Amicus Curiae Brief — Leslie Rutledge, Attorney General of Arkansas, Petitioner v. Pharmaceutical Care Management Association

Supreme Court briefApr 1, 2020

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No. 18-540

IN THE

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LESLIE RUTLEDGE, in her official capacity

as Attorney General of the State of Arkansas,

Petitioner,

PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION,

Respondent.

On Writ Of Certiorari

To The United States Court Of Appeals

For The Eighth Circuit

BRIEF FOR THE CHAMBER OF COMMERCE

OF THE UNITED STATES OF AMERICA AND

THE AMERICAN BENEFITS COUNCIL

AS AMICI CURIAE

IN SUPPORT OF RESPONDENT

_______________

DARYL L. JOSEFFER

HELGI C. WALKER

JANET GALERIA

Counsel of Record

U.S. CHAMBER LITIGATION CENTER MATTHEW S. ROZEN

1615 H Street, N.W.

MAX E. SCHULMAN

GIBSON, DUNN & CRUTCHER LLP

Washington, D.C. 20062

1050 Connecticut Avenue, N.W.

Washington, D.C. 20036

JAMES A. KLEIN

KATY JOHNSON

(202) 955-8500

AMERICAN BENEFITS COUNCIL

HWalker@gibsondunn.com

1501 M Street, N.W., Suite 600

Washington, D.C. 20005

Counsel for Amici Curiae

QUESTION PRESENTED

Section 514(a) of the Employee Retirement

Income Security Act of 1974 (“ERISA”) expressly

preempts “any and all State laws” that “relate to”

employee benefit plans. 29 U.S.C. § 1144(a). The

Eighth Circuit held that this provision preempts

Arkansas’s Act 900, which sets the prices ERISA

plans pay and the procedures they must follow to

reimburse pharmacies for drugs dispensed to plan

participants and beneficiaries. The Eighth Circuit

concluded that Act 900 is preempted because it

unlawfully interferes with the administration of

prescription-drug benefits on behalf of an ERISAgoverned employee benefit plan.

The question addressed by amici is whether

Arkansas can avoid preemption—despite Act 900’s

undisputed impact on plan administration—by

casting the Act’s onerous restrictions as a matter of

“rate regulation” and “necessary incidents to that

regulation,” and by purporting to impose these

restrictions on third-party administrators acting as

agents for ERISA plans, rather than on the plans

themselves.

TABLE OF CONTENTS

Page

QUESTION PRESENTED...........................................i

INTEREST OF AMICI CURIAE ................................ 1

SUMMARY OF THE ARGUMENT ............................ 2

ARGUMENT ............................................................... 5

ARKANSAS’S AND THE UNITED STATES’

PROPOSED EXCEPTIONS TO ERISA

PREEMPTION CONTRAVENE ERISA AND

THIS COURT’S PRECEDENT ............................... 7

A. STATES CANNOT REGULATE THE

STRUCTURE OF PLAN BENEFITS

UNDER THE GUISE OF “RATE

REGULATION” ............................................ 7

B. THERE IS NO EXCEPTION FROM

PREEMPTION FOR STATE

REGULATION OF ERISA PLAN

BENEFITS “INCIDENTAL” TO OTHER

REGULATORY OBJECTIVES ....................... 12

C. ERISA PREEMPTION APPLIES

EQUALLY TO STATE LAWS

TARGETING THIRD-PARTY AGENTS

OF ERISA PLANS .................................... 16

II. THE PROPOSED EXCEPTIONS TO

PREEMPTION WOULD UNDERMINE

UNIFORM PLAN ADMINISTRATION IN

AREAS EXTENDING FAR BEYOND THIS

CASE .............................................................. 19

CONCLUSION .......................................................... 25

iii

TABLE OF AUTHORITIES

Page(s)

Cases

Alessi v. Raybestos-Manhattan, Inc.,

451 U.S. 504 (1981) ................................................ 9

Am.’s Health Ins. Plans v. Hudgens,

742 F.3d 1319 (11th Cir. 2014) ............................ 17

Black & Decker Disability Plan v. Nord,

538 U.S. 822 (2003) ................................................ 9

Boggs v. Boggs,

520 U.S. 833 (1997) ................................................ 2

Braswell v. United States,

487 U.S. 99 (1988) ................................................ 18

Cal. Div. of Labor Standards Enf’t v.

