As many of you already know, the Retail Industry Leaders Association ("RILA") filed a challenge to Maryland's Fair Share Health Care Fund Act -- the so-called Wal-Mart bill -- in U.S. District Court last week. You can access the complaint filed here. You can also access a web page here by RILA devoted to its opposition to state health care mandates as well as this document discussing their arguments in favor of ERISA preemption: "Legal Overview: Discriminatory Health Care Mandates." Excerpt:
Union supporters also will argue that their proposed laws are not mandated health care laws because they give employers the “choice” whether to pay money to the state or for increased employee health coverage. But paying the state is no choice at all—it is a penalty—because no employer would “choose” to write a check to the state for which it received nothing in return. The Supreme Court made essentially the same point when it indicated there would be preemption for “a state law whose economic effects, intentionally or otherwise, were so acute ‘as to force an ERISA plan to adopt a certain scheme of substantive coverage.’” DeBuono v.
NYSA-ILA Med. & Clinical Servs. Fund, 520 U.S. 806, 816 n.16 (1997). In the words of the Supreme Court, this is “a Hobson’s choice” prohibited by ERISA. Travelers, 514 U.S. at 664.
The Workforce Prof Blog has comments here regarding the litigation.
See a previous post here at Benefitsblog discussing the legal debate over the legislation.
From the Wall Street Journal--"Maryland Votes To Override Veto Of Wal-Mart Bill":
Maryland legislators voted to become the first state to enact a law forcing large employers -- namely Wal-Mart Stores Inc. -- to pay a penalty if they fail to spend a certain amount of their payrolls in the state on health insurance for their workers.
The Senate voted 30-17 to override Republican Gov. Robert Ehrlich's veto of the bill last year. The Maryland House followed suit last night with an 88-50 vote for the override.The bill proposed requiring employers with more than 10,000 workers in Maryland to pay a penalty to the state's health-insurance program if they fall short of paying an amount equal to 8% of their payroll in the state for health insurance for those employees. . .
The debate could continue in the courts. The Maryland Chamber of Commerce has argued that the potential new law will conflict with federal employment law, namely the Employee Retirement Income Security Act. Supporters counter that it isn't pre-empted by ERISA.
Access a summary of the bill here and the text of the bill itself here.
Important links regarding the debate:
Although the efforts failed in Arizona, California, Connecticut, New Hampshire and Tennessee, and was vetoed by Maryland's and Vermont's governors, the measure is still alive in five other states.They include New York, Massachusetts, Minnesota, Oregon, Pennsylvania and Washington.
Matthew Vansuch, a 3L at the University of Akron School of Law, has written a very interesting note for the Akron Law Review, discussing the impact of the U.S. Supreme Court case of Kentucky Association of Health Plans, Inc. v. Miller. The note is entitled "Not Just Old Wine in New Bottles: Kentucky Association of Health Plans, Inc. v. Miller Bottles a New Test for State Regulation of Insurance." As you may recall, the Miller case changed the test for determining whether a state law is deemed to be a law "which regulates insurance” under the ERISA "savings clause" to the following two-prong test: (1) the state law must be directed specifically directed toward entities engaged in insurance, and (2) the state law must substantially affect the risk pooling arrangement between the insurer and the insured. The article contains an interesting observation about how federal district courts since Miller have been "sluggish" in coming to an understanding of the perceived "differences between the common sense-McCarran-Ferguson test and the Miller test." Vansuch argues that "Miller is a new blend of wine fermented from a different batch of grapes than those used in the bottling of the casks of old, unlabeled wine barrels that confused everyone, including the Supreme Court." He further argues that Miller's two-part test is a “clean break,” and "not merely the old McCarran-Ferguson grapes recycled into Miller’s vintage."
Read more about ERISA preemption in previous posts which you can access here.
The Third Circuit issued an opinion today, putting to rest the controversy that stemmed from several federal district court cases* in Pennsylvania which had held that ERISA does not preempt bad faith insurance claims brought under 42 Pa. C.S. section 8371**. The Third Circuit opinion issued today in Barber v. Unum Life Ins. Co. of Am., holds that, under the doctrine of conflict preemption, ERISA preempts the statute because it provides "a form of ultimate relief in a judicial forum that [adds] to the judicial remedies [already] provided by ERISA,” citing the very recent and well-known U.S. Supreme Court case of Aetna Health Inc. v. Davila, 124 S. Ct. 2488 (2004) as authority. (You can read about the Aetna case here and here.)
The Third Circuit opinion also provides that, under the doctrine of express preemption, the state statute is preempted as well. The court held that the statute does not constitute a law that "regulates insurance," preventing the statute from being "saved" from preemption under ERISA's "saving clause." (ERISA's saving clause--section 514(b)(2)(A) of ERISA--creates an exception to preemption of a state law when that state law proposes to regulate insurance.) The court relied on another recent U.S. Supreme Court case, Kentucky Association of Health Plans, Inc. v. Miller, 538 U.S. 329 (2003) in reaching its decision under the doctrine of express preemption. (You can read about the Miller case here.) The court applied the two-part test promulgated in Miller that a statute “regulates insurance” and satisfies the saving clause only if it (1) is “specifically directed toward entities engaged in insurance” and (2) “substantially affect[s] the risk pooling arrangement between the insurer and the insured.” The Third Circuit in Barber ruled that the Pennsylvania statute satisfied the first prong of the test, but not the second, in reaching its decision that the statute was not "saved" from preemption.
