# Amicus Curiae Brief — Metropolitan Life Insurance v. Massachusetts > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0138%3A22 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 1985 - **Citation:** 471 U.S. 724 ## Text — r rence Supreme Court, US FILED Nos. 84-325 & 84-356 JAN 25 1985 ALEXANDER L. STEVAS, IN THE CLERK Supreme Comet of the United Sarre OCTOBER TERM, 1984 METROPOLITAN LIFE INSURANCE COMPANY, i Appellant, COMMONWEALTH OF MASSACHUSETTS, Appellee. TRAVELERS INSURANCE COMPANY, Appellant, Vv. COMMONWEALTH OF MASSACHUSETTS, Appellee. On Appeal from the Supreme Judicial Court for the Commonwealth of Massachusetts BRIEF FOR THE AMERICAN PSYCHOLOGICAL ASSOCIATION, THE ASSOCIATION FOR THE ADVANCEMENT OF PSYCHOLOGY, AND THE MASSACHUSETTS PSYCHOLOGICAL ASSOCIATION AS AMICI CURIAE IN SUPPORT OF APPELLEE. DONALD N. BERSOFF (Counsel of Record) KIT KINPORTS BRUCE J. ENNIS ENNIS, FRIEDMAN, BERSOFF & EWING 1200 ~ 17th Street, N.W. Washington, D.C. 20036 (202) 775-8100 Counsel for Amici Curiae January 25, 1985 eee WILSON - Eras Printine Co.. Inc. - 789-0096 - WASHINGTON. D.C. 20001 TABLE OF CONTENTS TABLE OF AUTHORITIES ...............-.---------------e--0-00- INTEREST OF AMICI CURIAE... INTRODUCTION AND SUMMARY OF ARGU- I cetrertneitencnnnsseasnscnstemmeemannennseanenanmnacsmansnesmmeennncinses ARGUMENT ....................... sedan tpetanegtitnnammenenanmne I. II. Il. ERISA WAS NOT INTENDED TO PREEMPT MANDATED BENEFIT STATUTES ............. A. Arguably, the Massachusetts Statute “Re- lates to” Employee Benefit Plans Governed CT B. The Massachusetts Statute Is a Law Regulat- ing Insurance and Is Therefore Excepted from ERISA’s Preemption Provision ............. C. The Massachusetts Statute Does Not Fall Within the Scope of the “Deemer Provi- sion” THE McCARRAN-FERGUSON ACT WAS INTENDED TO PRESERVE MANDATED BENEFIT STATUTES ......... A. The Relevant Caselaw Compels the Conclu- sion that Section 47B Is a Statute that Reg- ulates the Business of Insurance B. The Legislative History Compels the Conclu- sion that Section 47B Is a Statute that Regu- lates the Business of Insurance 4 APPELLANTS’ NARROW READING OF THE INSURANCE SAVINGS CLAUSE IS UNSUPPORTABLE ... A. The Statutory Language, Legislative His- tory, and Judicial Construction of the Rele- vant Statutes Do Not Support Appellants’ Reading of the Insurance Savings Clause.... 11 14 16 19 ii TABLE OF CONTENTS—Continued Page B. The Relevant Policy Considerations Do Not Support Appellants’ Reading of the Insur- ance Savings Clause ............... 24 CONCLUSION ... 28 iii TABLE OF AUTHORITIES Cases: Page Addrisi v. Equitable Life Assurance Soc’y of United States, 503 F.2d 725 (9th Cir. 1974), cert. denied, 420 U.S. 929 (1975) 0.0020... 18 Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504 LESSON EE 2, 3, 5, 22 American Progressive Life & Health Ins. Co. v. Corcoran, 715 F.2d 784 (2d Cir. 1983) .............. 11 Anglin v. Blue Shield, 693 F.2d 315 (4th Cir. 1982) LSS A 18 Attorney General v. Travelers Ins. Co., 385 Mass. 598, 488 N.E.2d 1228 (1982) —.............................. 4 Cate v. Blue Cross & Blue Shield, 434 F. Supp. I _ scnssssescsencnces 14 Cochran v. Paco, Inc., 606 F.2d 460 (5th Cir. a neusseneonenenseccos 21 Dawson v. Whaland, 529 F. Supp. 626 (D.N.H. a enenesemesonecscens 18 Eversole v. Metropolitan Life Ins. Co., 500 F. Supp. 1162 (C.D. Cal. 1980) ................................ 14 Feinstein v. Nettleship Co., 714 F.2d 928 (9th Cir. 1983), cert. denied, 104 S. Ct. 2346 (1984)... 17 General Sni't Corp. v. Mitchell, 523 F. Supp. 427 EE ET ET 14 Grant v. Erie Ins. Exchange, 542 F. Supp. 457 (M.D. Pa. 1982), aff'd mem., 716 F.2d 890 (3d Cir.), cert. denied, 104 S. Ct. 349 (1983) ............. 18 Group Life & Health Ins. Co. v. Royal Drug Co., ee 16, 17, 24 Haynes v. United States, 353 U.S. 81 (1957)........ 24 Hewlett-Packard Co. v. Barnes, 425 F. Supp. 1294 (N.D. Cal. 1977), aff'd, 571 F.2d 502 (9th Cir.) (per curiam), cert. denied, 439 U.S. 831 (1978).. 13-14 Hewlett-Packard Co. v. Barnes, 571 F.2d 502 (9th Cir.) (per curiam), cert. denied, 439 U.S. 831 (1978) iets 21 Insurance Comm’r v. Metropolitan Life Ins. Co., 296 Md. 334, 463 A.2d 793 (1983) ............. 10, 11, 14, 26 ‘iv TABLE OF AUTHORITIES—Continued Page John Hancock Mutual Life Ins. Co. v. Commis- sioner of Ins., 349 Mass. 390, 208 N.E.2d 516 ST ee ee ee NH, LEN 22 Lowe v. Aarco-American, Inc., 586 F.2d 1160 (7th Siete, SUIIEIY dintesteisdibicisinsnssiestinialedaiiininicdiaia nts te) 18 Malone v. White Motor Corp., 485 U.S. 497 GITUITE dilinsnstlascsidltidibcaithiniilict laisse ae ot 22 Marks v. United States, 161 U.S. 297 (1896)........ 16 McDonald v. Thompson, 305 U.S. 263 (1938) ........ 14 Mcllhenny v. American Title Ins. Co., 418 F. Supp. SN ee ae Oem 18 McLaughlin v. Connecticut General Life Ins. Co., 565 F. Supp. 434 (N.D. Cal. 1983) WW... 14, 16 Metropolitan Life Ins. Co. v. Whaland, 119 N.H. 894, 410 A.2d 635 (1979) (per curiam).....11, 14,16, 26 Michigan United Food & Commercial Workers Unions v. Baerwaldt, 572 F. Supp. 943 (E.D. Mich. 1983), appeal docketed, No. 83-1570 (6th Cir. Aug. 16, 1983) .................... 11 New Hampshire-Vermont Health Service v. Whaland, 119 N.H. 886, 410 A.2d 642 (1979) RRSP EA EO se ore 18 North Haven Board of Education v. Bell, 456 U.S. UE I italia eit ane a ee 11, 18, 24 Perry v. Fidelity Union Life Ins. Co., 606 F.2d 468 (5th Cir. 1979), cert. denied, 446 U.S. 987 aE SASSER OO. leech ielr 18 Pierucci v. Continental Casualty Co., 418 F. Supp. dk ane eRe el 18-19 Polish Nat’l Alliance v. NLRB, 322 U.S. 643 ID Seite neibeicianibaleieianilidniii a ee ae 21, 25 Prudential Ins. Co. v. Benjamin, 328 U.S. 408 ERS oe NN Renee ALN Bk 19, 20, 21, 27 Russo v. Boland, i103 Ill. App. 3d 905, 431 N.E.2d gg EA Ge ae ake 14 SEC v. National Securities, Inc., 393 U.S. 458 FRESE cE RE Py Cr, 17 SEC v. Variable Annuity Life Ins. Co. of America, 359 U.S. 65 (1959) W000. ~“ 15, 23 V TABLE OF AUTHORITIES—Continued Page Shaw v. Delta Air Lines, Inc., 103 S. Ct. 2890 (1OGB) nnn ncn an cnecenn cs ecencoennenncoensnenncensnesesnnensnnounenenaseness 3, 4, 7 St. Paul Elec. Workers Welfare Fund v. Markman, 490 F. Supp. 931 (D. Minn. 1980) -.................---- 11 St. Paul Fire & Marine Ins. Co. v. Barry, 438 U.S. BBL (1DTB) .enncnnnnneeno.-n2nc-nconcenevecsecnsnnsnncnerooscnensecees 20 Standard Oil Co. v. Agsalud, 442 F. Supp. 695 (N.D. Cal. 1977), aff'd, 633 F.2d 760 (9th Cir. 1980), aff'd mem., 454 U.S. 801 (1981) -............. 27 Standard Oil Co. v. Agsalud, 633 F.2d 760 (9th Cir. 1980), aff'd mem., 454 U.S. 801 (1981)-....... 4 Stone & Webster Engineering Corp. v. Ilsley, 690 F.2d 328 (2d Cir. 1982), aff'd mem., 103 S. Ct. BEC4 (19GB) onan nce neen-n---n-nnnennnenneenerenenenenanensenseneee 4,5 Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119 (| On ee 16, 17 Wadsworth v. Whaland, 562 F.2d 70 (1st Cir. 1977), cert. denied, 435 U.S. 980 (1978) .....4, 11, 14, 21 Wayne Chemical, Inc. v. Columbus Agency Service Corp., 426 F. Supp. 316 (N.D. Ind.), modified, 567 F.2d 692 (7th Cir. 1977) ...........--...--------------- 9, 21 Wayne Chemical, Inc. v. Columbus Agency Service Corp., 567 F.2d 692 (7th Cir. 1977) .............-.-.---- 11 Western & Southern Life Ins. Co. v. State Board of Equalization, 451 U.S. 648 (1981) -.................. 19, 20 Women in City Gov’t United v. City of New York, 515 F. Supp. 295 (S.D.N.Y. 1981) ......................- 22 Statutory Materials: McCarran-Ferguson Act, 15 U.S.C. § 1011 et seq... 2,14 4 ee 15 CT A 15 EG ee 21 OO ——————————————————E 21 National Labor Relations Act, 29 U.S.C. § 151 et , OO cciccaspententnengitinnianieeiniaens vi TABLE OF AUTHORITIES—Continued Page Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. 2 cece cece eee 1 Ee se 26 I 10, 28 | ae a eee 2 BD WBA. © BEGB CB) 0B) aon nccceecceecccececcoceeseseereees es 27 er 2,7 29 U.S.C. § 1144(b) (2) (A) 5 29 U.S.C. § 1144(b) (2) (B) -... 12 29 U.S.C. § 1144(b) (5) (A) 11 29 U.S.C. § 1144(d) SR Tene a ee CO 16 CAL. INS. CODE § 10277 (West 1972)... 9 a “em STAT. ANN. § 38-174d (West Supp. EE REPRE SE UR an I ee 1 aE 9 MD. ANN. Cope art. 48A, § 477E (1979)... 9 Mass. ANN. Laws ch. 175, § 22 (Michie/Law. Co- ed ay 8 Mass. ANN. Laws ch. 175, § 47B (Michie/Law. Co- ae ere ate Cr ee 1 Mass. ANN. LAWS ch. 175, § 47C (Michie/Law. Co- RET Te cat aa tae 1,9 Mass. ANN. Laws ch. 175, §108(2)(a)(3) (Michie/Law. Co-op. 1977) .................. 8 Mass. ANN. Laws ch. 175, §110D (Michie/Law. Ph ing TE Leer Fe See Oe Si 8 ASS. ANN. LAWS ch. 175, §110(H) (Michie/ Law. Co-op. 1977) nine kandeace en aid 8 Mass. ANN. Laws ch. 175, §118C (Michie/Law. ETE En a ee Neen 9 MAss. ANN. Laws ch. 175, §118L (Michie/Law. Rae aT ae ee 9 Mass. ANN. Laws ch. 175, § 182(1) (Michie/Law. FPO ae en ay a ee 9 Mass. ANN. Laws ch. 175, § 182(6) (Michie/Law. Ne I ihn niaidiiiaiadiiaia ei tk a 9 MAss. ANN. Laws ch. 175, § 184(4) (Michie/Law. PUY HUI ‘Snicdaiciiestitiiniahintinkaisinmeabioatectantetiiin ss. 8 vii TABLE OF AUTHORITIES—Continued Page Mass. ANN. Laws ch. 175, §142 (Michie/Law. CO-OP. 1977) .....-.---------c--ceeeo--ncencerenenecsnrescensenneeneenee 9 MINN. STAT. ANN. § 62A.149 (West Supp. 1984) .. 10 VA. CODE § 38.1-348.1 (1981) ........-----------------0------ 9 VA. CoDE § 38.1-824 (1981) ~......-...---—--------- e+e 9 Wis. STAT. ANN. § 632.89 (West 1980) _.................. 9 Wis. STAT. ANN. § 632.90 (West 1980) ..................... 10 Legislative Materials: H.R. Rep. No. 873, 78th Cong., 1st Sess. (1943) .... 15 H.R. REp. No. 148, 79th Cong., 1st Sess., reprinted in 1945 U.S. Cope Conc. & AD. NEws 670........ 15 H.R. Rep. No. 1280, 93d Cong., 2d Sess., reprinted in 1974 U.S. Cope Conc. & AD. NEws 5038........ 6, 12 H.R. Rep. No. 1785, 94th Cong., 2d Sess. (1977).. 12, 13 S. 209, 96th Cong., 1st Sess., 125 Conc. REC. 933 0, ) Neen 11 S. REP. No. 1112, 78th Cong., 2d Sess. (1944)........ 15, 20 S. REP. No. 127, 93d Cong., 1st Sess. (1973), re- printed in 1974 U.S. CopE Conc. & AD. NEWS GED ceceremtens citiiestensacanigniteiaiaisesiMasimiieumeen 6 SENATE COMM. ON LABOR AND HUMAN RESOURCES, 96TH CONG., LEGISLATIVE CALENDAR (final ed. Bir, GB, TBD eaccercetceretcscne pn ccrensttiinecinenencsmmennmmmnte 11 89 ConG. REc. (1943) S caccnnsnenn vanes eccccscscosevecssoscovenevecnsanenesces 15 90 ConG. REc. (1944) a I acecice steer cn eceicncesneccecnsccvesccencceerceosesnnenesenees 20 i, ID ses eenn ence anecneccnswscccnssncsnseneenesntcnscoenscoee 27 _ 21 Oi, I eccccesccees -crensernsscnescnesinecsatnesteatincssonmeenssnns 15 1 TEI ectecvecncnnsessssevetenenzesemionscccescinmusesineeinecnenenencess 15 Sa 22 Oh GI eeccccrrennerenseercrsnsencenpsncessesscnsssennsscnnscnnvemnnaetoes 19 Pr GG nnn naan nanan nnn nennnnnenenennsnesncneneneresceneseensnece 19 Dy GR ccccesesrcesesacsrvemntntecentvansontensbpeastemmmnemccentit 25 TIED cericncncncessncnmenqreecesnmeonpnssanssomnsbenntanaaatatnesnian 19 SO OE 19 viii TABLE OF AUTHORITIES—Continued Page p. 6548 ssiiibidbaaitbaiiaditatindiaiilaninglbie 26 ITT Ls ccieitid nails linsisinipnatabieniliameadienseitlabiite 20, 27 alcatel ieee italian 27 I iicetait ies cainadlinia ada ceintieetannetliaila tidal 19 EEE SOR ene eee ON ee Oa RE 20 ir TT cea teat naiiadilnindiinsstapncesmnuncitemsidlanitbdianibiigaanentl 19 91 ConG. REc. (1945) EERE ee ee 19 actin i ie hacnatidaaiaaditaniiiabaemneeliiiis 21 i ee eran e es 20 EE Re ae ee a 21 RT ECC Ce Oe Re Fe 19-20, 20 120 ConG. REc. (1974) RE SEER SO ner Toa ee ee EE 7 SNE 6, 7, 27 EE ee nn ene nT me 7 125 Conc. REG. (1979) AP RSEY REET ee Se a a 11 General Court Joint Committee on Insurance, Ad- vances in Health Insurance in Massachusetts RRS sa A 7-8, 16 Texts, Treatises, and Other Authorities: P. AREEDA, ANTITRUST LAW: AN ANALYSIS OF ANTITRUST PRINCIPLES AND THEIR APPLICATION I i i 18 Brummond, Federal Preemption of State Insurance Regulation Under ERISA, 62 IowA L. REV. 57 ERE RIE TEE Se cere Te rae, 6, 138, 19, 25 Comment, ERISA Preemption and Indirect Regu- lation of Employee Welfare Plans Through State Insurance Laws, 78 CoLuUM. L. REv. 1536 (1978).. 6, 7, Manno, ERISA Preemption and the McCarran- Ferguson Act: The Need for Congressional Act- tion, 52 TEMPLE L.Q. 51 (1979) 2.0000. 9, 13, 19 1X TABLE OF AUTHORITIES—Continued Okin, Preemption of State Insurance Regulation by ERISA, 13 FoRUM 652 (1978) ....................--.-- 6, 9, 28 Peel, Regulatory Developments in Minimum Stand- ards for Health Insurance Policies, 13 FORUM GD Ge ectncertecntcientnncnctmnenienenngsinmnsnmncnen 8, 10 Weller, The McCarran-Ferguson Act’s Antitrust Exemption for Insurance: Language, History and Policy, 1978 DUKE L.J. 587 _..................