Dillingham Constr., N.A., Inc.,

519 U.S. 316 (1997) ........................................ 14, 17

Conkright v. Frommert,

559 U.S. 506 (2010) .............................................. 22

De Buono v. NYSA-ILA Med. & Clinical

Servs. Fund,

520 U.S. 806 (1997) .................................... 9, 15, 16

Egelhoff v. Egelhoff ex rel. Breiner,

532 U.S. 141 (2001) ............................. 3, 5, 6, 9, 11,

14, 18, 20, 21, 22

FMC Corp. v. Holliday,

498 U.S. 52 (1990) .............................................. 3, 9

Fort Halifax Packing Co. v. Coyne,

482 U.S. 1 (1987) ........................................ 6, 17, 20

Gobeille v. Liberty Mut. Ins. Co.,

136 S. Ct. 936 (2016) ............. 4, 5, 6, 10, 12, 14, 15,

16, 17, 18, 21, 22, 23, 25

Ingersoll-Rand Co. v. McClendon,

498 U.S. 133 (1990) ........................................ 14, 20

Kollman v. Hewitt Assocs., LLC,

487 F.3d 139 (3d Cir. 2007) ................................. 18

Ky. Ass’n of Health Plans, Inc. v. Miller,

538 U.S. 329 (2003) .............................................. 23

Lockheed Corp. v. Spink,

517 U.S. 882 (1996) ................................................ 9

Massachusetts v. Morash,

490 U.S. 107 (1989) ................................................ 9

Met. Life Ins. Co. v. Glenn,

554 U.S. 105 (2008) .............................................. 23

Met. Life Ins. Co. v. Massachusetts,

471 U.S. 724 (1985) ............................................ 8, 9

Nationwide Mut. Ins. Co. v. Darden,

503 U.S. 318 (1992) .............................................. 19

N.Y. State Conference of Blue Cross &

Blue Shield Plans v. Travelers Ins.

Co.,

514 U.S. 645 (1995) .................... 7, 8, 10, 11, 14, 15

Patterson v. Shumate,

504 U.S. 753 (1992) .............................................. 19

Pharm. Care Mgmt. Ass’n v. D.C.,

613 F.3d 179 (D.C. Cir. 2010) .............................. 18

Pilot Life Ins. Co. v. Dedeaux,

481 U.S. 41 (1987) ................................................ 14

Raymond B. Yates, M.D., P.C. Profit

Sharing Plan v. Hendon,

541 U.S. 1 (2004) .................................................. 19

Republic of Iraq v. Beaty,

556 U.S. 848 (2009) .............................................. 13

Rush Prudential HMO, Inc. v. Moran,

536 U.S. 355 (2002) ........................................ 22, 23

Self-Ins. Inst. of Am., Inc. v. Snyder,

827 F.3d 549 (6th Cir. 2016) ................................ 16

Shaw v. Delta Air Lines, Inc.,

463 U.S. 85 (1983) ........................................ 5, 8, 13

TRW Inc. v. Andrews,

534 U.S. 19 (2001) ................................................ 14

Varity Corp. v. Howe,

516 U.S. 489 (1996) .................................... 9, 19, 22

Statutes

29 U.S.C. § 1001(a) ................................................ 9, 20

29 U.S.C. § 1002(16)(A) ............................................. 22

29 U.S.C. § 1002(21) .................................................. 22

29 U.S.C. § 1002(38) .................................................. 22

29 U.S.C. § 1003(b)(3) ................................................. 8

29 U.S.C. § 1102(a) .................................................... 22

29 U.S.C. § 1104 ........................................................ 22

29 U.S.C. § 1144(a) .......................................... 2, 13, 25

29 U.S.C. § 1144(b)(2) ............................................... 13

29 U.S.C. § 1144(b)(2)(A) ........................................ 8, 9

29 U.S.C. § 1144(b)(7) ............................................... 13

Ark. Code Ann. § 17-92-507(a)(7) ............................. 16

Ark. Code Ann. § 17-92-507(c)(2) .......................... 3, 12

Ark. Code Ann. § 17-92-507(c)(4) .............................. 12

Ark. Code Ann. § 17-92-507(c)(4)(A) ........................... 3

Ark. Code Ann. § 17-92-507(c)(4)(B) ........................... 3

Ark. Code Ann. § 17-92-507(c)(4)(C)(i) ....................... 3

Ark. Code Ann. § 17-92-507(c)(4)(C)(iii) ..................... 3

Ark. Code Ann. § 17-92-507(e) .................................... 3

vii

Other Authorities

Edward R. Berchick et al., Health

Insurance Coverage in the United

States: 2018 (Nov. 8, 2019) .................................. 20

Health Economics Practice, Barents

Group, LLC, Impacts of Four

Legislative Provisions on Managed

Care Consumers (1998) ........................................ 21

Kaiser Family Found., Employer Health

Benefits: 2019 Annual Survey (2019) .................. 22

Pharmacy Benefit Mgmt. Inst., 2018

Trends in Drug Benefit Design

(2018) .............................................................. 22, 23

Treatises

Restatement (Second) of Agency § 7

(1958) .................................................................... 19

Restatement (Second) of Agency § 345

(1958) .................................................................... 19

INTEREST OF AMICI CURIAE1

The Chamber of Commerce of the United States of

America (the “Chamber”) is the world’s largest

business federation. It represents approximately

300,000 direct members and indirectly represents the

interests of more than 3 million companies and

professional organizations of every size, in every

economic sector, and from every region of the country.

