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ERISA Preemption Basics

ERISA Preemption Basics Sponsored by Payors, Plans, and Managed Care Practice Group September 26 , 2011 Presenter: Paula B. Denney, Esquire , Jackson Walker LLP, Houston, TX, pdenney@jw.com. Preemption: the rules and the exceptions.

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ERISA Preemption Basics

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  1. ERISA Preemption Basics Sponsored byPayors, Plans, and Managed Care Practice GroupSeptember 26, 2011Presenter: Paula B. Denney, Esquire, Jackson Walker LLP, Houston, TX, pdenney@jw.com 1

  2. Preemption: the rules and the exceptions 2

  3. ERISA supersedes (pre-empts) any and all state laws related to ERISA governed benefit plans, except . . . state laws “regulating insurance.” 29 U.S.C. §1132(a) and §1144 3

  4. TOPIC 1

  5. Is it an ERISA-Governed Plan? • Is there a plan? • ERISA does not cover certain plans without meaningful employer involvement (AFLAC duck) • safe harbor rules • ERISA does not cover governmental/religious plans • ERISA does not cover individual plans . 29 U.S.C. §1003(b) 4

  6. What Does “Related to” Mean? • Not much of a limit on preemption’s scope, BUT • Other tests used to limit scope based on Congressional intent 5

  7. Congressional Intent: the Public Policy Supporting Preemption • Uniformity of decision-making regimes • Control plan costs • Areas of exclusive federal concern balanced against states’ traditional role in regulating insurance 6

  8. Examples of Laws Not “Relating to” ERISA Plans • “Run of the mill” state laws (e.g., garnishment; prevailing wage statutes; taxes of general application) • Surcharge collected by hospital on certain insured • One test (only some circuits): is relationship among traditional ERISA entities affected by law? 7

  9. TOPIC 2

  10. Laws “Regulating Insurance” as a Limited Exception to Preemption’s Scope • state law “saved” from preemption if it “regulates insurance” • test: (1) specifically directed to entities engaged in business of insurance; (2) substantially affects risk pooling arrangement between insurer/insured • the deemer clause • other exceptions for federal laws, state laws vis banking and securities Kentucky v. Miller (S. Ct. 2003) 8

  11. TOPIC 3

  12. Complete v. Conflict Preemption • Complete: federal law supplants all state law • Test: Aetna v. Davila • Further tests (Circuits) vary 9

  13. Complete v. Conflict Preemption • Conflict: federal law supplants contradictory remedies/standards, but may not take the place of a state law cause of action • Test 10

  14. TOPIC 4

  15. What happens if a state law is preempted? (Why are we arguing about this?) 11

  16. If preemption applies, ERISA the statute or federal common law applies to: • The claims (complete) • Defense (complete and conflict) • Remedies (complete and conflict) • Relevant evidence (complete and conflict) • Standard of review (complete and conflict) 12

  17. Remedies Under ERISA (If your claim is complete or conflict pre-empted) • Money damages in limited circumstances • Equitable relief • Injunctive relief 13

  18. ERISA’s Favorable Standard of Review for Claims Decision-Maker • With discretionary authority only • State DOI’s prohibiting discretionary authority clauses for fully insured plans • With no discretionary authority, is denovo 14

  19. Potentially Limited Discovery • The administrative record (even if denovo) • Evidence of conflict 15

  20. TOPIC 5

  21. Application of the Preemption Rule and Exceptions • Benefit claims • Bad faith/Insurance code • Wrongful death/mental anguish • Provider/payor disputes (non-contracted and contracted) • Prompt pay penalties 16

  22. Claims for Benefits • Even if phrased as state law claims • Even if brought as tort claims 17

  23. Mixed Coverage and Treatment Decisions • Wrongful death • Mental anguish 18

  24. Bad faith/Insurance Code claims 19

  25. Provider/Payor Disputes • Non-contract • Contract 20

  26. Provider Disputes/Non-Contracted Providers • The role (or lack thereof) of assignments from the plan participant • Some courts draw a distinction between misrepresentations about the entire lack of coverage v. extent of coverage • Does it matter that the provider is not mentioned—not an “enumerated party” under the statue (AKA “who’s your plaintiff?”) 21

  27. Provider disputes/contracted providers 22

  28. State law prompt pay requirements and penalties 23

  29. ERISA PREEMPTION BASICS

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