Read more about the history of the legal controversy in this article from Law.com: "ERISA and Bad-Faith Claim Debate."
*Rosenbaum v. UNUM Life Insurance Co. of America, No. 01-6758, 2002 U.S. Dist. LEXIS 14155 (E.D. Pa. July 29, 2002); Barber v. UNUM Life Insurance Co. of America, No. 03-3018 (E.D. Pa. filed Sept. 9, 2003); Stone v. Disability Mgmt. Servs., 288 F. Supp. 2d 684 (M.D. Pa. 2003).
**42 Pa. C.S. § 8371 provides:
In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions:(1) Award interest on the amount of the claim from the date the claim was made by the insured in an amount equal to the prime rate of interest plus 3%.
(2) Award punitive damages against the insurer.
(3) Assess court costs and attorney fees against the insurer.
Some of you may remember a post here at Benefitsblog last October entitled "ERISA preemption: a "Serbonian Bog" in which Judge Becker's concurring opinion in the case of DeFelice v. Aetna was highlighted. It is interesting to note that Justice Ginsburg (joined by Justice Breyer) issued a concurring opinion in the Aetna Health Inc. v. Davila case decided yesterday by the U.S. Supreme Court (previous posts here and here), in which she refers to Judge Becker's concurring opinion as follows:
The Court today holds that the claims respondents asserted under Texas law are totally preempted by §502(a) of the Employee Retirement Income Security Act of 1974 (ERISA or Act), 29 U.S.C. § 1132(a). That decision is consistent with our governing case law on ERISA’s preemptive scope. I therefore join the Court’s opinion. But, with greater enthusiasm, as indicated by my dissenting opinion in Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002), I also join “the rising judicial chorus urging that Congress and [this] Court revisit what is an unjust and increasingly tangled ERISA regime.” DiFelice v. AETNA U.S. Healthcare, 346 F.3d 442, 453 (CA3 2003) (Becker, J., concurring).She goes on to note that the Court "has coupled an encompassing interpretation of ERISA’s preemptive force with a cramped construction of the “equitable relief” allowable under §502(a)(3)" so that "a 'regulatory vacuum' exists", emphasizing that “virtually all state law remedies are preempted but very few federal substitutes are provided.”
Her final words in the opinion were as follows:
“Congress … intended ERISA to replicate the core principles of trust remedy law, including the make-whole standard of relief.” Langbein 1319 [pdf]. I anticipate that Congress, or this Court, will one day so confirm.
Yesterday's U.S. Supreme Court ruling in Aetna Health Inc. v. Davila is dominating the news today. (Take a look at the Benefits Buzz at Benefitslink.com today and you'll see that 12 out of the 18 articles posted pertain to the case.) So I would be remiss, I guess, if I didn't highlight a few of the articles here. Just a few headlines that caught my eye are as follows:
From Forbes.com, "When Fighting HMOs, Shoot First."
From USA Today.com, "HMOs win, patients lose, and Congress stays in coma."
From the AZDailysun.com, "Supreme court: States can't make up own laws about suing HMOs." (Apparently, nine other states--Arizona, California, Georgia, Louisiana, Maine, New Jersey, Oklahoma, Washington and West Virginia--have laws similar to the Texas Health Care Liability Act which was at issue in the case.)
Also from USA Today.com, "Democrats renew push for patient bill of rights."
The Kaiser Network.org reports on the case here, showcasing reactions to the case:
According to USA Today, the Supreme Court decision likely will "put more pressure on Congress to broaden ERISA to allow greater remedies for injured patients" (Biskupic, USA Today, 6/22). The decision also "may well reignite the political battle over the long-stalled patients' bill of rights in Congress," the Los Angeles Times reports (Los Angeles Times, 6/22). Congressional efforts to pass patients' rights legislation "fizzled" in 2001, in part because some states had passed their own laws and because "health plans were already offering broader coverage and the ability to appeal decisions," according to CQ Today (Schuler, CQ Today, 6/21).
SCOTUSblog has a listing of articles here as well.
The U.S. Supreme Court has issued an opinion in the important case of Aetna Health Inc. v. Davila, consolidated with Cigna Healthcare of Texas v. Calad. The court unanimously reversed and remanded the case in an opinion by Justice Thomas. Justice Ginsburg filed a concurring opinion that Justice Breyer joined. The Court held that respondents' state causes of action fell within ERISA §502(a)(1)(B), and were therefore completely pre-empted by ERISA §502 and removable to federal court.
The New York Times is reporting--"Supreme Court Sides with HMO's on Patient Suits":
The Supreme Court said Monday that patients who claim their HMOs wouldn't pay for needed medical care cannot sue for big malpractice damages, an issue at the heart of the long debate over efficiency versus service in managed health care. The court was unanimous in saying that two HMO patients in Texas cannot pursue big malpractice or negligence cases against their insurers, as they claimed a Texas patient protection law allowed them to do.
UPDATE: Lyle Denniston (via SCOTUSblog) has written about the case here.
You can also listen to his Audioblog post here.
More on the case later . . .