Many of the Chamber’s members maintain,

administer, or provide services to employee benefits

programs governed by ERISA. An important function

of the Chamber is to represent the interests of its

members in matters before Congress, the Executive

Branch, and the courts. To that end, the Chamber

regularly files amicus briefs in cases that raise issues

of concern to the nation’s business community.

The American Benefits Council (the “Council”) is

a national non-profit organization dedicated to

protecting and fostering privately sponsored employee

benefit plans. The Council’s approximately 440

members are primarily large, multi-state employers

that provide employee benefits to active and retired

workers and their families.

The Council’s

membership also includes organizations that provide

employee benefit services to employers of all sizes.

Collectively, the Council’s members either directly

sponsor or provide services to retirement and health

1 The parties consented to the filing of this brief. Pursuant to

Rule 37.6, counsel for amici represents that this brief was not

authored in whole or in part by counsel for a party and that none

of the parties or their counsel, nor any other person or entity

other than amici, their members, or their counsel, made a

monetary contribution intended to fund the preparation or

submission of this brief.

plans covering virtually all Americans

participate in employer-sponsored programs.

who

The Chamber and the Council frequently

participate as amici curiae in cases with the potential

to significantly affect the design and administration

of employee benefit plans.

Many of these

organizations’ members offer their employees the

opportunity to participate in health plans similar to

the plans at issue here.

The ERISA preemption issues presented in this

case are critically important to the Chamber, the

Council, and their members. Members of both the

Chamber and the Council hold differing views on the

subject matter of the law at issue in this case—the

efficacy of pharmacy benefit managers (“PBMs”) and

maximum allowable cost (“MAC”) pricing. Indeed,

certain aspects of the PBM model stand at odds with

the interests of many plan sponsors. But amici are

united in their commitment to the strong ERISA

preemption principles long recognized by this Court’s

jurisprudence. Given “the centrality of pension and

welfare plans in the national economy, and their

importance to the financial security of the Nation’s

work force,” Boggs v. Boggs, 520 U.S. 833, 839 (1997),

the protection of uniform plan administration is

essential to the interests of employers and their plans’

participants and beneficiaries.

SUMMARY OF THE ARGUMENT

ERISA Section 514(a) expressly preempts “any

and all State laws” that “relate to” employee benefit

plans. 29 U.S.C. § 1144(a). The plain language of this

express-preemption provision is broad, and it operates

to block states from forcing plans to “design” and

administer “their programs in an environment of

differing state regulations.” FMC Corp. v. Holliday,

498 U.S. 52, 60 (1990); see also Egelhoff v. Egelhoff ex

rel. Breiner, 532 U.S. 141, 147-48 (2001). Congress

enacted this bar because allowing such a hodge-podge

of different regulations in different states would

“complicate the administration of nationwide plans”

and produce “inefficiencies that employers might

offset with decreased benefits.” FMC Corp., 498 U.S.

at 60.

The Arkansas statute at issue in this case, Act

900, frustrates Congress’s aims by requiring

administrators to process claims for prescription-drug

benefits under different substantive and procedural

rules—and pay higher amounts—in Arkansas than in

other states, where other members of the same plans

reside. These rules include requirements that benefit

managers continually update the MAC lists specifying

the amounts at which PBMs reimburse pharmacies

for drugs prescribed to plan members, Ark. Code Ann.

§ 17-92-507(c)(2),

and

administrative

appeal

procedures allowing pharmacies to challenge

reimbursements they consider too low, id. § 17-92507(c)(4)(A)-(B). The law also imposes a rule of

decision requiring a PBM, as claims administrator, to

grant certain appeals, increase reimbursement for the

claims at issue and any other affected claim, and

adjust its MAC list going forward. Id. § 17-92507(c)(4)(C)(i), (iii).

Finally, the law permits

pharmacies unilaterally to decline to dispense a

requested drug, notwithstanding a patient’s benefits

claim and the pharmacy’s contractual obligations to

the PBM, if the PBM’s reimbursement falls below a

specified threshold. Id. § 17-92-507(e). As the court

of appeals recognized, these provisions “interfer[e]

with national uniform plan administration” of ERISA

plans, and are therefore preempted by ERISA. Pet.

App. 5a.

To evade the inexorable conclusion that Act 900

impermissibly treads on this core concern of ERISA,

Arkansas and the United States as amicus posit a

series of limitations on ERISA preemption. Arkansas

suggests that its interventions into this sphere avoid

preemption because they are only “ordinary state rate

regulation and necessary incidents to that

regulation.” Pet. Br. 13. The United States argues

that Act 900 also is not preempted because it applies

to third parties that administer pharmacy benefits for

ERISA plans, and “thus regulate[s] PBM

administration, not ERISA plan administration.”