-...-.-- 21, 25 INTEREST OF AMICI CURIAE The American Psychological Association (APA) is a voluntary nonprofit, scientific, and professional organiza- tion with more than 60,000 members. It has been the major association of psychologists in the United States since 1892. The APA’s purpose, as reflected in its by- laws, is to “advance psychology as a science and profes- sion, and as a means of promoting human welfare.” The Association for the Advancement of Psychology (AAP) is a nonprofit corporation supported by the vol- untary contributions of 6,000 psychologists. AAP seeks to inform the three branches of government of the ethical, professional, and scientific views of the psychological com- munity. The Massachusetts Psychological Association, with over 1650 members, is a state affiliate of the APA. It repre- sents the scientific and professional interests of psycholo- gists within Massachusetts, including psychologists work- ing in academic and professional settings, both in public and private institutions. Amici file this brief pursuant to Rule 36.2 of the Rules of this Court. The parties have consented to the filing of the brief; their consents have been filed with the Clerk. INTRODUCTION AND SUMMARY OF ARGUMENT In 1973, the Massachusetts legislature enacted an in- surance statute requiring all group health insurance pol- icies to provide specified coverage for mental health bene- fits. See Mass. Ann. Laws ch. 175, § 47B (Michie/Law. Co-op. 1977) (Section 47B). The Massachusetts Supreme Judicial Court—properly in the view of amici—rejected appellants’ arguments that this statute is preempted by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seg., and by the National Labor Relations Act (NLRA), 29 U.S.C. § 151 et seg. Although Section 47B arguably relates to employee benefit plans and therefore falls within the scope of ERISA’s preemption provision, it is excepted from pre- emption by ERISA’s insurance savings clause, which was meant to preserve the long line of state statutes, includ- 2 ing Section 47B, that regulate the contents of insurance policies. The one exception to the insurance savings clause, which prohibits States from deeming employee benefit plans to be insurers, does not apply to Section 47B, which regulates only insurance companies. The decision below is additionally supported by the McCarran-Ferguson Act, 15 U.S.C. § 1011 et seqg., which represents Congress’ judgment that, as a matter of fed- eral policy, insurance regulation should be performed by the States. This case does not involve a conflict between Section 47B and ERISA, as appellants would have this Court be- lieve. Rather, any conflict that does exist is between ERISA and the McCarran-Ferguson Act. For this rea- son, this Court’s usual reluctance to weigh conflicting pol- icy considerations is particularly appropriate here. ARGUMENT I. ERISA WAS NOT INTENDED TO PREEMPT MAN- DATED BENEFIT STATUTES. ERISA’s preemption provision, § 514(a), 29 U.S.C. § 1144(a), provides that the Act “shall supersede any and all State laws insofar as they may now or hereafter re- late to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title.” There is no question that the benefit plans at issue here are “employee benefit plans” as defined in 29 U.S.C. § 1003. The only issues are whether Section 47B “re- lates to” employee benefit plans within the meaning of § 1144, and, if so, whether the statute falls within one of the express exceptions to § 1144. A. Arguably, the Massachusetts Statute “Relates to” Employee Benefit Plans Governed by ERISA. In Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504 (1981), the Court held that ERISA preempted a state statute prohibiting the reduction of a retiree’s pension benefits by the amount of workers’ compensation awards 3 the retiree received subsequent to retirement. After find- ing that Congress had actually contemplated and ap- proved such an offset of pension benefits, the Court con- cluded that the statute “ ‘relate[s] to pension plans’ gov- erned by ERISA because it eliminates one method for calculating pension benefits . . . permitted by federal law.” Id. at 524. The Court’s conclusion was not altered by the fact that the statute “intrudes indirectly, through a workers’ com- pensation law rather than directly, through a statute called ‘pension regulation.” Jd. at 525. Rather, the Court concluded that “even indirect state action bearing on private pensions may encroach upon the area of ex- clusive federal concern.” /d. Then, in Shaw v. Delta Air Lines, Inc., 103 S. Ct. 2890 (1983), the Court held that the New York Human Rights Law and the State’s Disability Benefits Law “related to” pension plans governed by ERISA. The Court reasoned that “[a] law ‘relates to’ an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan.” Jd. at 2900. Applying this definition, the Court concluded that “the Human Rights Law, which prohibits employers from structuring their employee benefit plans in a manner that discrimi- nates on the basis of pregnancy, and the Disability Bene- fits Law, which requires employers to pay employees spe- cific benefits, clearly ‘relate to’ benefit plans.” Jd. ERISA does not specify which benefits must be included in employee benefit plans. Accordingly, Section 47B does not conflict with any provision of ERISA so as to “relate to” benefit plans in the sense in which that term was used in Alessi. But Alessi does suggest that the fact that the mandated benefit statute is nominally an insurance law, rather than a benefits plan law—-and therefore bears on benefit plans only indirectly—would not save the Massa- chusetts statute from preemption under ERISA? And be- 1 Although Section 47B does require employee benefit plans to provide the mental health benefits specified in the statute, there has 4 cause Section 47B does require that insurance policies is- sued to benefit plans provide specified mental health bene- fits, it arguably “relates to” those employee benefit plans just as the Disability Benefits Law did in Shaw. The Massachusetts statute can, however, be distin- guished from the New York laws at issue in Shaw. New York’s Human Rights Law had been interpreted by the state courts to prohibit any employer from maintaining an employee benefit plan that treated pregnancy differ- ently from other nonoccupational disabilities. See 103 S. Ct. at 2895. The Disability Benefits Law expressly required all employers to provide the same benefits for pregnancy-related disabilities as for any other disability. See id. at 2896. The Massachusetts statute, by contrast, requires that mental health benefits be provided to only certain employees—those whose benefit plan is covered by an insurance policy. The statute thus “relates to” only those employee benefit plans, and not to benefit plans gen- erally. Arguably, the statute’s indirect relation to only a subset of employee benefit plans governed by ERISA takes it outside the scope of the preemption provision. Most of the courts that have considered ERISA’s effect on mandated benefit statutes have, however, concluded that such statutes do “relate to” employee benefit plans governed by ERISA? Accordingly, although the point is been no attempt to enforce Section 47B against employee benefit plans and the Commonwealth apparently concedes that that part of the statute is preempted by ERISA. The Massachusetts Supreme Judicial Court, relying on state law, found that the portion of Sec- tion 47B applicable to employee benefit plans was severable from the portion applicable to insurance policies. See Attorney General v. Travelers Ins. Co., 385 Mass. 598, 601, 483 N.E.2d 1228, 1225 (1982), reprinted in App. to Juris. Stmts. at 13a, 15a-16a. This state law ruling is binding on this Court; accordingly, the only question before the Court is the effect of ERISA on the portion of Section 47B regulating insurance policies. 2 See, e.g., Stone & Webster Engineering Corp. v. Ilsley, 690 F.2d 323, 329 (2d Cir. 1982), aff'd mem., 108 S. Ct. 3564 (1983) ; Stand- ard Oil Co. v. Agsalud, 633 F.2d 760, 766 (9th Cir. 1980), aff’d mem., 454 U.S. 801 (1981); Wadsworth v. Whaland, 562 F.2d 70, 77 (1st Cir. 1977), cert. denied, 485 U.S. 980 (1978). 5 not free from doubt, amici will assume here that Section 47B does “relate to” employee benefit plans. B. The Massachusetts Statute Is a Law Regulating Insurance and Is Therefore Excepted from ERISA’s Preemption Provision. Even if Section 47B “relates to” employee benefit plans within the terms of the ERISA preemption provision, the statute is not preempted if it falls within one of the ex- press exceptions to the reach of the preemption provision. The relevant exception here, the so-called insurance sav- ings clause, is set forth in 29 U.S.C. § 1144(b) (2) (A): “Except as provided in subparagraph (B), nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance... .” This Court’s prior decisions are of little assistance in determining whether Section 47B is a law which regulates insurance within the meaning of this savings clause. In both cases, the Court noted that state laws regulating in- surance are excepted from ERISA’s broad preemption provision.* But the insurance savings clause was not at issue in either case, and therefore the Court did not elaborate on the reach of that provision. In fact, the Court made clear in Alessi that it was not ruling on the applicability of ERISA’s preemption provision in cases such as this. See 451 U.S. at 525 n. 21. Congress’ intent in excepting state laws regulating in- surance from the scope of the ERISA preemption provi- sion cannot be determined from the language of that statute. Nowhere in ERISA does Congress define the phrase “law . . . which regulates insurance” or give any clue to its meaning. But it should be noted that Congress used very broad language in the insurance savings clause: it preserves “any law of any State which regu- lates insurance... .” (Emphasis added. ) 8 See Shaw v. Delta Air Lines, Inc., 103 S. Ct. 2890, 2897 (1983) ; Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523 n. 19 (1981). 6 The legislative history does not address the scope of the insurance savings clause. Until the ERISA bill emerged from confererence, every prior version of the preemption provision had superseded state law only in the specific areas regulated by ERISA. The Conference Committee broadened the preemption provision to include all state laws that relate to pension plans, rather than only those dealing with subjects regulated by ERISA, but the Com- mittee did not comment on the reasons for the change. See H.R. Rep. No. 1280, 93d Cong., 2d Sess., reprinted in 1974 U.S. Code Cong. & Ad. News 5038, 5162. With re- spect to the insurance savings clause, the Conference Re- port merely states: “The preemption provisions of title I are not to exempt any person from any State law that regulates insurance... .” IJd.4 Moreover, the Conference Committee’s changes were not disclosed until the Conference Reports were filed with Con- gress fewer than ten days before the statute was passed in August 1974. See Brummond, Federal Preemption of State Insurance Regulation Under ERISA, 62 Iowa L. Rev. 57, 115-16 (1976). Thus, “the present language of section 514 was inserted by the Conference Committee at a very late hour, after no congressional hearings, and with little explanatory comment... .” Id. at 116.5 * The legislative history of prior versions of the preemption provi- sion is similarly unenlightening. See, e.g., S. REP. No. 127, 93d Cong., 1st Sess. 35, 47 (1973), reprinted in 1974 U.S. Cope Conc. & AD. NEWS 4838, 4871, 4883. ®In addition, Congress was preoccupied during this period with the issues arising from President Nixon’s resignation on August 9, 1974. See 120 Conc. REc. 29,933 (1974) (remarks of Sen. Javits). “(I]t would be naive to suppose that during this period any serious attention could have been devoted to such matters as the status of an obscure preemption provision in a 250-page federal statute.” Brummond, Federal Preemption of State Insurance Regulation Under ERISA, 62 Iowa L. REv. 57, 116 (1976); see also Okin, Preemption of State Insurance Regulation by ERISA, 13 Forum 652, 678 (1978) ; Comment, ERISA Preemption and Indirect Regu- lation of Employee Welfare Plans Through State Insurance Laws, 78 CoLuM. L. REv. 1536, 1542 & n. 42 (1978) (hereafter cited as ERISA Preemption Comment). 