News

"Oklahoma's insurance department asked the U.S. Supreme Court to review the Tenth Circuit's decision in PCMA v. Mulready  ... which held that parts of an Oklahoma law regulating pharmacy benefit managers (PBMs) were preempted by ERISA and by Medicare Part D. In its petition, the state says that Mulready 'is irreconcilable with [the Supreme Court's] unanimous decision in Rutledge ,' and that Mulready also created a 'textbook' circuit split with the Eighth Circuit." [ PCMA v. Mulready , No. 22-6074 (10th Cir. Aug. 15, 2023; cert pet. filed May 10, 2024, No. 23-1213 )]

"For plans and insurers relying on out-of-network providers squeezed by the surprise billing protections and seeking ad hoc arrangements regarding payment for services, this case rather clearly demonstrates that ERISA preemption prevails when the payment amount is determined by referencing the terms of a plan." [ Peer Grp. for Plastic Surgery, PA v. United Healthcare Servs., Inc. , No. 23-2073 (D.N.J. Mar. 28, 2024)]

Video of Apr. 16 hearing. Opening statement, Rep. Bob Good (R-VA); testimony from [1]  Mr. Russell DuBose , Phifer Inc.; [2]  Ms. Mairin Mancino , Peterson Center on Healthcare; [3]  Ms. Karen L. Handorf , Berger Montague; and [4]  Mr. Scott Behrens , Lockton Companies.

"The growing tension between state law and federal preemption over regulating drug benefits will be high on lawmakers' agenda at an upcoming House hearing on strengthening [ERISA] as the law turns 50.... States see the new laws as an effort to help community pharmacists who may be harmed by PBM practices, but employer groups say the laws could block them from designing their health plan benefits in ways that reduce pharmacy costs."

"HR Policy reiterated the importance of the national framework provided by ERISA during the COVID-19 pandemic. Due to this framework, employers were able to quickly implement crucial health care services, like telehealth, nationally. The comments urged the Committee to 'reject any attempts to weaken the federal restriction on state-by-state regulation of self-insured employers.' "

"Mercer recommends the committee direct the Congressional Research Service to publish an extensive report on ERISA preemption. Copies of the report should be sent to every state's insurance commissioners and legislators, as well as the leadership of the National Association of Insurance Commissioners  ... Mercer recommends building on recent transparency improvements to ensure that group health plan fiduciaries have access to the information they need to better fulfill existing fiduciary duties, including selecting and monitoring service providers that administer plan benefits."

"Preemption is fundamental to ERISA working as intended.... [T]he Council recommends to the committee that additional detail be added to ERISA's prohibited transaction rules as they pertain to health plans ... to require plan service providers ... to disclose to the plan and the plan fiduciary in advance of services being provided both the affiliate status of the party/provider and ... the cost that will be charged with respect to any services being provided by the affiliate."

"ERIC continues to support congressional efforts to designate that vendors involved in critical plan design and administration decisions, including an entity providing pharmacy benefit management services, are fiduciaries within the meaning of section 3(21) of ERISA with respect to a group health plan or group health insurance coverage.... Transparency is needed regarding PBM compensation sources.... There are multiple frameworks and standards that health plan sponsors and ERISA fiduciaries already comply with and use to protect sensitive plan and participant data.... The introduction of new or broadened requirements under ERISA would be redundant and would contribute to further complexity and administrative costs."

"[P]laintiffs contend that Section 42's 'equivalent benefits' provision is preempted by ERISA because it 'relates to' their employee benefit plans by having a 'connection with or reference to' those plans. The court agreed ... The [Illinois DOL] objected, arguing that Section 42's cash alternative allowed the law to escape preemption because it enabled the plaintiffs to comply without involving their benefit plans. The court rejected this argument[.]" [ Staffing Servs. Ass'n of Ill. v. Flanagan , No. 23-16208 (N.D. Ill. Mar. 11, 2024)]

"Key areas of focus.... [1] ERISA preemption.... [2] Prescription drugs.... [3] Paid leaves.... [4] Telehealth.... [5] Insurance coverage mandates.... Key action steps ... [1] Engage with peers, trade groups.... [2] Leverage vendor relationships.... [3] Keep your superiors informed."

"A decision from the United States Court of Appeals for the Tenth Circuit, which found that several provisions of an Oklahoma law regulating pharmacy benefit managers (PBMs) were preempted by federal law, will remain in place for now after a panel denied Oklahoma's motion to stay the mandate ... [A] stay would have allowed Oklahoma to enforce the challenged provisions while it pursues review by the Supreme Court of the United States[.]" [ PCMA v. Mulready , No. 22-6074 (10th Cir. Aug. 15, 2023; pet. for en banc hearing denied Dec. 12, 2023; motion to stay denied Jan. 2, 2024)]

"Groups representing companies with self-insured health plans say the states' attempts to fill the void on PBM legislation threaten preemption protections under [ERISA].... Employers are advocating for reforms to PBMs similar to what some states are doing, but they say change needs to happen instead at the federal level to ensure uniform standards."