U.S. Br. 27.

This Court should reject these artificial

limitations, which would eviscerate ERISA

preemption. State regulation of the rates that ERISA

plans agree to pay to provide coverage to their

members is not an exception to ERISA preemption; it

is at the core of what ERISA preempts because

calculating benefits is a central plan function. Nor is

there any blanket exemption from preemption for

requirements imposed as incidents to an otherwise

legitimate state purpose. Indeed, as this Court

recently reaffirmed, “ERISA pre-empts a state law

that regulates a key facet of plan administration even

if the state law exercises a traditional state power.”

Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 936, 946

(2016) (emphasis added). Gobeille likewise confirms

that ERISA preemption applies equally when a state

law regulates core plan functions by imposing

requirements only on a plan’s “third-party

administrator” or agent, rather than the plan itself.

Id. at 942.

To hold otherwise would contravene ERISA’s

plain text and this Court’s precedents, and would open

significant gaps in ERISA’s preemptive scope for all

employee benefit plans, posing a serious threat to the

ability of plan sponsors to offer nationwide employee

benefit plans that can be administered in a uniform

manner from state to state. A ruling upholding Act

900 would sanction a patchwork of state requirements

that would decrease efficiency and increase plan

costs—not just in the PBM context, but in numerous

others involving different kinds of benefits and plans,

different aspects of plan administration, and different

kinds of third-party administrators. The result would

be to “undermine the congressional goal of

‘minimiz[ing] the administrative and financial

burden[s]’

plan

administrators—burdens

ultimately borne by the beneficiaries.” Gobeille, 136

S. Ct. at 944 (quoting Egelhoff, 532 U.S. at 149-50).

This Court should reject the unduly narrow,

counter-textual approach to ERISA preemption

offered by Arkansas and the United States, and affirm

the decision of the court of appeals holding Act 900

preempted.

ARGUMENT

This Court has long held that “[a] law ‘relates to’

an employee benefit plan,” and so is preempted by

ERISA, “if it has a [(1)] connection with or [(2)]

reference to such a plan.” Shaw v. Delta Air Lines,

Inc., 463 U.S. 85, 96-97 (1983). As elaborated over

more than three and a half decades, the first branch

of this two-part framework establishes that “a state

law … has an impermissible ‘connection with’ ERISA

plans” if it “governs … a central matter of plan

administration,” “interferes with nationally uniform

plan administration,” or imposes “acute, albeit

indirect, economic effects” that “‘force an ERISA plan

to adopt a certain scheme of substantive coverage or

effectively restrict its choice of insurers.’” Gobeille v.

Liberty Mut. Ins. Co., 136 S. Ct. 936, 943 (2016). This

“connection with” preemption ensures fidelity to

“[o]ne of the principal goals of ERISA”: “to enable

employers ‘to establish a uniform administrative

scheme, which provides a set of standard procedures

to guide processing of claims and disbursement of

benefits.’” Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S.

141, 148 (2001) (quoting Fort Halifax Packing Co. v.

Coyne, 482 U.S. 1, 9 (1987)).

Arkansas and the United States ask this Court to

depart from these settled principles by chiseling a trio

of novel, non-textual exceptions out of the statutory

scope of ERISA preemption. Arkansas claims that no

state law is preempted that imposes “rate regulation,”

broadly defined as “regulations that limit” the rates

paid for “goods and services [plans] provide

beneficiaries.” Pet. Br. 13. Arkansas also seeks a free

pass from preemption for any laws “incidental” to a

permissible objective of state regulation, “even if those

[laws] bear on benefits or claims processing” by

ERISA plans. Id. at 14. And the United States

suggests

that

states

may

regulate

plan

administration so long as they “direct” their laws at

agents acting on plans’ behalf, instead of the plans

themselves. U.S. Br. 27.

These propositions lack foundation in ERISA’s

text or this Court’s precedent. If adopted, they will

harm plans and their members by crippling ERISA’s

preemption provision and undermining uniform plan

administration.

The Court should reject these

arguments and affirm the decision below.

ARKANSAS’S AND THE UNITED STATES’

PROPOSED EXCEPTIONS TO ERISA

PREEMPTION CONTRAVENE ERISA AND

THIS COURT’S PRECEDENT

Arkansas’s and the United States’ narrow

approaches to ERISA preemption depart from

longstanding precedent in ways that would

significantly undercut the broad scope of preemption

expressly established by Congress and enforced by

this Court. Arkansas’s novel exception to preemption

for laws “incidental to rate regulation,” and the

United States’ exception for laws “directed at” third

parties acting as plans’ agents, lack support in

statutory text or precedent. To the contrary, this

Court’s precedents establish that states cannot

regulate the structure and administration of plan

benefits under the guise of “rate regulation,” that

ERISA preemption admits of no exception for state

laws “incidental” to broader regulatory objectives, and

that ERISA preemption protects activities of plan

administration equally whether carried out by plans

or their agents.