7 The few substantive comments concerning preemption made during the debate on the Conference Reports focused on the scope of § 1144(a), not on the exceptions to preemption like the insurance savings clause. See ERISA Preemption Comment, supra note 5, at 1542 & n. 42. And the three veiled references that were made to the savings clause during the debate on the Conference Reports are not helpful in ascertaining the intended reach of that clause. See 120 Cong. Rec. 29,942 (1974) (remarks of Sen. Javits) (referring merely to “certain exceptions . . .”) ; see also id. at 29,197 (remarks of Rep. Dent) ; id. at 29,933 (remarks of Sen. Williams). There is no indication in ERISA’s legislative history that Con- gress recognized the tension between the preemption pro- vision itself, which preempted any state law relating to employee benefit plans, and the insurance savings clause, which preserved all state laws regulating insurance. Thus, there is absolutely no indication that Congress intended to preempt state statutes such as this one. The language and legislative history of the insurance savings clause therefore require a presumption that Con- gress intended to give the clause its ordinary meaning: the Court “must give effect to this plain language unless there is good reason to believe Congress intended the lan- guage to have some more restrictive meaning.” Shaw v. Delta Air Lines, Inc., 103 S. Ct. at 2900. Interpreting the insurance savings clause according to its plain meaning indicates clearly that Massachusetts’ mandated benefit statute is a law that regulates insurance within the meaning of that clause. Section 47B is con- tained in the chapter of the state statutes that pertains to insurance. It was proposed by the legislature’s Joint Committee on Insurance. It was enacted because the leg- islature found that “[a] need . . . exists for all people to be safeguarded against the high and sometimes crip- pling costs of professional mental health care today” and that “in order for the cost to be reasonable, insurance for mental illness must be a mandatory feature on all policies sold in the state.” General Court Joint Committee on In- 8 surance, Advances in Health Insurance in Massachusetts 9, 5 (Aug. 1974). And it operates by regulating the contents of insurance policies. Certainly, these factors suggest that Section 47B is a law that regulates insurance. This conclusion is corroborated by the tradition of state insurance regulations—begun long before ERISA was en- acted—that, like Section 47B, govern the contents of in- surance policies in an effort to protect the interests of the insured. One commentator has noted that the first man- dated benefit legislation was enacted in California in 1949. See Peel, Regulatory Developments in Minimum Standards for Health Insurance Policies, 138 Forum 680, 682 (1978). Since that time, state legislatures have passed a wide variety of mandated benefit legislation. In Massachusetts, for example, since at least 1956 all group life insurance policies have been required to guar- antee that any insured who leaves the group will remain insured under the policy for a certain period unless he is otherwise entitled to similar benefits. See Mass. Ann. Laws ch. 175, § 134(4) (Michie/Law. Co-op. 1977). A similar provision governing group health insurance pol- icies was enacted in 1967. See id. §110D. In 1960, the legislature enacted a statute requiring insurance policies to provide coverage for those hospitalized or receiving treatment in a state soldiers’ home. See id. § 22. In 1962, the Commonwealth required all health insurance policies that provide for termination of a dependent child’s cover- age at a specified age to continue coverage if the child is “mentally or physically incapable of earning his own liv- ing on the termination date... .” Id. § 108(2) (a) (3). In 1973, in addition to enacting Seciton 47B, the legisla- ture required all group health insurance policies to pro- vide certain specified benefits for the treatment of al- coholism. See id. §110(H). These are only some of the many provisions in the Massachusetts statutes regulating insurance that have been in existence since ERISA was enacted and that mandate specific insurance benefits.* ® See also, e.g., MASS. ANN. LAWS ch. 175, § 22 (Michie/Law. Co-op. 1977) (prohibiting certain insurance policy provisions; 9 Thus, “a myriad of state enactments. . . have provided for years the guidance as to what is and is not permissi- ble in the writing of insurance for employee groups.” Manno, ERISA Preemption and the McCarran-Ferguson Act: The Need for Congressional Action, 52 Temple L.Q. 51, 56 (1979). See also Okin, supra note 5, at 656 (“State insurance departments have long exercised jurisdiction over the content of individual and group accident and health policies issued in their state by insurance car- riers.” ) .7 adopted before 1960) ; id. §47C (requiring all group health insur- ance policies to provide coverage for newborn infants and adopted children, including coverage of birth abnormalities; adopted on August 9, 1974) ; id. §§ 118C, 118L (requiring all automobile insur- ance policies to include certain coverage; adopted in 1968); id. § 182(1) (requiring life insurance policies to contain a provision providing that the insured is entitled to a thirty-day grace period within which to pay any premium due after the first year; adopted by 1933); id. §§ 182(6), 142 (requiring life insurance policies to include a provision entitling the insured to a loan on the policy at a specified interest rate; adupted by 1943). 7 California, Florida, Michigan, Missouri, and Virginia enacted legislation between 1968 and 1972 that requires insurers to extend major medical coverage to dependents who are disabled when they reach the age where they would otherwise be terminated from coverage under the terms of the policy. See Wayne Chemical, Inc. v. Columbus Agency Service Corp., 426 F. Supp. 316, 324 n. 8 (N.D. Ind. 1977), modified on other grounds, 567 F.2d 692 (7th Cir. 1977) ; VA. Cope § 38.1-848.1 (1981). In 1971, Wisconsin required group health insurance policies to provide coverage for treatment of alco- holism, see Wis. STAT. ANN. § 632.89 (West 1980), and Connecticut required such policies to provide mental health benefits, see CONN. GEN. STAT. ANN. § 88-174d (West Supp. 1984). Since 1971, Cali- fornia has required that any group hospital, medical, or surgical policy provide coverage for mentally or physically handicapped de- pendents of the insured after the dependents reach the age of major- ity. See CAL. INS. CoDE § 10277 (West 1972). In 1973, the Virginia legislature passed a statute requiring all plans for furnishing pre- paid medical services to pay for services rendered by licensed psychologists, podiatrists, chiropractors, and optometrists. See Va. CopE § 38.1-824 (1981). Since 1973, Maryland has required all health insurance policies to provide mental health benefits, see MD. ANN. CopE art. 48A, § 477E (1979); Minnesota has required that 10 When ERISA was enacted, therefore, there was already a long tradition of state regulation of the contents of in- surance policies. Congress must have been aware of that fact—especially since at that very time insurance com- panies and state insurance commissioners were develop- ing policies on mandated benefit statutes.* And Congress was obviously aware that some pension plans might pur- chase insurance because ERISA defines “employee wel- fare benefit plan” as a plan that provides certain benefits “through the purchase of insurance or otherwise... .” 29 U.S.C. § 1002(1). If Congress had intended to end the States’ longstanding tradition of regulating the contents of insurance policies, it would likely have limited the in- surance savings clause in some fashion. See Insurance Comm’r v. Metropolitan Life Ins. Co., 296 Md. 334, 340, 463 A.2d 793, 796 (1983).° The fact that it did not sug- all health insurance policies provide coverage for treatment of alco- holism and drug dependence, see MINN. STAT. ANN. § 62A.149 (West Supp. 1984); and Wisconsin has required that every group health policy offer certain coverage for treatment of tuberculosis, see Wis. STAT. ANN. § 632.90 (West 1980). 8In fact, state mandated benefit statutes were sufficiently com- mon prior to the enactment of ERISA to attract considerable atten- tion by the insurance industry. In late 1971, the Health Insurance Association of America (HIAA), which filed an amicus brief in support of appellants’ jurisdictional statements, appointed a Task Force on Minimum Standards for Health Insurance Policies. The National Association of Insurance Commissioners (NAIC) began deliberations on minimum standards legislation in late 1972; in December 1973, the NAIC adopted a model mandated benefit statute. In early 1974, the HIAA Task Force then began to develop its recommendations for a model statute and, in May 1974, submitted a draft to the NAIC. See Peel, 18 Forum at 682- 86. The amicus brief filed by HIAA in this case indicates that the association has a membership of 327 private insurance companies, including both appellants, and that these companies write more than eighty-five percent of the health insurance policies written by pri- vate insurance companies in this country. See Brief Amicus Curiae of Health Insurance Association of America in Support of Jurisdic- tional Statements at 1. HIAA’s Vice President and General Counsel is Joe W. Peel, the author of the article cited above. * In fact, a bill waa introduced in 1979 to amend ERISA to provide that state mandated benefit statutes are not preserved by the insur- - | 11 gests that the insurance savings clause was actually in- tended to mean what it says and thus to preserve state laws like Section 47B. The overwhelming majority of courts that have con- sidered this issue have concluded that mandated benefit laws are laws that regulate insurance and thus within the scope of the insurance savings clause.’® C. The Massachusetts Statute Does Not Fall Within the Scope of the “Deemer Provision.” Although Section 47B must be considered a state law regulating insurance, it is nonetheless preempted by ance savings clause. See S. 209, 96th Cong., Ist Sess. § 155, 125 Conc. REc. 933, 937 (1979). The bill was intended to overrule the court’s decision in Wadsworth v. Whaland, 562 F.2d 70 (1st Cir. 1977), cert. denied, 485 U.S. 980 (1978). See 125 Conc. REc. 947 (1979) (remarks of Sen. Javits). Although the bill was reported to the Senate, it apparently died without ever being debated. See SENATE COMM. ON LABOR AND HUMAN RESOURCES, 96TH CONG., LEGISLATIVE CALENDAR 108, 111 (final ed. Jan. 4, 1981). Admittedly, Congress’ failure to pass this bill does not necessarily demonstrate its intent that the insurance savings clause exempt mandated benefit statutes from preemption under ERISA. But this postenactment history does indicate that Congress was at least aware of the courts’ interpretation of the insurance savings clause, and “it lends weight to the argument .. .” that the savings clause was intended to except mandated benefit statutes. North Haven Board of Education v. Bell, 456 U.S. 512, 534 (1982). Moreover, “the relatively insubstantial interest given [this portion of S. 209] seems particularly significant since Congress has proceeded to amend .. .” ERISA’s preemption provision in another respect proposed by S. 209. Id. Compare S. 209, 96th Cong., Ist Sess. § 155, 125 Conc. REc. 937 (1979), with 29 U.S.C. § 1144(b) (5) (A). 10 See, e.g., American Progressive Life & Health Ins. Co. v. Corcoran, 715 F.2d 784, 787 (2d Cir. 1983); Wayne Chemical, Inc. v. Columbus Agency Service Corp., 567 F.2d 692, 700 (7th Cir. 1977); Wadsworth v. Whaland, 562 F.2d at 77; St. Paw Elec. Workers Welfare Fund v. Markman, 490 F. Supp. 931, 933 (D. Minn. 1980) ; Insurance Comm’r v. Metropolitan Life Ins. Co., 296 Md. 334, 344-45, 463 A.2d 793, 798 (1983) ; Metropolitan Life Ins. Co. v. Whaland, 119 N.H. 894, 901-02, 410 A.2d 635, 640 (1979) (per curiam). But see Michigan United Food & Commercial Work- ers Unions v. Baerwaldt, 572 F. Supp. 948 (E.D. Mich. 1983), appeal docketed, No. 88-1570 (6th Cir. Aug. 16, 1983). 12 ERISA if it falls within the scope of the one exception to the insurance savings clause. That exception, the so- called “deemer provision,” provides that an employee benefit plan may not “be deemed to be an insurance com- pany or other insurer, . . . or to be engaged in the busi- ness of insurance .. . for purposes of any law of any State purporting to regulate insurance companies [or] insurance contracts... .” 