29 U.S.C. § 1001(b) This goal is effectuated in various provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).A. ERISA Preemption of State Laws, GenerallyERISA relieves plan fiduciaries from the aforementioned quandaries by generally preempting state law. 29 U.S.C. § 1144. Federal preemption is a concept rooted in Article VI, Clause 2 of the U.S. Constitution (the Supremacy Clause), which states that “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof [i.e., ERISA] … shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, anything in the Constitution or Laws of any State to the Contrary notwithstanding.”

Plan sponsors and fiduciaries have challenged the enforceability of these state laws on the ground that they were preempted pursuant to ERISA § 514, which expressly preempts all state laws “insofar as they may now or hereafter relate to any employee benefit plan.” 29 U.S.C. § 1144(a). The states have argued that the clauses were insulated from preemption pursuant to ERISA’s “savings clause,” which provides that ERISA “shall [not] be construed to exempt or relieve any person from any law of any State which regulates insurance, banking or securities.”

Plan sponsors and fiduciaries have challenged the enforceability of these state laws on the ground that they were preempted pursuant to ERISA § 514, which expressly preempts all state laws “insofar as they may now or hereafter relate to any employee benefit plan.” 29 U.S.C. § 1144(a). The states have argued that the clauses were insulated from preemption pursuant to ERISA’s “savings clause,” which provides that ERISA “shall [not] be construed to exempt or relieve any person from any law of any State which regulates insurance, banking or securities.”

The bill seeks to amend the individual insurance policies under N.Y. INS. LAW § 3216, group insurance policies under N.Y. INS. LAW § 3221, including ERISA-governed plans, and health maintenance organizations contracts under N.Y. INS. LAW § 4303.But this proposed law indisputably interferes with the administration of ERISA-governed plans. ERISA § 514(a), 29 U.S.C. § 1144(a), provides that ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” Here, the proposed bill is mandating coverage and takes away the decision-making authority of the claim administrator and places it in the hands of a “qualified healthcare professional” or “treating physician” to determine whether the treatment should be covered by the medical plan. The bill is excepted from ERISA preemption only if it is a state law “which regulates insurance, banking, or securities.”

But this proposed law indisputably interferes with the administration of ERISA-governed plans. ERISA §514(a), 29 U.S.C. §1144(a) provides that ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” Here, the proposed bill is mandating coverage and takes away the decision-making authority of the claim administrator and places it in the hands of a “qualified healthcare professional” or “treating physician” to determine whether the treatment should be covered by the medical plan.

describing Mulready as “an unfortunate – and arguably errant – legal development” in a news release, the National Association of Chain Drug Stores noted the organization would continue remaining “focused on confronting PBM tactics that harm patients” as states in the Tenth Circuit would be immediately impacted by Mulready.As noted, the holding of Mulready in the Tenth Circuit will have limited effects on a nationwide scale until similar holdings trend in other circuits or the U.S. Supreme Court takes up the issue. However, in addition to monitoring state laws and federal court decisions, stakeholders should also continue monitoring potential federal legislative approaches to addressing PBM-related issues—such as those proposed in the bipartisan bills currently being debated in both chambers of Congress—which could make squaring PBM and ERISA plan issues even more complex.ENDNOTESPCMA v. Mulready, No. 22-6074 (10th Cir. 2023).Rutledge v. Pharm. Care Mgmt. Ass’n, 141 S. Ct. 474 (2020). 29 U.S.C. § 1144. National Conference of State Legislatures, Prescription Drug State Bill Tracking Database 2015-Present (July 31, 2023).Id. Mulready, No. 22-6074 at 10 (quoting Okla. Stat. tit. 36, § 6959 (2019)). 29 U.S.C. § 1144(a).Mulready, No. 22-6074 at 17 (quoting Rutledge, 141 S. Ct. at 479).Id.Mulready, No. 22-6074 at 18.Id. at 21 (quotingN.Y. State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins.Co., 514 U.S. 645, 659 (1995)).Id. at 22.Id. at 20 (quoting Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S. 724, 739 (1985)).Id. at 20 (quoting Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 359 (2002)).Id. at 21.Id. (internal citations omitted).Id. (quoting PCMA v. District of Columbia, 613 F.3d 179, 188 (D.C. Cir. 2010); second quoting Travelers, 514 U.S. at 659).Id. at 53.Id. at 24 (quoting Rutledge, 141 S. Ct. at 480) (internal citations omitted). Id. at 17-18 (quoting Rutledge, 141 S. Ct. at 480).Mulready, No. 22-6074 at 28 (quoting Shaw v. Delta Air Lines, Inc., 463 U.S.

ERISA section 4(b)(3), 29 U.S.C. § 1103(b)(3), excludes state-required workers' compensation, unemployment compensation, or disability insurance plans from ERISA coverage, and, thus, those laws are not preempted by ERISA.Because of this, states are permitted to require separate non-ERISA plans covering only those kinds of benefits. Similarly, Congress amended ERISA section 514(b), 29 U.S.C. § 1144(b), to specifically save the Hawaii Prepaid Health Care Act from preemption after it was found to be preempted in Standard Oil Co. v. Agsalud. Similar Congressional action would be required to save the LTC Act.Nor is the LTC Act directed at the insurance industry to be saved as a law that regulates insurance. To be saved as a law that "regulates insurance" under § 1144(b)(2)(A), the law must satisfy two requirements.

The Ninth Circuit concluded that the California Insurance Code §10110.6 is not preempted by ERISA because it falls within the savings clause set forth in 29 U.S.C. § 1144(b)(2)(A), is directed toward entities engaged in insurance and it substantially affects the risk-pooling arrangement between the insurer and the insured.Preemption and the Savings Clause ERISA preempts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” 29 U.S.C. §1144(a).

DM & E logically sought to thwart Schieffer’s ability to recoup double damages under the applicable state law.In this regard, DM & E commenced an action in federal court to enjoin the arbitration as preempted by ERISA. See 29 U.S.C. § 1144(a); Aetna Health Inc. v. Davila, 542 U.S. 200, 209, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004) (ERISA expressly preempts “any state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy.”) DM&E argued that the Employment Agreement is an ERISA plan and, therefore, the district court had subject matter jurisdiction to enjoin Schieffer’s attempt to invoke preempted state law remedies. The district court disagreed, holding that the Employment Agreement is not an ERISA employee benefit plan and, therefore, granted Schieffer’s motion to dismiss.

Standard Ins. Co. v. Lindeen, 2010 U.S. LEXIS 4079 (May 17, 2010), a panel of the Ninth Circuit unanimously affirmed the decision of Judge Molloy of the District of Montana, which rejected Standard Insurance Company’s (“Standard”) challenge to the Montana Insurance Commissioner’s disapproval of any employee benefit plan that contains a “discretionary clause” (537 F. Supp. 2d 1142 (D. Mont. 2008)). Judge O’Scannlain, writing for the Ninth Circuit panel, affirmed, finding that although the Commissioner’s practice relates to a covered employee benefit plan (29 U.S.C. §1144(a)), it was not preempted on account of ERISA’s clause that expressly saves from preemption any state law that “regulates insurance, banking, or securities” (29 U.S.C. § 1144(b)(2)(A) (the so-called “savings clause)). Applying the two-part test set forth in Kentucky Ass’n of Health Plans, Inc. v. Miller, 538 U.S. 329, 342 (2003), the court found that the Montana practice was specifically directed towards entities engaged in insurance (prong one of the two-part test) and substantially affected the risk-pooling arrangement between the insurer and the insured (the second prong).