A. STATES CANNOT REGULATE THE

STRUCTURE OF PLAN BENEFITS UNDER

THE GUISE OF “RATE REGULATION”

Arkansas’s defense of Act 900 starts from the

mistaken premise that under New York State

Conference of Blue Cross & Blue Shield Plans v.

Travelers Insurance Co., 514 U.S. 645 (1995), “ERISA

does not preempt rate regulation,” meaning

regulation of “the rates at which third-party plan

administrators reimburse providers of healthcare

benefits.” Pet. Br. 23. Respondent ably explains why

Act 900 is not “rate regulation,” because it directly

regulates the administration of benefits and the

integrally related process of reimbursement on behalf

of and under a plan. Resp. Br. 36-40. This Court

should not only reject Arkansas’s “rate regulation”

argument as applied to Act 900 in particular, but

should also resist Arkansas’s broader invitation—

which finds no support in Travelers—to carve a vast

exception from ERISA preemption for “rate

regulation” in the expansive sense that Arkansas uses

that term here.

State regulation of the rates that ERISA health

benefit plans agree to pay for treatment of their

members is at the core of what ERISA preempts.

Travelers itself recognized that “ERISA pre-empt[s]

state laws that mandat[e] employee benefit structures

or their administration,” including any law that

“force[s] an ERISA plan to adopt a certain scheme of

substantive coverage.” 514 U.S. at 658, 668. A state

ordinarily may not require an ERISA plan “to pay

employees specific benefits,” Shaw, 463 U.S. at 97,

108 (sick leave), or “cover a specified illness or

procedure,” Met. Life Ins. Co. v. Massachusetts, 471

U.S. 724, 728, 735 n.14 (1985) (minimum mentalhealth-care benefits), much less set the dollar amount

that a plan must pay for the benefits it elects to cover.2

2 Shaw and Met. Life recognized enumerated statutory

exceptions to these rules—exceptions not applicable or invoked

here—but they each found preemption outside the scope of these

exceptions. Shaw held that New York could mandate sick-leave

benefits through disability insurance plans “exempt from

ERISA” under 29 U.S.C. § 1003(b)(3), but could not “require an

employer to alter its ERISA plan” to provide those benefits. 463

U.S. at 108. Met. Life held that Massachusetts could mandate

minimum-health-care benefits for insured plans under an

exception to preemption for laws “regulat[ing] insurance,” 29

Instead, ERISA preempts laws regulating a plan’s

“method of calculating … benefits.” De Buono v.

NYSA-ILA Med. & Clinical Servs. Fund, 520 U.S. 806,

814-15 (1997) (citing Alessi v. Raybestos-Manhattan,

Inc., 451 U.S. 504, 524-25 (1981)). “[T]he payment of

benefits” is “a central matter of plan administration”

that ERISA preemption squarely protects from state

regulation. Egelhoff, 532 U.S. at 148.

State regulation of plan benefit levels is

antithetical to ERISA’s statutory scheme. “Congress’

primary concern” in enacting ERISA was to ensure

that employers pay the benefits due to their

employees, Massachusetts v. Morash, 490 U.S. 107,

115 (1989)—not to “mandate what kind of benefits

employers must provide if they choose to have

[benefits] plans,” Lockheed Corp. v. Spink, 517 U.S.

882, 887 (1996). Congress well understood that

employers are not “require[d] … to establish employee

benefit plans,” ibid., and that undue regulation would

only “discourage employers from offering [such] plans

in the first place,” Varity Corp. v. Howe, 516 U.S. 489,

497 (1996). ERISA thus leaves plan sponsors “large

leeway” to decide what benefits to offer. Black &

Decker Disability Plan v. Nord, 538 U.S. 822, 833

(2003). State laws telling ERISA plans how much to

pay for covered benefits directly undercut that leeway.

Congress also enacted ERISA to enable plan

administrators “to calculate uniform benefit levels

nationwide,” FMC Corp. v. Holliday, 498 U.S. 52, 60

(1990), in light of the “increasingly interstate” scope of

many employee benefits plans, 29 U.S.C. § 1001(a).

Congress thus elected federal rather than state

regulation to avoid a jumble of “[d]iffering, or even

U.S.C. § 1144(b)(2)(A), but not for self-funded plans to which the

exception does not apply, 471 U.S. at 735 & n.14.

parallel, regulations from multiple jurisdictions” that

could prevent plans from offering the same benefits in

different states.

Gobeille, 136 S. Ct. at 945.