29 U.S.C. § 1144(b) (2) (B). The plain meaning of that provision indicates that it does not apply to the statute in question here. The deemer provision clearly states only that a State may nut deem an employee benefit plan to be an insurance company and thereby attempt to apply its insurance laws to the benefit plan. No legislative history suggests that the deemer provi- sion was intended to mean anything other than what it says. The Report explaining the Conference Committee’s amendments to the preemption provision merely restates the language of the deemer provision without clarifying its meaning. See H.R. Rep. No. 1280, 93d Cong., 2d Sess., reprinted in 1974 U.S. Code Cong. & Ad. News 5038, 5162. And there was no mention of the deemer provision either during the debate on the Conference Report or in prior Committee Reports. Subsequent legislative history does, however, confirm that the deemer provision should be interpreted accord~- ing to its plain meaning. An activities report issued in 1977 by the Subcommittee on Labor Standards of the House Committee on Education and Labor explains: “the ‘deemed’ language was utilized to create an irrebuttable presumption that these [employee benefit] plans are not insurance .. . for purposes of state regulation. ... The irrebuttable presumption would not be overcome even if an employee benefit plan engages in activities which bring it within the insurance . . . activities generally regulated by a state.” H.R. Rep. No. 1785, 94th Cong., 2d Sess. 47 (1977). Thus, the Report makes clear that, even though self-insured employee benefit plans may have some of the characteristics of insurance, the deemer pro- 13 vision prohibits a state from applying its insurance regu- lations to such benefit plans on the ground that they are engaged in the business of insurance." The Report then goes on to point out that an insurance policy sold to an employee benefit plan is subject to state regulation: “(Cjertain entrepreneurs have undertaken to mar- ket insurance products to employers and employees at large, claiming these products to be ERISA cov- ered pians. ... The entrepreneur will then argue that his enterprise is an ERISA benefit plan which is protected, under ERISA’s preemption provision, from state regulation. ... [T]hese plans are... no more ERISA plans than is any other insurance policy sold to an employee benefit plan. “To the extent that such programs fail to meet the definition of an ‘employee benefit plan,’ state regu- lation of them is not preempted by section 514, even though such state action is barred with respect to the plans which purchase these ‘products.’” Id. at 48 (emphasis added). | This subsequent history is not conclusive evidence of the deemer provision’s meaning, but it does provide evidence of Congress’ intent, especially in the absence of contem- poraneous legislative history. See, e.g., North Haven Board of Education v. Bell, 456 U.S. 512, 5385 (1982). Thus, the courts have interpreted the deemer provision to prohibit States from regulating self-insured employee benefit plans under their insurance laws.” But the ma- 11 See, e.g., Brummond, supra note 5, at 77, 90-91; Manno, ERISA Preemption and the McCarran-Ferguson Act: The Need for Con- gressional Action, 52 TEMPLE L.Q. 51, 59 (1979). Because no self- insured benefit plans are involved here, the Court need not rule on the proper application of the ERISA preemption provision in cases involving self-insured plans—for example, whether the deemer pro- vision prohibits a state from applying its insurance regulations to a self-insured benefit plan if additional factors, aside from the mere fact of self-insurance, indicate that the plan is engaged in the business of insurance. Likewise, the Court need not attempt to define precisely what is a self-insured plan. 12 See, e.g., Hewlett-Packard Co. v. Barnes, 425 F. Supp. 1294, 1300 (N.D. Cal. 1977), aff'd, 571 F.2d 502, 504 (9th Cir.) (per 14 jority of courts have also concluded that the deemer pro- vision does not apply to mandated benefit statutes, like Section 47B, that regulate the contents of insurance poli- cies sold to employee benefit plans.* If the deemer provision is interpreted more broadly to bar state regulation of insurance policies issued to em- ployee benefit plans, it would nullify the insurance sav- ings clause. ERISA preempts all state insurance laws that “relate to” employee benefit plans, unless they are excepted by the savings clause. And the deemer provision prohibits States from directly regulating employee bene- fit plans. If the deemer provision is also interpreted to preempt all state laws that regulate the contents of in- surance policies purchased by benefit plans, no state in- surance laws relating to benefit plans would be left for the savings clause to save—rendering the savings clause superfluous, in violation of the well-established principle that legislation should be construed so as to give effect to each part. See, e.g., McDonald v. Thompson, 305 U.S. 263, 266 (1938). Thus, the deemer provision cannot be read to preempt Section 47B, and that statute must fall within the scope of the insurance savings clause. II. THE McCARRAN-FERGUSON ACT WAS INTENDED TO PRESERVE MANDATED BENEFIT STATUTES. Any doubt about ERJSA’s effect on mandated benefit statutes is laid to rest by the McCarran-Ferguson Act, 15 U.S.C. $ 1011 et seg., which provides in relevant part: curiam), cert. denied, 439 U.S. 831 (1978); Russo v. Boland, 108 Ill. App. 3d 905, 909-10, 481 N.E.2d 1294, 1298 (1982). 18 See Wadsworth v. Whaland, 562 F.2d at 77-78; McLaughlin v. Connecticut General Life Ins. Co., 565 F. Supp. 434, 448-44 (N.D. Cal. 1983) ; Eversole v. Metropolitan Life Ins. Co., 500 F. Supp. 1162, 1169 (C.D. Cal. 1980); Cate v. Blue Cross & Blue Shield, 424 F. Supp. 1187, 1190 & n. 5 (E.D. Tenn. 1977); Insurance Comm’r v. Metropolitan Life Ins. Co., 296 Md. at 344-45, 463 A.2d at 798; Metropolitan Life Ins. Co. v. Whaland, 119 N.H. at 902-08, 410 A.2d at 640; ERISA Preemption Comment, supra note 5, at 1540-41. But see, €.g., General Split Corp. v. Mitchell, 523 F. Supp. 427, 430 (E.D. Wis. 1981). 15 “The business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such busi- ness.” Id. § 1012(a). The first paragraph of the Act declares the congres- sional policy that “the continued regulation and taxation by the States of the business of insurance is in the public interest.” Id. § 1011. Thus, the Act represents Congress’ judgment that, as a matter of federal policy, the regula- tion of insurance should be performed by the States.” Congress recognized that the States had traditionally ex- ercised this pover* and wanted to ensure the preserva- tion of such authority in the States,** which, in Congress’ view, were best able to undertake such regulation.” As this Court noted in SEC v. Variable Annuity Life Ins. Co. of America, 359 U.S. 65, 68 (1959), “[w]hen the States speak in the field of ‘insurance,’ they speak with the authority of a long tradition.” The McCarran-Ferguson Act is helpful in determining the reach of ERISA’s preemption provision for two ad- ditional, independent reasons. First, the meaning of the McCarran-Ferguson Act’s reference to state “laws... which relate to the regulation . . . of [the] business [of insurance!,” 15 U.S.C. §1012(a), aids in defining the meaning of the similar phrase, state “law which regu- 14 See, e.g., H.R. REP. No. 148, 79th Cong., 1st Sess. 3, reprinted in 1945 U.S. Cope Conc. & AD. News 670, 672; S. Rep. No. 1112, 78th Cong., 2d Sess. 3, 7 (1944) ; 90 Conc. REc. 6525 (1944) (remarks of Rep. Walter); SEC v. National Securities, Inc., 393 U.S. 453, 458 (1969). 15 See, e.g., H.R. REP. No. 148, 79th Cong., 1st Sess. 2, reprinted in 1945 U.S. CopE Conc. & AD. NEws 670, 670-71; S. Rep. No. 1112, 78th Cong., 2d Sess. 2 (1944) (noting that the States “have regu- lated insurance for over 90 years .. .’’). 16 See, e.g., H.R. REP. No. 873, 78th Cong., Ist Sess. 6 (1943); 89 Conc. REc. 10,659 (1943) (remarks of Rep. Miller). 17 See, e.g., S. REP. No. 1112, 78th Cong., 2d Sess. 5, 7 (1944); 90 CoNnG. REC. 6524 (1944) (remarks of Rep. Walter). 16 lates insurance,” found in the insurance savings clause.’* Second, the final paragraph of ERISA’s preemption pro- vision indicates that Congress expressly intended that ERISA not alter or impair any federal statute, including the McCarran-Ferguson Act. See 29 U.S.C. § 1144(d). A. The Relevant Caselaw Compels the Conclusion that Section 47B Is a Statute that Regulates the Business of Insurance. This Court’s decisions interpreting the McCarran- Ferguson Act have identified three criteria relevant in determining whether a particular practice falls within the Act’s reference to the “business of insurance”: “first, whether the practice has the effect of transferring or spreading a policyholder’s risk; second, whether the prac- tice is an integral part of the policy relationship between the insurer and the insured; and third, whether the prac- tice is limited to entities within the insurance industry.” Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129 (1982) (emphasis in original). Mandated benefit stat- utes like Section 47B satisfy all three criteria. The first criterion was set forth in detail in Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 212, 211 (1979), where the Court noted that one “indispensa- ble characteristic of insurance” is “the spreading and underwriting of a policyholder’s risk.” Section 47B un- questionably relates to the spreading and underwriting —of risk. The statute reflects a legislative judgment that the costs of mental health care should be underwritten by health insurance policies and that the risk of costly mental health care should be shared. See General Court Joint Committee on Insurance, Advances in Health Insurance in Massachusetts 5 (Aug. 1974); Superior Court Find- ings & Conclusions, reprinted in App. to Juris. Stmts. at 36a, 50a-5la. It therefore requires that insurance policies insure against “the risk that policyholders will be unable 18 See, e.g., Marks v. United States, 161 U.S. 297, 302 (1896); McLc ughlin v. Connecticut General Life Ins. Co., 565 F. Supp. 434, 443 (N.D. Cal. 1983); Metropolitan Life Ins. Co. v. Whaland, 119 N.H. 894, 901, 410 A.2d 635, 639 (1979) (per curiam). 17 to pay for [the cost of mental health care] during the period of coverage.” Royal Drug, 440 U.S. at 213. By requiring certain coverage in all insurance policies, Sec- tion 47B “defines the scope of risk assumed by the in- surer from the insured” and has a direct impact on “the measure of the risk” that is transferred to the insurer. Pireno, 458 U.S. at 131, 130. The second criterion was set forth in detail in SEC v. National Securities, Inc., 393 U.S. 453, 460 (1969), where the Court noted that the McCarran-Ferguson Act “was concerned with the type of state regulation that cen- ters around the contract of insurance... . The rela- tionship between insurer and insured, the type of policy which could be issued, its reliability, interpretation, and enforcement—these were the core of the ‘business of in- surance.’ ”’ Congress’ “focus,” the Court continued, “was on the relationship between the insurance company and the policyholder. Statutes aimed at protecting or regulat- ing this relationship, directly or indirectly, are laws regu- lating the ‘business of insurance.’ ” Jd. Section 47B clearly falls within the scope of this cri- terion. The statute “centers around the contract of in- surance” by prescribing terms that must be included within that contract, and it determines “the type of policy which [can] be issued.” And Section 47B is an attempt by the legislature to “secure the interests of those purchasing insurance policies,” id., by requiring that the insurer provide certain safeguards to all policyholders. Unlike Pireno, therefore, this case involves a statute that is “an integral part of the policy relationship between the insurer and insured.” 458 U.S. at 131. The third criterion is likewise present in this case. Mandated benefit statutes impose requirements solely on insurers, and their purpose is to affect only the relation- ship between insurers and their policyholders; they do not “inevitably involve[] third parties wholly outside the insurance industry... .” Jd. at 132.