated benefits laws must be adhered to by the insurer are the Sixth and Ninth.
The Ninth Circuit held, in Moore v. Provident Life & Acc. Ins. Co., 786 F.2d 922, 926-27 (9th Cir.1986), that the stop-loss insurer’s function was not the "business of insurance.” The claims were therefore pre-empted by ERISA and not saved by the insurance savings clause. This rationale was followed in United Food & Commercial Workers v. Pacyga, 801 F.2d 1157, 1161— 62 (9th Cir.1986). Several district courts have followed the direction of the Ninth Circuit. See, e.g., Drexelbrook Engineering Co. v. The Travelers Ins. Co., 710 F.Supp. 590 (E.D.Pa.1989), aff’d without opinion, 891 F.2d 280 (3d Cir.1989); Birdsong, et al. v. Olson, et al., 708 F.Supp. 792 (W.D.Tex.1989); Rasmussen v. Metropolitan Life Ins. Co., 675 F.Supp. 1497 (W.D.La.1987); Minnesota Chamber of Commerce & Industry v. Hatch, 672 F.Supp. 393 (D.Minn.1987); Bone v. Assoc. Management Services, Inc., 632 F.Supp. 493 (S.D.Miss.1986); Cuttle v. Federal Employees Metal Trades Council, 623 F.Supp. 1154 (D.Maine 1985); and Hutchinson v. Benton Casing Service, Inc., 619 F.Supp. 831 (S.D.Miss.1985).
I believe the better reasoned approach is that adopted by the Sixth Circuit in Michigan United Food and Commercial Workers Unions v. Baerwaldt, 767 F.2d 308, 312-13 (6th Cir.1985), cert. denied, 474 U.S. 1059, 106 S.Ct. 801, 88 L.Ed.2d 777 (1986) and Northern Group Services, Inc. v. Auto Owners Insurance Co., 833 F.2d 85, 91 (6th Cir.1987), cert. denied, 486 U.S. 1017, 108 S.Ct. *13581754, 100 L.Ed.2d 216 (1988). The Sixth Circuit found that the "stop-loss” nature of the insurance purchased by the plans in those cases was irrelevant — the plans were insured.
Whether the actual insured is the employer or the ERISA plan, the stop loss insurance is purchased to “provide benefits for plans subject to ERISA.” Metropolitan Life, 471 U.S. at 738 n. 15, 105 S.Ct. at 2388 n. 15. That the plan pays a deductible does not alter the fact that benefits payable above specified levels, either on an individual beneficiary or in the aggregate, are nonetheless insured. See Baerwaldt, 767 F.2d at 313.
Northern Group Services, 833 F.2d at 91. Several district courts have likewise followed this approach. See, e.g., Hall v. Pennwalt Group Comprehensive Medical Expense Benefits Plan, Civ. Action No. 88-7672, 1989 WL 45627 (E.D. Pa.1989) [1989 U.S. Dist. LEXIS 3018]; Auto Club Ins. Assoc., v. Mutual Savings and Loan Assoc., 672 F.Supp. 997 (E.D.Mich.1987); State Farm Mutual Automobile Ins. Co. v. American Community Mutual Ins. Co., 659 F.Supp. 635 (E.D.Mich.1987), aff’d without opinion, 863 F.2d 49 (6th Cir.1988); and Simmons v. Prudential Ins. Co. of America, 641 F.Supp. 675 (D.Colo.1986).

. The Plan describes those covered as the "eligible Employees of the Employer and their eligible Dependents.”

. I re-emphasize that although on my reading of Texas law, the plan was an "insured" plan, no recovery is available against the plan. Metropolitan is very clear that state mandatory benefit laws are pre-empted by ERISA from directly regulating the content of a plan. Recovery is available only against NALAC, the insurer, which can be regulated by the state' — even when insuring a plan — because of the savings clause which excepts it from ERISA’s general pre-emption provision.

. Texas Rules of Appellate Procedure 114(a) states that a question of state law can be certified to the Supreme Court of Texas if "it appears to the certifying court that there is no controlling precedent in the decisions of the Supreme Court of Texas.” See Lucas v. United States, 807 F.2d 414, 418 (5th Cir.1986).