Regulations requiring plans to calculate payments for

health benefits differently from state to state are

incompatible with that scheme.

Nothing in Travelers saves laws like Act 900 from

preemption, even supposing that they could

accurately be called “rate regulation.” Travelers

upheld a New York law that “require[d] hospitals to

collect surcharges from patients.” 514 U.S. at 649

(emphasis added). As the state told this Court, these

“assessments [we]re not imposed upon ERISA plans”

or their agents, and “the law d[id] not require any

ERISA plan or third party payor to pay any benefit,

any level of benefit, or any particular amount of a

patient’s hospital bill.” Br. for Pet’rs Cuomo, et al.,

Travelers, 1994 WL 646144, at 18-19 (U.S. Nov. 16,

1994). Indeed, “at least one commercial insurer …

made the determination that its plan terms d[id] not

permit payment” of the surcharge. Reply Br. for Pet’rs

Cuomo, et al., Travelers, 1994 WL 721247, at 10 n.10

(U.S. Dec. 29, 1994). Because the statute did not

impose any “substantive coverage requirement

binding plan administrators,” the principal ground for

preemption asserted in this Court was that the law

improperly influenced plans’ choice of insurers

because the surcharge for some insurers’ patients was

greater than for others’ patients. 514 U.S. at 658-59,

664. Regulation of the rates paid by ERISA plans and

their administrators and agents simply was not at

issue.

Even as to the type of “rate regulation” at issue in

Travelers—regulating hospitals’ charges to patients—

the Court did not adopt a blanket rule precluding

preemption. Arkansas makes much of the Court’s

statement in a footnote that “ERISA was not meant to

pre-empt basic rate regulation.” 514 U.S. at 668 n.6.

But the Court’s point was to reject a categorical bar on

state rate regulation, not to adopt a categorical safe

harbor. As the Court explained in the body of the

opinion, ERISA cannot be read to universally “bar any

state regulation of hospital costs.” Id. at 664. But that

does not mean that every such regulation survives

preemption. To the contrary, the Court upheld New

York’s surcharge only after determining that the

statute “affect[ed] only indirectly the relative prices of

insurance policies,” and “d[id] not bind plan

administrators to any particular choice” or “preclude

uniform administrative practice or the provision of a

uniform interstate benefit package.” Id. at 659-60,

668. The Court made clear that if the statute had

“force[d] an ERISA plan to adopt a certain scheme of

substantive coverage or effectively restrict[ed] its

choice of insurers,” it “might indeed be pre-empted.”

Id. at 668. Travelers thus confirms that state “rate

regulation”—even in the sense used in that case—is

subject to the ordinary test for preemption based on

its “effects” on ERISA plans.

In this case, Arkansas’s Act—unlike the law in

Travelers—impermissibly mandates plans’ benefit

calculations because it binds plans and their

administrators to pay specified amounts for benefits

using particular reimbursement processes. See Resp.

Br. 36-40. Rather than simply regulating the prices

paid by consumers for goods and services in the

healthcare market, with only indirect influence on

plan decisions, the law directly dictates the

substantive and procedural rules governing a plan’s

“‘system for processing claims and paying benefits.’”

Egelhoff, 532 U.S. at 150. It even prevents plans from

guaranteeing coverage by allowing pharmacists to

decline to dispense drugs. The law thus effectively

negates the benefit at issue—the patient’s right to

receive medication according to the cost-sharing and

reimbursement terms set out in the plan. Under

state-specific PBM restrictions like Arkansas’s,

“[p]lan administrators cannot make payments simply

[as] specified by the plan documents. Instead they

must familiarize themselves with state laws so that

they can determine” the specific procedures and rules

of decision that apply to pharmaceutical benefit

coverage in each state. Id. at 148-49. No “rate

regulation” exception countenances this “direct

regulation of a fundamental ERISA function.”

Gobeille, 136 S. Ct. at 946.

B. THERE IS NO EXCEPTION FROM

PREEMPTION FOR STATE REGULATION

OF ERISA PLAN BENEFITS

“INCIDENTAL” TO OTHER REGULATORY

OBJECTIVES

Arkansas’s second flawed limitation on ERISA

preemption is that “ERISA does not preempt

necessary incidents to otherwise permissible laws.”

Pet. Br. 25 (heading). Arkansas claims this purported

exemption

saves

Act

900’s

“enforcement

mechanisms”—e.g., requiring plans to regularly

update their MAC lists, Ark. Code Ann. § 17-92507(c)(2),

and

hear

appeals

challenging

reimbursement decisions, id. § 17-92-507(c)(4)—

“because they are necessary and incidental to

Arkansas’s otherwise permissible rate regulation.”

Pet. Br. 24-25.