° 19 See also, e.g., Feinstein v. Nettleship Co., 714 F.2d 928, 932 (9th Cir. 1983), cert. denied, 104 S. Ct. 2846 (1984) (noting that 18 Thus, this Court’s prior decisions interpreting the scope of the McCarran-Ferguson Act indicate clearly that Section 47B is a law that regulates the business of in- surance and is not to be superseded by any federal stat- ute. This conclusion has likewise been reached by the vast majority of courts which have considered the ques- tion whether the type of benefits offered by an insurance policy fall within the scope of the McCarran-Ferguson Act. In Grant v. Erie Ins. Exchange, 542 F. Supp. 457 (M.D. Pa. 1982), aff'd mem., 716 F.2d 890 (3d Cir.), cert. denied, 104 S. Ct. 349 (1983), for example, the plaintiffs challenged the defendant insurance companies’ refusal to provide insurance coverage for work loss bene- fits to persons who died in automobile accidents. Noting that “‘[m]atters of ... extent of coverage... go to the very heart of the relationship between the insurance company and the policyholder ... ,’” the court held that the McCarran-Ferguson Act was applicable in that case. Id. at 462 (quoting McIlhenny v. American Title Ins. Co., 418 F. Supp. 364, 369 (E.D. Pa. 1976) ).” the term “entities within the insurance company” includes insurers and insureds). 20 Likewise, in Anglin v. Blue Shield, 698 F.2d 315 (4th Cir. 1982), the plaintiff challenged Blue Shield’s refusal to offer him a policy protecting himself and his minor child; Blue Shield would offer such a policy only if it also covered the plaintiff’s wife. The court concluded that the McCarran-Ferguson Act was applicable because “(t]he allegations in the plaintiff’s complaint are the very essence of the relationship between insurer and policyholder. He has alleged that Blue Cross/Blue Shield has refused to offer the exact coverage that he prefers.” Jd. at 320. See also, e.g., Perry v. Fidelity Union Life Ins. Co., 606 F.2d 468, 476 (5th Cir. 1979), cert. denied, 446 U.S. 987 (1980) ; Lowe v. Aarco- American, Inc., 5386 F.2d 1160, 1162 (7th Cir. 1976); Addrisi v. Equitable Life Assurance Soc’y of United States, 503 F.2d 725 (9th Cir. 1974), cert. denied, 420 U.S. 929 (1975); Dawson v. Whaland, 529 F. Supp. 626, 632 (D.N.H. 1982) ; Pierucci v. Continental Cas- ualty Co., 418 F. Supp. 704 (W.D. Pa. 1976); New Hampshire- Vermont Health Service v. Whaland, 119 N.H. 886, 893, 410 A.2d 642, 647 (1979) (per curiam); P. AREEDA, ANTITRUST LAW: AN 19 B. The Legislative History Compels the Conclusion that Section 47B Is a Statute that Regulates the Business of Insurance. The legislative history of the McCarran-Ferguson Act provides further confirmation that Congress intended that federal laws like ERISA should not interfere with state statutes like Section 47B. Although the phrase “laws ... which relate to the regulation . . . of [the] business [of insurance]” is not defined in the legislative history of the McCarran-Ferguson Act, that history in- dicates that Congress clearly understood that the Act would protect state laws regulating the terms and con- tents of insurance policies and the types of coverage and benefits offered. For example, Sen. Ferguson, one of the sponsors of the Act, observed that “a state law relat- ing to... the fixing of the terms of a contract of insur- ance ... would be permitted... .” 91 Cong. Rec. 480 (1945).** As this Court noted in Prudential Ins. Co. v. Benjamin, 328 U.S. 408, 430 (1946), “Congress must have had full knowledge of the nation-wide existence of state systems of regulation and taxation . . .” when it enacted the McCarran-Ferguson Act. Moreover, that Act was intended to give the States very broad power to regulate the business of insurance. “The unequivocal language of the Act suggests no excep- tions.” Western & Southern Life Ins. Co. v. State Board of Equalization, 451 U.S. 648, 653 (1981) (emphasis added). Thus, Sen. Ferguson noted that the Act gave the States “full power to act by legislation... .” 91 ANALYSIS OF ANTITRUST PRINCIPLES AND THEIR APPLICATION 43 (1982 Supp.) ; Brummond, supra note 5, at 104; Manno, supra note 11, at 538. 21 See also, e.g., 90 CONG. REC. 6561 (1944) (remarks of Rep. Anderson) (“the States [do] have a right to control risks . . . and all the other things which the average insurance men recognize come under State regulations”) ; id. at 6528 (remarks of Rep. Miller) ; id. at 6536 (remarks of Rep. Howell) ; id. at 6538 (remarks of Rep. Springer) ; id. at 6546 (remarks of Rep. Voorhis) ; id. at 6556 (re- marks of Rep. Graham). 20 Cong. Rec. 1481 (1945).% And throughout the legislative history, the observation was frequently made that the Act was meant to give the States broad discretion “to regu- late insurance as they each see fit.” S. Rep. No. 1112, 78th Cong., 2d Sess. 5 (1944) .* Moreover, the latitude given the States to regulate the business of insurance was not meant to apply only to the precise forms of state regulation in existence in 1945 when the McCarran-Ferguson Act was passed. Rather, the Act was intended to permit the States to take steps to resolve any unforeseeable problems that might face the insurance industry in the future. See 91 Cong. Rec. 483 (1945) (remarks of Sen. Radcliffe). Congress there- fore recognized that the States would continue to make use of “experimentation” in regulating insurance, §. Rep. No. 1112, 78th Cong., 2d Sess. 6 (1944), to ensure “[p]rogress in insurance,” which “can be made only by constantly liberalizing coverage and constantly reducing costs.” 90 Cong. Rec. 6550 (1944) (remarks of Rep. Ploeser). Thus, “enactment of the McCarran-Ferguson Act ‘put the full weight of [Congress’] power behind ex- isting and future state legislation... .’” Western & Southern Life Ins. Co. v. State Board of Equalization, 451 U.S. at 654 (quoting Prudential Ins. Co. v. Ben- jamin, 328 U.S. at 431) (emphasis added). The McCarran-Ferguson Act was also meant to protect state insurance laws from preemption by federal statutes that might later be enacted. Thus, Sen. Ferguson ex- plained, “if Congress should tomorrow pass a law relating to interstate commerce, and should not specifically apply the law to the business of insurance, it would not be an implied repeal of this bill, and this bill would not be af- 22 See also, e.g., 91 CONG. REc. 488 (1945) (remarks of Sen. Radcliffe) ; 90 CoNG. REc. 6559 (1944) (remarks of Rep. Sumners) ; St. Paul Fire & Marine Ins. Co. v. Barry, 488 U.S. 581, 551 (1978) (referring to “the overall framework of plenary state regula- tion ...”). 23 See also 91 CONG. REc. 1481 (1945) (remarks of Sen. Fergu- son) ; 90 ConG. REc. 6418 (1944) (remarks of Rep. Allen). 21 fected ... .” 91 Cong. Rec. 481 (1945).* The Mc- Carran-Ferguson Act therefore “remov(ed] obstructions [to state regulation of insurance] which might be thought to flow from [Congress’] power, whether dormant or exercised, except as otherwise expressly provided in the Act itself or in future legislation.” Prudential Ins. Co. v. Benjamin, 328 U.S. at 429-30 (emphasis added) .* 24 Although the McCarran-Ferguson Act provides that a federal law that “specifically relates to the business of insurance” may be construed to preempt state insurance regulations, 15 U.S.C. § 1012(b) (emphasis added), that provision is not applicable in this case. ERISA is not a law that specifically relates to the business of insur- ance. Rather, ERISA specifically relates to employee benefit plars. Moreover, it is difficult to understand how ERISA can be viewed as a statute explicitly designed to repeal the McCarran-Ferguse:n Act and to preempt state insurance regulations when ERISA expressly indicates no intent to displace state insurance laws and no intent to supersede the McCarran-Ferguson Act. See Cochran v. Paco, Inc., 606 F.2d 460, 464 (5th Cir. 1979) ; Wadsworth v. Whaland, 562 F.2d 70, 78 (1st Cir. 1977), cert. denied, 485 U.S. 980 (1978). Two courts have found that some portions of ERISA do specifically relate to the business of insurance within the meaning of the McCarran-Ferguson Act. See Hewlett-Packard Co. v. Barnes, 571 F.2d 502, 505 (9th Cir.) (per curiam), cert. denied, 439 U.S. 831 (1978); Wayne Chemical, Inc. v. Columbus Agency Service Corp., 426 F. Supp. 316, 320 n. 1 (N.D. Ind. 1977), modified on other grounds, 567 F.2d 692 (7th Cir. 1977). But neither court articu- lated a persuasive rationale for its conclusion. 25 The portion of the McCarran-Ferguson Act providing that the Act does not “affect in any manner the application to the business of insurance .. .” of the NLRA is not relevant to this case—even though some of the employee benefit plans that pur- chase insurance policies from appellants are the result of col- lective bargaining. 15 U.S.C. § 1014. That provision was meant to codify this Court’s decision in Polish Nat’l Alliance v. NLRB, 322 U.S. 643 (1944), which held that the labor relations of insurance companies are subject to the NLRA. See, e.g., 91 Conc. REc. 1090 (1945) (remarks of Rep. Gwynne); 90 Conc. REc. 6419 (1944) (remarks of Rep. Allen); Weller, The McCarran-Ferguson Act’e Antitrust Exemption for Insurance: Language, History and Policy, 1978 DUKE L.J. 587, 594. Thus, that section provides only that the McCarran-Ferguson Act does not “jeopardize the rights of insur- ance workers .. .” under the NLRA;; it therefore has no application 22 Thus, the McCarran-Ferguson Act was drafted to pro- tect the long tradition of state regulation of the business of insurance. Because mandated benefit statutes like Sec- tion 47B regulate the business of insurance within the meaning of the McCarran-Ferguson Act, that statute re- quires, as a matter of federal policy, that such state stat- utes be preserved. Thus, this case involves more than a conflict between a state law—Section 47B—and a federal law—ERISA. Rather, it involves a conflict between two federal laws—ERISA and the McCarran-Ferguson Act. Resolution of such a conflict might be difficult if Con- gress had not indicated on two separate occasions in ERISA that the important policies underlying the Mc- Carran-Ferguson Act should prevail. Given the two ex- press exceptions to the reach of ERISA’s preemption pro- vision—the insurance savings clause and the provision indicating that ERISA is not intended to impair any federal law—any conflict between ERISA and the Mc- Carran-Ferguson Act must be resolved in favor of the latter, and therefore in favor of mandated benefit statutes like Section 47B. to this case. 90 CoNG. REC. 6526 (remarks of Rep. Brehm). See also, e.g., Women in City Gov’t United v. City of New York, 515 F. Supp. 295, 304 (S.D.N.Y. 1981) ; John Hancock Mutual Life Ins. Co. v. Commissioner of Ins., 349 Mass. 390, 397-98, 208 N.E.2d 516, 522 (1965). Likewise, the NLRA does not itself preempt Section 47B. See Malone v. White Motor Corp., 435 U.S. 497, 504-05 (1978) (noting that “nothing in the NLRA . . . expressly forecloses all state regula- tory power with respect to those issues, such as pension plans, that may be the subject of collective bargaining,” and that in another statute, the predecessor to ERISA, Congress had “recognized and preserved state authority to regulate pension plans .. .” without dis- tinguishing those established by collective bargaining); see also Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 526 n. 23 (1981) (noting that where Congress preserves the States’ role, the NLRA does not preempt state regulation). 23 Ill. APPELLANTS’ NARROW READING OF THE IN- SURANCE SAVINGS CLAUSE IS UNSUPPORT- ABLE. Appellants propose that ERISA’s insurance savings clause be construed to preserve only “the traditional areas of state insurance regulation . . .”