"[T]he Tenth Circuit found that ... ERISA preempted Huff's state law claims because the factual basis for his lawsuit was a challenge to the increase in premiums under his company-furnished life insurance plans. The court rejected his argument that he had converted the life insurance policy to an individual one with MetLife when he left employment." [ Huff v. BP Corporation North America, Inc. , No. 23-5022 (10th Cir. Dec. 20, 2023)]

"The Oklahoma Attorney General's office is likely to appeal to the Supreme Court. ... [T]he Eighth Circuit had previously ruled that ERISA did not preempt regulation of pharmacy benefit managers (PBMs) ... while the Tenth Circuit [has] ruled that similar regulation is preempted by ERISA.... As things now stand, PBMs, insurers, etc., operating in Kansas City, Missouri, and Kansas City, Kansas, may be subject to different legal standards as ERISA preempts state regulation of PBMs in Kansas but not in Missouri." [ PCMA v. Mulready , No. 22-6074 (10th Cir. Aug. 15, 2023; pet. for en banc hearing denied Dec. 12, 2023)]

"[E]mployers and their associations have been stopped by Ninth Circuit courts when they attempted to argue state and local benefits laws are preempted by ERISA and other federal laws due to the market-participant exception to preemption. The Ninth Circuit has now rejected the market-participant exception  ... at least based on the penalty provisions of the San Francisco law.... [T]he case may provide a roadmap for employers who want to challenge state and local benefits laws in the future." [ Airlines for America v. City and County of San Francisco , No. 22-15677 (9th Cir. Aug. 29, 2023)]

"[E]ffective January 1, 2024 ... [1] Employers must annually provide five days/40 hours of paid sick leave (PSL) to employees (increased from the current three days/24 hours).... [2] Employers may cap total PSL accruals at 10 days/80 hours (increased from the current six days/40 hours). [3] Employers may limit the amount of accrued PSL employees may carry over annually to five days/40 hours (increased from the current three days/24 hours)."

"[The court] denied MetLife's motion to dismiss Plaintiff's lawsuit stemming from MetLife's denial of disability and waiver of premium benefits finding that ... a Michigan state law requiring a six-year limitations period for breach of contract actions was not preempted by ERISA, and precluded application of a three-year contractual limitations clause in the Plans." [ Marshall v. Metropolitan Life Ins. Co. , No. 22-12218 (E.D. Mich. Sept. 22, 2023)]

"At the appellate level, PCMA argued, and the Tenth Circuit agreed, that Oklahoma's law violated ERISA by limiting the options employers could use to structure its benefits. By limiting or directing the ways in which employers could structure benefit plans, PCMA argued that the law's restrictions affected the governance of matters central to plan administration sufficient to trigger ERISA preemption under Rutledge." [ PCMA v. Mulready , No. 22-6074 (10th Cir. Aug. 15, 2023)]

"[The court] opined that the Act's discount prohibition requires that cost-sharing and copayments be the same for all network pharmacies 'whether retail or mail-order; standard or preferred.' ... [It] found that this prohibition ... directs or forbids an element of plan structure or benefit design. Next, the court noted that the Act's provider participation requirement forces plans to 'include many more brick-and-mortar pharmacies…. Because adding pharmacies costs plans money, this is a choice that plans might not otherwise make.' It found that this requirement also impermissibly affects plan structure or benefit design." [ PCMA v. Mulready , No. 22-6074 (10th Cir. Aug. 15, 2023)]

"In upholding the Arkansas state law in [ Rutledge ], the Supreme Court held that Arkansas' law was 'a mere cost regulation that did not have an impermissible connection with ERISA plans.' ... [T]he Mulready decision reinforces the idea that states may not force ERISA plans to adopt administrative, network, benefit design, or substantive coverage requirements. The holding in Mulready provides examples of impermissible state regulation of PBMs under the framework provided in Rutledge ." [ PCMA v. Mulready , No. 22-6074 (10th Cir. Aug. 15, 2023)]

50 presentation slides. Topics: [1] Washington update; [2] 2023 Short-term limited duration and fixed indemnity proposed regulations; [3] 2023 Mental health parity proposed regulations; [4] Case developments: Mulready and others; [5] Grab bag report and reminders.

"After several failed attempts by pharmacy benefit managers (PBM) to challenge state laws regulating PBMs, the 10th Circuit Court of Appeals handed down a big win for PBMs and, by extension, self-funded ERISA plans ... [W]hile the Oklahoma law does not directly regulate ERISA plans, but rather PBMs, the court recognized that ERISA plans are virtually compelled to use PBMs to administer their prescription drug benefits and, therefore, held that the Oklahoma law is preempted by ERISA as it impermissibly impacts and/or relates to ERISA plans by interfering with plan administrators' ability to administer their plans uniformly." [ PCMA v. Mulready , No. 22-6074 (10th Cir. Aug. 15, 2023)]

"The court's opinion distinguished the case from Rutledge v. Pharmaceutical Care Management Association (PCMA), in which the Supreme Court held that an Arkansas law requiring PBMs to tie their reimbursement rates to pharmacies' costs was not preempted by ERISA because it did not dictate plan choices. The 10th Circuit reasoned that, whereas the Arkansas law at issue in Rutledge merely resulted in an increase of costs for the PBM, the Act goes further by potentially having a direct effect on a plan's network design, and therefore 'governs a central matter of plan administration.' " [ PCMA v. Mulready , No. 22-6074 (10th Cir. Aug. 15, 2023)]

"Following the Tenth Circuit's decision, the case has been remanded to the district court that originally heard the case. Pending the outcome of the district court proceedings, Oklahoma is likely to request that the Tenth Circuit rehear the case, and/or pursue an appeal to the Supreme Court.... [T]he Mulready decision ... is a conservative, well-reasoned application of prior precedent. Had the Tenth Circuit reached an opposite conclusion, it would have been a sea change in the world of both ERISA preemption and state regulation of ERISA plans." [ PCMA v. Mulready , No. 22-6074 (10th Cir. Aug. 15, 2023)]

"States will no doubt continue to attempt to rein in the power of PBMs -- the court noted that PBMs administer prescription drug benefits for approximately 270 million people -- and courts will continue to examine ERISA's preemptive effect on various state PBM laws. Ultimately, the court suggested, states may have to approach Congress to seek redress for their displeasure with PBMs." [ PCMA v. Mulready , No. 22-6074 (10th Cir. Aug. 15, 2023)]