Arkansas’s argument falters at every step. There

is nothing “otherwise permissible” about Act 900’s

purported “rate regulation.” See supra at 10-12. But

even assuming arguendo that a state could enact a

“permissible” rate-regulation measure in this area,

the supposedly “incidental” provisions of Act 900

would still violate ERISA in light of their interference

with uniform plan administration. Resp. Br. 40-41.

Arkansas’s novel premise that states can

“regulate the structure or management of plan

beneficiaries’ benefits” to advance “otherwise

permissible laws,” Pet. Br. 25 (heading) (emphasis

omitted), gets ERISA preemption exactly backward.

ERISA’s express preemption provision, Section

514(a), defines the scope of preemption by a law’s

relation to the federal interest at stake—ERISAgoverned “employee benefit plan[s]”—not the state’s

objective in interfering with those interests. 29 U.S.C.

§ 1144(a). The provision does not distinguish among

state laws that meet this criterion, but broadly

“supersedes any and all” of them. Ibid. (emphasis

added). Congress’s use of the “‘expansive’” term “any”

leaves “no warrant to limit the class of provisions of

law” preempted by the statute. Republic of Iraq v.

Beaty, 556 U.S. 848, 856 (2009). The Court “must give

effect to this plain language.” Shaw, 463 U.S. at 97.

The only exceptions to ERISA’s categorical test for

preemption—that is, the only laws that may avoid

preemption “even if” they “regulate the structure or

management of plan beneficiaries’ benefits,” Pet. Br.

25—are specifically enumerated in Section 514(b).

They include, for example, laws that “regulat[e]

insurance, banking, or securities,” 29 U.S.C.

§ 1144(b)(2), and “qualified domestic relations

orders,” id. § 1144(b)(7). Arkansas does not invoke

any of these exceptions. And there is no statutory

exception for statutory provisions that are

“incidental” to rate regulation or any other non-

enumerated statutory purpose. Where, as here,

“‘Congress explicitly enumerates certain exceptions to

a general prohibition, additional exceptions are not to

be implied, in the absence of evidence of a contrary

legislative intent.’” TRW Inc. v. Andrews, 534 U.S. 19,

28 (2001).

Outside of the enumerated statutory exceptions to

ERISA preemption, this Court has consistently

recognized that state laws relating to ERISA plans are

preempted regardless of whether the state claims they

are “incidental to” an otherwise permissible state

scheme. “ERISA certainly contemplated the preemption of substantial areas of traditional state

regulation.” Cal. Div. of Labor Standards Enf’t v.

Dillingham Constr., N.A., Inc., 519 U.S. 316, 330

(1997). A “law that regulates a key facet of plan

administration” is therefore preempted “even if the

state law exercises a traditional state power.”

Gobeille, 136 S. Ct. at 946 (citing Egelhoff, 532 U.S. at

151-52). Such a law “cannot be saved by invoking [a]

State’s traditional power[s]” because the “purpose” of

a state law cannot “transform [its] direct regulation of

‘a central matter of plan administration’ into an

innocuous and peripheral set of additional rules.”

Ibid. (citation omitted). Instead, “[u]nder th[e] ‘broad

common-sense meaning’” of ERISA’s preemption

provision, “a state law may ‘relate to’ a benefit plan,

and thereby be pre-empted, even if the law is not

specifically designed to affect such plans, or the effect

is only indirect.” Ingersoll-Rand Co. v. McClendon,

498 U.S. 133, 139 (1990) (quoting Pilot Life Ins. Co. v.

Dedeaux, 481 U.S. 41, 47 (1987)).

Travelers—the linchpin of Arkansas’s “incident to

rate regulation” defense—illustrates the point:

Whatever its purpose, a law is only “otherwise

permissible” under ERISA, Pet. Br. 25, if it “does not

bind plan administrators to any particular choice” or

“preclude uniform administrative practice or the

provision of a uniform interstate benefit package.”

514 U.S. at 659-60, 668; see supra at 10-12. If a

“necessary” or “incidental” component of the law fails

this test, the law is not “otherwise permissible.”

Arkansas rests its contrary view on nothing more

than a single, inapposite sentence in Gobeille. Pet. Br.

25-26. Gobeille held that Congress “intended to preempt state reporting laws … that operate with the

purpose of furthering public health,” including the

Vermont law at issue in the case. 136 S. Ct. at 946.

Arkansas points to the Court’s speculation that the

“analysis may be different” if a state imposed

“incidental reporting” to facilitate “enforcement” of an

otherwise valid state law, such as the state tax upheld

in De Buono. Ibid. (emphasis added). But the Court

made clear it was not reaching this issue because

“that [was] not the law before the Court.” Ibid. Even

assuming arguendo that a different analysis applied,

nothing in Gobeille suggests that the analysis would

show that all “incidental reporting” requirements—

let alone all “necessary incidents” to other types of

“otherwise permissible laws,” Pet. Br. 25 (heading)—

survive preemption.