—for example, “licensing and examination of insurers, . . . minimum capital and surplus requirements, ... [and] general over- sight of insurance companies.” Brief for Appellant Metropolitan Life Insurance Co. at 34-35. There is ab- solutely no support for this exceedingly narrow reading of the savings clause. A. The Statutory Language, Legislative History, and Judicial Construction of the Relevant Statutes Do Not Support Appellants’ Reading of the Insurance Savings Clause. Appellants’ proposed construction of the savings clause distorts the plain meaning of that clause, which broadly preserves “any law of any State which regulates insur- ance... .” It cannot be read to preserve only those insurance laws that are to appellants’ liking. Moreover, appellants’ interpretation of the insurance Savings clause renders it completely superfluous. ERISA’s preemption provision supersedes only those state laws that “relate to” employee benefit plans. But the types of in- surance regulations appellants consider “traditional” are in no way related to employee benefit plans. Rather, they relate solely to insurance companies. If the insurance savings clause is interpreted to preserve only those types of insurance regulations, it has no meaning whatsoever because such regulations are not even arguably preempted by ERISA. In addition, there is no support for appellants’ limited definition of traditional areas of state insurance regula- tion. In fact, there is a very long tradition of state statutes, like Section 47B, that prescribe the contents of insurance policies and that mandate that certain benefits be included in those policies. See SEC v. Variable An- nuity Life Ins. Co. of America, 359 U.S. 65, 79 (1959) 24 (acknowledging “[t]he traditional state insurance de- partment regulation of contract terms...”). That tradi- tion was solidly established when ERISA was enacted in 1974—and even when the McCarran-Ferguson Act was enacted in 1945. If Congress had meant to exclude such traditional forms of state insurance regulation from the savings clause, it certainly would have so stated and would not have applied that clause to “any law of any State which regulates insurance... .” ** B. The Relevant Policy Considerations Do Not Support Appellants’ Reading of the Insurance Savings Clause. Because appellants’ construction of the insurance sav- ings clause is not supported by the relevant statutory language, legislative history, or caselaw, they perforce rely on policy considerations supposedly favoring their reading of that clause. But “[t]hese policy considera- tions were for Congress to weigh, and [this Court is] not free to ignore the language and history of [ERISA and the McCarran-Ferguson Act] even were [the Court] to disagree with the legislative choice.” North Haven Board of Education v. Bell, 456 U.S. 512, 586 n. 26 (1982). Moreover, “[r]Jeferral to the legislators is par- ticularly appropriate in this case, as the policy aspects may not be as one-sided as those painted by [appel- lants].” Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 256 n. 26 (1979) (Brennan, J., dissenting). 26In a case similar to this one, this Court rejected the Federal Government’s narrow reading of the term “health insurance” as it appeared in another federal statute. The Court relied on the ab- sence of a definition of the term in the statute or legislative history, and on the lack of support for the limited definition in the statutory language or legislative history. Accordingly, the Court concluded that the Federal Government had “offer[ed] no persuasive reasons why the term ‘health insurance’ in [26 U.S.C.] § 22(b) (5) should be limited to the particular forms of insurance conventionally made available by commercial companies.” Haynes v. United States, 353 U.S. 81, 84 (1975). Similar reasoning requires rejection of appel- lants’ narrow definition of the term “insurance” in the insurance savings clause. 25 Leaving the task of balancing the relevant policies to Congress is additionally appropriate in this case because it involves a conflict between two federal statutes and because Congress has already rejected attempts to amend ERISA so as to preempt state mandated benefit laws. See note 9, supra. Because amici believe that this Court should not involve itself in weighing the conflicting pol- icy considerations at issue in this case, we discuss them only briefly and limit the discussion to points not ad- dressed in the amicus brief of the Committee for Compre- hensive Insurance Coverage. Appellants’ construction of the insurance savings clause would create an immense regulatory vacuum in the field of insurance. It would result in the preemption of all state statutes prescribing the contents of insurance pol- icies—at least insofar as those statutes applied to policies sold to employee benefit plans governed by ERISA. For example, the statutes cited at pages 8-10 above would all be subject to preemption.?’ There is no federal system for the regulation of insurance to replace this comprehensive and traditional scheme of state regulation. And ERISA does not attempt to control the substance of health and welfare benefits. In fact, the bulk of ERISA is directed at pension plans, not at welfare plans like those at issue in this case.** Ceasing all governmental regulation of welfare benefit plans, other than ERISA’s disclosure and 27 Appellants’ attempt to dismantle the traditional state regula- tion of the contents of insurance policies, leaving no federal regula- tion in its place, is the latest in a long line of attempts by the insurance companies to avoid regulation. Sec, e.g., Polish Nat'l Alliance v. NLRB, 322 U.S. 6438, 648-49 (1944); 90 CoNG. REC. 6537-38 (1944) (remarks of Rep. Celler); Weller, supra note 25, at 590, 592, 614. 28 The statute’s title suggests that Congress was primarily con- cerned with pension benefit plans. Moreover, the scarcity of regula- tory provisions applicable to welfare benefit plans and the congres- sional hearings indicate that reform of private pension plans was Congress’ main objective. See Brummond, supra note 5, at 61-63, 114, 115; ERISA Preemption Comment, supra note 5, at 1536 n. 4, 1546 n. 70. 26 fiduciary requirements, is completely inconsistent with the legislative history of the McCarran-Ferguson Act, which indicates that Congress wished to avoid “the grave danger, unless something is done at once, that the insurance companies will be absolutely unregulated.” 90 Cong. Rec. 6548 (1944) (remarks of Rep. Hobbs). It is likewise in- consistent with the legislative history of ERISA, which indicates that Congress wished to preserve the existing scheme of state insurance regulation, and that Congress was concerned with the inadequacy of governmental regu- lation of employee benefit plans, see, eg., 29 U.S.C. § 1001.” Appellants’ proposal would be exceedingly difficult to administer. In defining “the traditional areas of state insurance regulation,” they suggest a distinction between “the wide range of state laws designed to protect the in- surance purchaser from improper or imprudent conduct by the insurance company” and “state laws whose purpose and effect is to control plan content or the relationship between the plan itself and the plan’s beneficiaries.” Brief for Appellant Metropolitan Life Insurance Co. at 34. Not only is state control over the content of insurance policies a traditional area of state insurance regulation, but the very purpose of such control is to protect the pur- chaser of insurance. Accordingly, appellants’ attempted distinction has no meaning. Even appellants concede that their construction of the insurance savings clause may lead to “difficult Jine-drawing problems.” Jd. at 35. In addition to ignoring the substantial policies dis- served by their reading of the insurance savings clause, appellants exaggerate the importance of the policies al- legedly supporting their proposal. Appellants argue, for example, that mandated benefit statutes make it more dif- ficult for interstate employers to provide uniform benefits 29 See also Insurance Comm’r v. Metropolitan Life Ins. Co., 296 Md. 334, 343-44, 463 A.2d 793, 798 (1983); Metropolitan Life Ins. Co. v. Whaland, 119 N.H. 894, 908, 410 A.2d 635, 640 (1979) (per curiam). 27 and therefore create increased administrative costs for such employers. Although Congress may have wished to minimize the need for interstate employers to administer their plans differently in different states, it was also will- ing to sacrifice that interest to accommodate the States’ interests. For example, ERISA permits continued en- forcement cf state laws relating to workmen’s compensa- tion, unemployment compensation, and disability insur- ance, although they vary substantially from state to state. See 29 U.S.C. § 1003(b) (3). Moreover, the insurance savings clause permits the States to enforce at least some insurance laws relating to employee benefit plans, even though those laws likewise differ among the States. Thus, “lmjere incantation of the congressional goal of uni- formity in regulation cannot resolve this question of statu- tory construction.” Standard Oil Co. v. Agsalud, 442 F. Supp. 695, 706 (N.D. Cal. 1977), aff'd, 633 F.2d 760 (9th Cir. 1980), aff'd mem., 454 U.S. 801 (1981). Moreover, because state laws have traditionally pre- scribed the contents of insurance policies, diversity in this area has long been the norm for interstate employee benefit plans. And it was precisely such diversity that the McCarran-Ferguson Act was intended to preserve.” There is no evidence in ERISA’s legislative history that Congress intended to sacrifice this diversity; in fact, Con- gress’ concern for uniformity appears to have been limited to regulation of benefit plans, and not to regula- tion of insurance companies selling policies to those plans. See, e.g., 120 Cong. Rec. 29,933 (1974) (remarks of Sen. Williams). 8° See, e.g., Prudential Ins. Co. v. Benjamin, 328 U.S. 408, 431 (1946) (“Congress intended to declare, and in effect declared, that uniformity of regulation, and of state taxation, are not required in reference to the business of insurance by the national public inter- est, except in the specific respects otherwise expressly provided for’) ; 90 ConG. REc. 6418-19 (1944) (remarks of Rep. Allen) ; id. at 6550 (remarks of Rep. Robsion); id at 6551 (remarks of Rep. Ploeser) . 28 Appellants also argue that mandated benefit statutes encourage employee benefit plans to become self-insured. However, there is no evidence in ERISA’s language or legislative history that self-insurance is contrary to Con- gress’ intent. In fact, Congress clearly recognized that some employee welfare benefit plans would not purchase insurance policies. See 29 U.S.C. § 1002(1). Moreover, the States have every incentive to discourage self- insurance to maximize the impact of mandated benefit statutes and other state insurance regulations, as well as to prevent “a loss of revenue from the traditional state source of insurance company taxation, the premium tax ... -” Okin, supra note 5, at 671. Thus, although judicial balancing of the countervailing policy considerations is especially inappropriate in this case and should instead be left for Congress, the relevant policies support the decision below. CONCLUSION Amici urge this Court to affirm the decision below. Respectfully submitted, DONALD N. BERSOFF (Counsel of Record) KIT KINPORTS BRUCE J. ENNIS ENNIS, FRIEDMAN, BERSOFF & EWING 1200 - 17th Street, N.W. Washington, D.C. 20036 (202) 775-8100 Counsel for Amici Curiae January 25, 1985 APPELLEE’S BRIEF - In the Supreme Court of the United States. OCTOBER TERM, 1984. METROPOLITAN LIFE INSURANCE COMPANY, APPELLANT, 4 COMMONWEALTH OF MASSACHUSETTS, APPELLEE. THE TRAVELERS INSURANCE COMPANY, APPELLANT, 4 COMMONWEALTH OF MASSACHUSETTS, APPELLEE. ON APPEALS FROM THE SUPREME JUDICIAL COURT FOR THE COMMONWEALTH OF MASSACHUSETTS. Brief for the Appellee. FRANCIS X. BELLOTTI, Attorney General, SALLY A. KELLY, Assistant Attorney General, Counsel of Record, SuSAN M. ROBERTS, Assistant Attorney General, One Ashburton Place, Boston, Massachusetts 02108. (617) 727-3672 Attorneys for the Appellee BATEMAN & SLADE, INC BOSTON, MASSACHUSETTS Questions Presented. 1. Whether a Massachusetts statute requiring that all health insurance policies issued in the state include minimum mental health benefits is protected from preemption by the Employee Retirement Income Security Act of 1974 (ERISA), because of an express ERISA exemption for state insurance laws (29 U.S.C. § 1144 (b)(2)(A)). II. Whether a Massachusetts statute requiring that all health insurance policies issued in the state include minimum mental health coverage is preempted by the National Labor Relations Act (NLRA), 29 U.S.C. §§ 151 et seq. (i) (ii) Table of Contents. Questions Presented (i) Table of Authorities (iii) Statement of the Case 2 Summary of Argument 9 Argument 12 1. AS A STATE LAW REGULATING THE CON- TENT OF INSURANCE POLICIES, § 47B IS NOT PREEMPTED BY ERISA. 12 A. Preemption is Not Lightly Inferred, Particularly in an Area of Law Such as Insurance Regulation Which Has Historically Been a Concern of the States. 12 B. ERISA was Not Intended to Displace State Law Governing Insurance and Instead Explictly Pro- vides for Continued Enforcement of Such Laws. 14 C. Section 47B is a State Insurance Law. 29 1]. SECTION 47B IS NOT PREEMPTED BY THE NLRA BECAUSE IT DOES NOT CONFLICT WITH THE POLICY OR PROCEDURES OF FED- ERAL LABOR LAW. 34 A. Section 47B is Not Preempted by the NLRA Because It Regulates the Types of Insurance Poli- cies Issued in Massachusetts and Does Not Regu- late Substantive Terms of Collective Bargaining Agreements. 36 B. Section 47B is Not Preempted Because the States May Regulate in Both the Mental Health and In- surance Areas. 