From the Arkansas News Bureau, “Any willing provider law upheld, but won’t apply to self-insured, court rules .” The article discusses the Eighth Circuit opinion in the case of Prudential Insurance Company of America, et al. v. HMO Partners, et al. which held last week that Arkansas’ any willing provider law was not preempted by ERISA, except with respect to self-insured plans.
Background of the case:
(1) An Arkansas any willing provider law (“AWP law”) called the “Arkansas Patient Protection Act” was passed in 1995, but had been barred from being enforced in Arkansas after a federal district court issued an injunction, holding that the AWP law was subject to preemption under ERISA. The injunction was affirmed by the Eighth Circuit, in the case of Prudential Insurance Company of America, et al. v.National Park Medical Center, Inc.
(2) The U.S. Supreme Court in the case of Kentucky Association of Health Plans v. Miller decided in April of 2003 that an AWP law in Kentucky was not preempted by ERISA (discussed in previous posts which you can access here.)
(3) After the Miller case was decided, a case was filed in federal district court in Arkansas asking for “a judicial determination” on how the Miller case impacted the old Arkansas AWP law.
(4) The injunction issued in 1998 was lifted on February 12, 2004 by a federal district court in Arkansas, based on the Miller case, but the decision lifting the injunction was appealed to the Eight Circuit.
(5) The Eighth Circuit issued its opinion in the case last week upholding the lifting of the injunction as to insured plans and non-ERISA plans.
The Eigth Circuit’s holding, which was more involved than just upholding the district court’s lifting of the injunction, is as follows:
Pursuant to our analysis below, we hold that Miller mandates that we affirm the district court’s dissolution of the Prudential I injunction with regard to insured ERISA plans and non-ERISA plans. Miller, however, did not involve the issue of whether the Kentucky AWP statutes were preempted with regard to self-funded ERISA plans such as the Tyson plan. With regard to self-funded ERISA plans, we reverse the district court’s dissolution of the Prudential I injunction and remand to the district court to enter judgment consistent with this opinion. Finally, our holding that the Arkansas PPA can be enforced against insured ERISA plans compels us to consider, as a matter of first impression, whether ERISA’s civil enforcement provision completely preempts the civil penalties provision of the Arkansas PPA, Ark. Code Ann. § 23-99-207. Following the Supreme Court’s recent decision in Aetna Health Inc. v. Davila, 124 S. Ct. 2488 (2004), we hold that ERISA completely preempts the civil penalties provision of the Arkansas PPA as applied to suits that could have been brought under ERISA § 502, and we remand to the district court to enter judgment consistent with this opinion.
Please note that the Court, in holding that the AWP law was preempted by ERISA with respect to self-insured plans under the “deemer” clause analysis, rejected an argument that because the third party administrator for the self-funded plan contracts with insurance companies for access to their provider networks, “the Arkansas PPA can indirectly regulate the [self-funded] plan through those third-party insurance companies.” As support for this argument, the movants referenced the Supreme Court’s statement in Miller that non-insuring entities administering self-insured plans are engaged in the activity of insurance for the purpose of the savings clause (Miller, 538 U.S. at 336 n.1):
“[N]oninsuring HMOs would be administering self-insured plans, which we think suffices to bring them within the activity of insurance for purposes of [the savings clause].”
The Court, however, held that the movants had taken the Supreme Court’s statement about third-party administrators “out of context”:
The movants, however, take this statement out of context. The Miller Court’s discussion of third-party administrators came as a response to an argument against the application of the savings clause to the Kentucky AWP laws – namely that the application of those laws to non-insuring HMOs prevents the laws from being specifically directed toward entities engaged in insurance. Id. In Miller, the Supreme Court focused solely on the application of the savings clause. The movants’ argument here fails because it ignores the application of the deemer clause to self-funded ERISA plans, a non-issue in Miller, but the controlling issue in this case with regard to the [self-funded] plan.The Supreme Court has noted repeatedly that because of the deemer clause, statutes that indirectly regulate self-funded ERISA plans are not saved from preemption to the extent such statutes apply to self-funded plans . . Thus, we hold that not only does the Arkansas PPA exempt the [self-funded] plan and other self-funded ERISA plans from direct regulation but also that ERISA preempts any indirect state regulation of those plans because of the deemer clause.
The Eighth Circuit then went on to discuss the civil penalties provision of the Arkansas AWP law which stated that “[a]ny person adversely affected by a violation of this subchapter may sue in a court of competent jurisdiction for injunctive relief against the health care insurer and, upon prevailing, shall, in addition to such relief, recover damages of not less than one thousand dollars ($1,000), attorney’s fees, and costs.” The Kentucky AWP law considered by the Supreme Court in Miller apparently did not contain such a provision. The Eighth Circuit, in holding that ERISA § 502 “completely preempts the civil penalties provision of the Arkansas PPA, Ark. Code Ann. § 99-23-207, with respect to any cause of action that could have been brought under ERISA” relied on the Supreme Court’s recent holding in Aetna Health Inc. v. Davila, 124 S. Ct. 2488 (2004). However, the Court offered no opinion as to the “exact scope of this preemption because the Arkansas PPA’s civil penalties provision extends to ‘[a]ny person adversely affected by a violation’ of the Arkansas PPA and invites a number of possible suits that would require speculation beyond the scope of this appeal.”
(You can access additional posts on the Arkansas AWP law here.)