To the contrary, Gobeille

confirms that a reporting law may be preempted even

if it “operate[s] with the purpose of furthering public

health”—an otherwise permissible objective. 136 S.

Ct. at 946.

To be sure, there may be some state recordkeeping

requirements that exert such a tenuous and

incidental effect on plan administration that they do

meet the ordinary standard to trigger preemption.

That may have been true in De Buono—although De

Buono “did not explicitly concern reporting

requirements” and those requirements “drew no

comment from the Court.” Self-Ins. Inst. of Am., Inc.

v. Snyder, 827 F.3d 549, 557 (6th Cir. 2016). But what

matters is “the effect of the state law on ERISA plans,”

Gobeille, 136 S. Ct. at 943 (emphasis added), not

whether it is incidental to an otherwise lawful statute.

In short, to claim that a state law is “necessary

and incidental” to an “otherwise permissible …

regulation,” Pet. Br. 24-25, is not a defense to ERISA

preemption. Each provision of Act 900 must stand or

fall on its own terms.

C. ERISA PREEMPTION APPLIES EQUALLY

TO STATE LAWS TARGETING THIRDPARTY AGENTS OF ERISA PLANS

The United States proposes a third, equally

baseless limitation on ERISA preemption. Rather

than embrace Arkansas’s meritless exception for

“incidental” regulations, the United States argues

that ERISA does not preempt Act 900 because Act 900

“imposes obligations on PBMs, not plans.” U.S. Br.

27. The United States is wrong at the threshold that

the Act even makes this distinction—in reality, the

Act reaches any “entity,” including a plan, that

“administers or manages a pharmacy benefits plan,”

Ark. Code Ann. § 17-92-507(a)(7); see also Resp. Br.

46-47. But the government’s more fundamental error

is thinking that the distinction matters. To the

contrary, the government’s attempt to cabin ERISA

preemption to laws “‘directed at … plan sponsors’”

themselves—rather than at their agents, U.S. Br.

27—departs significantly from the long-established

analytical framework for ERISA preemption.

Under this Court’s precedents, ERISA preempts

state laws regulating central plan administration

regardless of whether the administration is carried

out by the plan or by a third party. What matters is

the “aspect of plan administration” regulated,

Gobeille, 136 S. Ct. at 945, and the “nature of the

effect … on ERISA plans,” Dillingham, 519 U.S. at

325, not the entity nominally regulated. That is the

only mode of preemption analysis that sensibly

accounts for the “administrative realities of employee

benefit plans” with which ERISA is concerned. Fort

Halifax, 482 U.S. at 9. A state can no more interfere

with plan administration carried out through a plan’s

agent than with administration by the plan itself.

Gobeille confronted this question directly,

concluding that ERISA preempted Vermont’s

reporting law even though that law imposed direct

requirements only on the respondent plan’s “thirdparty administrator,” Blue Cross. 136 S. Ct. at 942.

The position now advanced by the government—that

a state law avoids preemption if its “burden of

compliance

falls

on”

plan’s

third-party

administrator—garnered only two dissenting votes,

id. at 955 (Ginsburg, J., dissenting), and was rejected

by the majority, id. at 942.

The lower courts have likewise recognized that

“ERISA’s overarching purpose of uniform regulation

of plan benefits overshadows [any] distinction” based

on which entity is the “focus” of a state law. Am.’s

Health Ins. Plans v. Hudgens, 742 F.3d 1319, 1331

(11th Cir. 2014). The concerns underlying ERISA

preemption are “equally applicable to agents … who

undertake and perform administrative duties for and

on behalf of ERISA plans,” because “[t]o subject such

companies to … differing state [regulations] would

create obstacles to the uniformity of plan

administration” just as surely as differing obligations

imposed on plans themselves. Kollman v. Hewitt

Assocs., LLC, 487 F.3d 139, 148 (3d Cir. 2007).

At a minimum, a state law restricting third-party

administrators “constrains” the plan “by forcing it to

decide between administering its pharmaceutical

benefits internally upon its own terms or contracting

with a [third party] to administer those benefits upon

the terms laid down” by the state. Pharm. Care Mgmt.

Ass’n v. D.C., 613 F.3d 179, 188 (D.C. Cir. 2010)

(joined by Kavanaugh, J.). Just as ERISA preempts a

law that “effectively restrict[s] [an ERISA plan’s]

choice of insurers,” Gobeille, 136 S. Ct. at 943, it

assuredly preempts a law that effectively restricts a

plan’s reliance on third-party administrators. And a

state law that forces plans either to follow a state

scheme, or to alter their terms or administration to

avoid it, “is not any less of a regulation of … ERISA

plans simply because there are two ways of complying

with it.” Egelhoff, 532 U.S. at 150. Regulation of

third-party plan administration thus impermissibly

restricts

plan