43 Conclusion 52 Table of Authorities Cited. CASES. Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504 (1981) passim Allen-Bradley Local v. Wisconsin Employment Rela- tions, 315 U.S. 740 (,942) 35, 45 (ili) TABLE OF AUTHORITIES CITED. American Family Life Assur. Co. v. Commissioner of Ins., 388 Mass. 468, 446 N.E.2d 1061 (1983) 32 American Progressive Life & Health Ins. Co. v. Cor- eoran, 715 F.2d 784 (2d Cir. 1983) 32 Atty. Gen. v. Travelers Ins. Co., 391 Mass. 730 (1984) 9, 50n Atty. Gen. v. Travelers Ins. Co., 385 Mass. 598 (1982), vacated and rem’d __ U.S. —__, 103 S.Ct. 3563 (1983) 8 Barsky v. Board of Regents, 347 U.S. 442 (1954) 43 Beer Co. v. Massachusetts, 97 U.S. 25 (1878) 43 Belkziap, Inc. v. Hale, 463 U.S. 491, 103 S.Ct. 3172 (1983) 39 Blue Cross of Virginia v. Commonwealth, 221 Va. 349, 269 S.E.2d 827 (1980) 32 Brown v. Hotel & Restaurant Employees & Bartenders International Union, __ U.S. __, 104 S.Ct. 3179 (1984) 35, 39n, 40, 41 California Auto Association v. Maloney, 341 U.S. 105 (1951) 31 Chicago & North Western Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311 (1981) 13 Commonwealth v. Alger, 61 Mass. (7 Cush.) 53 (1851) 43 Consumer Product Safety Comm. v. GTE Sylvania, Inc., 447 U.S. 102 (1980) 24 Day-Brite Lighting, Inc. v. Missouri, 342 U.S. 421 (1952), reh. den., 343 U.S. 921 38, 41n, 46 De Canas v. Bica, 424 U.S. 351 (1976) 41, 45, 46 Farmer v. United Brotherhood of Carpenters & Joiners, 430 U.S. 290 (1977) 37n Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132 (1963) 13 Garner v. Teamsters Union, 346 U.S. 485 (1953) 35 Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205 (1979) 30, 47 Health Ins. Ass’n of America v. Hartnett, 44 N.Y.2d 302, 376 N.E.2d 1280 (1978) 32 (iv) TABLE OF AUTHORITIES CITED. Hines v. Davidowitz, 312 U.S. 52 (1941) 13, 35 Hoopeston Canning Co. v. Cullen, 318 U.S. 313 (1943) 30 In re Slaughter-House Cases, 83 U.S. 36 (1873) 43 Insurers’ Action Council, Inc. v. Markman, 653 F.2d 344 (8th Cir. 1981) 32 International Ass’n of Machinists & Aerospace Workers, v. Wisconsin Employment Relations Comm’n, 427 U.S. 132 (1976) 39, 40, 41 John Hancock Mut. Life Ins. Co. v. Commissioner of Ins., 349 Mass. 390, 308 N.E.2d 516 (1965) 50n Jones v. Rath Packing Co., 430 U.S. 519 (1977) 13 Malone v. White Motor Corp., 435 U.S. 497(1978) 27n, 35, 38, 39, 47 Massachusetts Nurses Ass’n v. Dukakis, 726 F.2d 41 (Ist Cir. 1984) 37, 44 Mills Music, Inc. v. Snyder, __ U.S. __, 53 U.S.L.W. 4035 (Jan. 8, 1985) 14 Motor Coach Employees v. Lockridge, 403 U.S. 274 (1971) 35 Mountain Timber Co. v. Washington, 243 U.S. 219 (1917) 38, 45 New York Life Ins. Co. v. Hardison, 199 Mass. 190, 85 N.E. 410 (1908) 31 New York State Dept. of Social Services v. Dublino, 413 U.S. 405 (1973) 12 New York Tel. Co. v. New York State Dept. of Labor, 440 U.S. 519 (1979) 37, 40, 41, 42, 44, 47 NLRB v. Insurance Agents’ International Union, 361 U.S. 477 (1960) 38 NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937) 35 Park ’n Fly, Inc. v. Dollar Park and Fly, Inc., __ U.S. __., 53 U.S.L.W. 4044 (Jan. 8, 1985) 14 Perez v. Campbell, 402 U.S. 637 (1971) 13 Philbrook v. Glodgett, 421 U.S. 707 (1975) 14 Prudential Ins. Co. v. Benjamin, 328 U.S. 408 (1946) 13 Red Lion Broadcasting Co. v. F.C.C., 395 U.S. 367 (1968) 24 (v) TABLE OF AUTHORITIES CITED. Retail Clerks International Association v. Schermer- horn, 375 U.S. 96 (1963) 35 Rice v. Santa Fe Elevator Corp., 331 U.S. 218 (1947) 13 San Diego Bldg. Trades Council v. Garmon, 359 U.S. 236 (1959) 39 Schwartz v. Texas, 344 U.S. 199 (1952) 12 Sears, Roebuck & Co. v. San Diego County Dist. Council of Carpenters, 436 U.S. 180 (1978) 37n, 42 SEC v. National Secur., Inc., 393 U.S. 453 (1969) —10, 30, 34, 47, 50 Shaw v. Delta Airlines, Inc., 463 U.S. 85, 103 S.Ct. 2890 (1983) passim Silkwood v. Kerr McGee Corp., __ U.S. ——, 104 S.Ct. 615 (1984) 44 Sioux Tribe of Indians v. United States, 316 U.S. 317 (1942) 24 Teamsters, Chauffeurs & Helpers Union v. Morton, 377 U.S. 252 (1964) 4| Teamsters Union v. Oliver, 358 U.S. 283 (1959) 40, 42 Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119 (1982) 47 United States v. Menashe, 348 U.S. 528 (1955) 22 Wadsworth v. Whaland, 562 F.2d 70 (Ist Cir. 1977), cert. denied, 435 U.S. 980 (1978) 20, 21, 26, 32 Wayne Chemical, Inc. v. Columbus Agency Service Corp., 567 F.2d 692 (7th Cir. 1977) 17n, 31, 32 West Coast Hotel Co. v. Parrish, 300 U.S. 379 (1937) 38, 45 Western & Southern Life Ins. Co. v. State Bd. of Equal- ization, 451 U.S. 648 (1981) 13, 36 STATUTES. Federal: Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 et seq. § 1001(a)(A) 27n § 1002(1) 17 (vi) TABLE OF AUTHORITIES CITED. 29 U.S.C. § 1051(1) 27n § 1081(a)(1) 27n § 1144(a) 6, 14, 18 § 1144(b) 6 § 1144(b)(2)(A) (i), 6, 15, 26 § 1144(b)(2)(B) 15, 28n § 1144(d) 15, 16, 18 § 1221 24 § 1222(a)(5) 24 §§ 1301-1309 27n Fair Labor Standards Act, 29 U.S.C §§ 201-219 49 Federal Trade Commission Act, 15 U.S.C. 88 41-58 48, 49 Labor Management Relations Act, 29 U.S.C. §§ 141-187 31 McCarran-Ferguson Act, 15 U.S.C. § 1011 et seq. 8, 10, 16, 47 § 1012 16, 49 § 1012(b) 48, 49, 50 § 1014 48, 49 Merchant Marine Act, 46 U.S.C. 49 National Labor Relations Act, 29 U.S.C. §§ 151 et seq. passim 42 U.S.C. § 289k-1, P.L. 93-282, 88 Stat. 135 (1974) 44n 42 U.S.C. § 290aa 44n 42 U.S.C. § 300e-10 24 42 U.S.C. § 300k et seq., P.L. 93-641, 88 Stat. 2226 (1975) 44n 42 U.S.C. § 2000e et seq. 18 42 U.S.C. §§ 2681 et seq., P.L. 88-164, 77 Stat. 290 (1963) 42 U.S.C. § 2689, et seq., P.L. 94-63, 89 Stat. 309 (1975) 44n Sherman Act, 15 U.S.C. §§ 1-7 48, 49 Taft-Hartley Act (see Labor Management Relations Act) 28 (vil) TABLE OF AUTHORITIES CITED. State: Massachusetts General Laws c. 15ID c. 175, § 47B § 110D § 113 et seq. § 134(4) c. 176A, § 8A c. 176G, § 4 Ariz. Rev. Stat. Ann. § 20-1402(4)(b) Conn. Gen. Stat. Ann. § 38-174D Ill. Ann. Stat. c. 73, § 979(7) Md. Ann. Code. art. 48A, § 477E Minn. Stat. Ann. § 62A.149 Wis. Stat. § 211.02(1) (1959) 1971 Wis. Laws c. 325 CONGRESSIONAL BILLS, COMMITTEE REPORTS, DEBATES, HEARINGS. S. 209, 96th Cong., Ist Sess. (1979) H.R. 2, 93d Cong., Ist Sess., § 514(a) 91 Cong. Rec. 481 (1945) 483 (1945) 120 Cong. Rec. 4742 (1974) 5002 (1974) 15757 (1974) 29197 (1974) 29933 (1974) 125 Cong. Rec.»931 (1979) S. Rep. No. 127, 93d Cong., x Sess., 1974 U.S. Code Cong. & Ad. News 4838 U.S. Code Cong, & Ad. News 3057-3058 (1973) Activity Report of the House Comm. on Education and Labor, H.R. Rep. No. 1785, 94th Cong. 2d Sess. 48 (1977) (viii) 27n passim 31 31 27n 5n 5n 29n 29n 29n 29n 29n 27n 29n 27 2In 50 51 2In 2In 24n 23 22n 27 27n 24 25 TABLE OF AUTHORITIES CITED. U.S. Sen. Comm. on Labor and Human Resources, ERISA Improvement Act of 1979: Summary and Analysis of Consideration, 46 (1979) 27 MISCELLANEOUS. Books & Articles: Archives of General Psychiatry, v.41, No. 10(Oct. 1984) 43n Cox, Recent Developments in Federal Labor Law Pre- emption, 41 Ohio St. L. J. 277 (1980) 37n, 42 General Joint Commission on Insurance, Advances in Health Insurance in Massachusetts, 1974 2 Goetz, The Regulations of Uninsured Employee Wel- fare Plans Under State Insurance Laws, 1967 Wis. L. Rev. 319 28n Harwood, Economic Costs to Society of Alcohol and Drug Abuse and Mental Illness, 1980 (Report Sub- mitted to Alcohol, Drug Abuse & Mental Health Ad- ministration, Contract # ADM 283-83-002) 46n McGuire, Financing Psychotherapy, Ballinger Publish- ing Co. (1981) 37n Okin, Federal Preemption of State Law Under ERISA: An Examination of the Effects of the Federal Man- date in the Light of Authoritative Precedent Under the Supremacy Clause, the McCarran-Ferguson Act and the Legislative History, 24 A. of Life Ins. Couns. Proc. 115 (1976) 23n Pfennigstorf & Kimball, Employee Legal Service Plans: Conflicts Between Federal and State Regula- tion, 1976, A.B. Found. Research J. 787 = 16n, 23n, 28 Robins, Lifetime Prevalence of Specific Psychiatric Disorders In Three Sites, 41 Archives of General Psychiatry 949 (1984) 43n Sharfstein, Dispelling Myths about Mental Health Benefits, Business & Health, Oct., 1984 37n Turza and Holloway, Preemption of State Laws Under ERISA, 5 Journal of Pension Planning & Compli- ance, 361 (1979) 23n, 27n, 28 (ix) TABLE OF AUTHORITIES CITED. No. 84-325, 84-356. Wells, Cost Sharing and the Demand For Ambulatory Mental Health Services, Rpt. of Rand Corp. & U.S. In the Dept. Health & Human Services, Library of Con- gress No. R 2960 HHS (1982) 43n Supreme Court of the United States. Other: U.S. Supreme Court Rule 30 2n OCTOBER TERM, 1984. U.S. Supreme Court Rule 34.2 2 METROPOLITAN LIFE INSURANCE COMPANY, APPELLANT, v. COMMONWEALTH OF MASSACHUSETTS, APPELLEE. THE TRAVELERS INSURANCE COMPANY, APPELLANT, Vv. COMMONWEALTH OF MASSACHUSETTS, APPELLEE. ON APPEALS FROM THE SUPREME JUDICIAL COURT FOR THE COMMONWEALTH OF MASSACHUSETTS. Brief for the Appellee. (x) 2 Statement of the Case. The Commonwealth is “dissatisfied”, within the meaning of Supreme Court Rule 34.2, with the appellants’ Statements of the Case' because the appellants continue to press factual and policy arguments which are inconsistent with the findings of the Massachusetts legislature and the trial court. Accord- ingly, the Commonwealth submits the following to supplement the appellants’ statements. 1. This case involves preemption-based challenges to a Mas- sachusetts insurance law that prescribes certain terms to be contained in insurance policies issued in the Commonwealth which provide coverage for hospital and surgical expenses. The statute under attack is codified at Mass. G. L. c. 175, § 47B (West Supp. 1984-1985) (hereinafter, § 47B).’ There can be no question that the Massachusetts state legis- lature adopted § 47B to address the problem of treating mental illness in the Commonwealth and not to avoid the strictures of ERISA. (General Court Joint Committee on Insurance, “Ad- vances in Health Insurance in Massachusetts,” 1974, A. 426- 458).° In passing the measure in December, 1973, the legislature felt compelled to act because federal policy in the area at that time did not adequately address Massachusetts’ or other states’ ' Brief of Appellant Metropolitan Life Ins. Co. (Metropolitan) at 3-9; Brief of Appellant Travelers Ins. Co. (Travelers) at 2-9. ? Section 47B is set forth in its entirety at J.S. App. 87a-89a. J.S. App. refers to the separately bound appendix to the Jurisdictional Statements filed by appellants. *“A.” refers to the separately bound Joint Appendix filed by the parties pursuant to Rule 30. 3 problems (A. 427). Specifically, the legislature perceived that mental health treatment in Massachusetts was inadequate in two basic respects: (1) the large majority of persons who evi- denced a need for mental health treatment, namely members of the poor and working segments of society, were not receiving it because they could not afford it, and (2) those persons within the groups who were receiving treatment were generally insti- tutionalized in state-run facilities and were not receiving treat- ment from community mental health centers, where, it was generally thought, persons could be treated on an out-patient basis and could continue to function within the mainstream of society (A. 430-432).* The legislature recognized that both these treatment in- adequacies were at least partially the result of the state of the market for mental health insurance. Because they could not afford it, persons who needed help were unable to obtain mental health insurance which would help pay for their treat- ment. That payment would in turn support payment of expenses at community-based mental health centers, which would en- courage their proliferation across the state and diminish the need for and utilization of state institutions (A. 432-433). The legislature’s recognition that the problems with the treat- ment of mental illness in Massachusetts stemmed from prob- lems associated with selling mental health insurance in the Commonwealth is precisely on point. Testimony presented by the Commonwealth at trial (A. 219-233), which the trial court ‘The legislature also understood (and testimony was presented which indi- cated) that because mental illness was not being treated, or was being treated on an institutionalized basis, Massachusetts was also suffering indirect costs to its economy. Indirect costs include the losses of income and the decreased productivity of workers which result from disability or death due to mental illness and include the incorrect over-utilization of non-psychiatric medical care for mental problems (J.S. App. Sla; A. 209-212, 218-219). 4 adopted as part of its findings, (J.S. App. 50a), indicated that the market for mental health insurance had become retracted. This retraction of the market was found to be the result of the phenomenon of adverse selection; insurance companies found they could not compete by offering an adequate package of mental health insurance coverage (A. 223-225). The principle of adverse selection deserves full explanation. It simply means that in a voluntary market poor insurance risks choose to buy mental health insurance. “Good risks” for mental health insurance, i.e., people who do not anticipate using the mental health benefit, do not buy the insurance because pre- miums are established based on an average price for both good and bad risks, and are therefore too expensive to attract good risks (A. 222). “Bad risks”, i.e., people who predict that they will utilize the benefit, buy the insurance, because for them, the average price is attractively low (A. 222). Thus, in a voluntary market, insurance companies which sell mental health benefits draw an “adverse selection” of the population, i.e., a group dominated by bad risks who will utilize the benefit (A. 223-224). Ironically, if an insurer reacts to the adverse selection phenomenon by raising premiums, the insurers actually attract a worse collection of bad risks (A. 224). This is so because the good risks who buy the benefit at the “average price,” refuse to buy the benefit at the “adverse selection” price. In addition, competition among insurance companies for “good risks” exacerbates the effects of adverse selection; companies which reduce the extent of coverage offered and therefore are able to lower their premiums cause good risks to abandon the insurer with the “adverse selection” of risks. Thus, a competi- tive and voluntary market creates continual retraction of the mental health insurance market. This cycle destroys the mar- ketability of mental health benefits (A. 224-225). Massachusetts’ solution to the mental health treatment prob- lem was to enact a statute, § 47B, which regulates the types of insurance policies sold in the Commonwealth. All policies 5 providing coverage for hospital and surgical expense are now required to provide minimum benefits for inpatient and outpa- tient mental health treatment.° Mandating of minimum levels of mental health insurance as prescribed by § 47B in a market controlled by adverse selection served to correct the retracted state of the insurance market (A. 225-227). Because minimum coverage levels were required, companies did not have to engage in the “ruinous competition for the good risks, leaving the bad risks with their competitors.” (A. 225.) Under a mandated benefits policy, “(t]he government mandate can mimic the result of a market if it were able to work correctly by setting prices appropriate for individuals.” (A. 226.) The good risks and the bad risks are spread around so that the insurance companies can survive while continuing to provide the benefits (A. 225-226). Mental health insurance is available for everyone to purchase at a price which they can afford (A. 225-226).° This discussion of the purpose of § 47B is not a post hoc rationalization offered by the state’s attorney. Instead these arguments emerge from an unusal legislative report detailing a number of the public policy goals of the statute. These include (1) the need to provide the public with affordable comprehen- sive inpatient and outpatient mental health care, (2) the foster- ‘Section 47B also requires employee benefit plans to provide the same minimum health benefits. With the enactment of ERISA in 1974, however, the Attorney General acknowledged that application of its terms to such plans was preempted. Therefore, the Commonwealth has not sought to enforce § 47B directly against uninsured employee benefit plans. See discussion of the pre- ERISA state regulation of employee benefit plans at 27-29, infra. *It is important to note that the 1973 statute contained parallel provisions providing for the inclusion of protection against mental illness costs, not just in health insurance policies and employee health and welfare plans, but also in hospital and medical services contracts. Mass. St. c. 1174, §§ 3-6, codified at Mass. G. L. c. 176A, § 8A (West Supp. 1984-1985) and c. 176B, § 4a (West Supp. 1984-1985). Three years later, when health maintenance organi- zations had emerged as significant providers of medical services, the require- ments of § 47B were made applicable to them. Mass. G. L. c. 176G, § 4 (West Supp. 1984-1985). 6 ing of community-based mental health care as an alternative to state-subsidized institutionalization, (3) the reduction of medical care expenditures for mentally-related illness and (4) the provision of relief to the Commonwealth from some of the financial burden of resolving mental health problems (J.S. App. 52a-53a). 2. The statutes said to preempt § 47B are ERISA and the NLRA (J.S. App. 85a-87a, 89a-91a). ERISA contains a series of express preemption clauses: § 514(a), 29 U.S.C. § 1144(a) generally preempts state laws which relate to employee benefit plans; § 514(b), 29 U.S.C. § 1144(b) saves from preemption state laws which regulate insurance. The NLRA contains no express preemption scheme; therefore, the question of state law preemption by the NLRA turns on the implied intent of Congress. 3. This case originated on June |, 1979, when the Attorney General filed a civil complaint in the Superior Court of Mas- sachusetts (A. 6-49). In that complaint, the Attorney General requested both a declaration that, the provisions of ERISA and the NLRA notwithstanding, the Metropolitan and Travelers insurance companies were required to issue policies containing the benefits required by § 47B, and injunctive relief effectuat- ing the declaration (A. 11-12). The defendant insurance com- panies had not themselves challenged the statute, and no ERISA plan was a party to the suit (A. 6-12). A preliminary injunction issued on August 28, 1979 (A. 57-59). The case was heard on its merits between September 22 and 29, 1980. The Findings and Conclusions of the trial court are set forth at J.S. App. 36a-62a. Throughout this litigation, the Commonwealth has asserted that § 47B is exempt from preemption because ERISA’s plain language saves “any law . . . of any state which regulates insurance. . . ” 29 U.S.C. § 1144(b)(2)(A) and because Con- gress did not intend for statutes regulating the types of insurance policies which may be issued in Massachusetts to be preempted by the NLRA (J.S. App. 86a, 89a-91a). The courts of the Com- 7 monwealth have consistently reached the same conclusion re- garding ERISA, albeit by a somewhat narrower reading of the insurance savings clause than that proposed here. As to both the NLRA and ERISA, the courts also based their decisions on an examination of the practical interplay of § 47B with ERISA and the NLRA (J.S. App. 4a-7a, 17a-34a, 36a-62a). The trial court rejected the insurers’ arguments that § 47B conflicted and interfered with the purposes of ERISA (J.S. App. 51la-56a). The insurers argued that variations from state to state in insurance laws such as § 47B would effect a lack of uniformity in multistate employee benefit plans and also argued that § 47B imposes cost burdens and encourages bank- ruptcy or promotes self-insurance of employee benefit plans. In rejecting these arguments, which the insurers continue to stress even now, the trial court found as a matter of fact that (1) the administrative burden imposed by mandated ben- efit laws, including diverse eligibility requirements for each state, is no more complex or burdensome to interstate commerce than various other multistate regulatory schemes such as workmen’s compensation laws; (2) the insurers presented no credible evidence that even assuming every state had enacted mandated benefit laws with varied eligibility requirements, such diversity and non- uniformity would be any more complex or burdensome to interstate commerce than other diverse multistate reg- ulatory schemes, such as workmen’s compensation laws; (3) the insurers introduced no credible evidence establish- ing that the trend toward self-insurance is more pro- nounced in Massachusetts by virtue of the enactment of § 47B; (4) the insurers presented no credible evidence of the actual cost insurers would incur if they complied with § 47B; (5) the insurance companies produced no credible evi- dence that they could not absorb the cost of compliance 8 with § 47B; or that aay ERISA plan in the United States had gone bankrupt because of compliance with a mandated benefit statute; and (6) the insurers produced no credible evidence that the cost-impact of § 47B has forced any policy holder to self-insure or that the trend toward self-insurance is more pronounced in Massachusetts because of § 47B. (J.S. App. 54a-S6a). The trial court also rejected the insurers’ preemption argu- ments under the NLRA. It found that statutes mandating bene- fits are no more disruptive to the collective bargaining process than statutes requiring coverage for pregnancy-related disabilities, and that collective bargaining agreements frequently differ from State to state due to differences in state law (J.S. App. 55a). 4. Following entry of an amended final judgment on De- cember |, 1980, this case has twice been before the Supreme Judicial Court of the Commonwealth (SJC), which has twice rejected the insurance companies’ arguments. In its first opinion, the highest court of the state noted that ERISA’s Savings clause for state insurance laws was broad enough to permit a reading saving § 47B from preemption. Atty. Gen. v. Travelers Ins. Co., 385 Mass. 598 (1982), va- cated and rem’d U.S. , 103 S.Ct. 3563 (1983) (J.S. App. 21a). The SJC held that § 47B was not preempted because of the language of ERISA’s preemption and savings clauses and the absence of any conflict between ERISA and § 47B (J.S. App. 22a-25a). On the matter of the NLRA, the court concluded that the statute, as a health regulation implemented through the mechanism of insurance, was saved from preemp- tion by Congress’ intent that the NLRA not supersede either local health regulation or state insurance laws within the mean- ing of the McCarran-Ferguson Act, 15 U.S.C. §§ 1011 et seq. (J.S. App. 25a-30a). The court also viewed § 47B as not having an absolute limit restricting unions’ and employers’ abilities to negotiate the terms of collective bargaining agree- ments (J.S. App. 31a). 9 On appeal, this Court vacated the SJC’s decision and re- manded the case for reconsideration in light of Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 103 S.Ct. 2890 (1983) (J.S. App. 10a). On remand, the SJC focused on the ERISA issues to the exclusion of the insurers’ renewed NLRA arguments, and again found that ERISA did not preempt § 47B. Attorney General v. Travelers Ins. Co., 391 Mass. 730 (1984) (J.S. App. la-9a). Considering the issues now in light of Shaw, the SIC found significance in the fact that Shaw does not address the insurance savings clause in ERISA (J.S. App. 4a). Using Shaw’ s analysis that effect must be given to ERISA’s plain language, 103 S. Ct. at 2900, the court reiterated its previous view that in light of the absence of any conflict between ERISA’s purposes and the operation of § 47B, and the plain words exempting from preemption “any law of any state which regulates insurance, § 47B should survive (J.S. App. 6a). The SJC concluded that to read ERISA as preempting § 47B would “read into the statute an intent that is not expressed by plain words or by necessary implication” and would “require an unnaturally narrow reading of the phrase ‘any law .. . which regulates insurance... .” (J.S. App. 6a). The court held that § 47B was a “bona fide regulation of insurance” and was “within the spirit, as well as the letter, of the insurance exception to ERISA preemption” and therefore should not be preempted (J.S. App. 7a). It is this conclusion which the insurance companies ask this Court to reverse. Summary of Argument. 1. Neither the plain language of ERISA, its legislative history, nor its clear purpose support the premise that state statutes regulating the content of insurance policies that may be sold in the state are preempted when applied to insurance policies purchased to provide benefits in employee welfare plans. 10 By means of ERISA, Congress sought to combat fraud and abuse in pension plan management by requiring extensive dis- closure and the application of fiduciary standards to the man- agement of pension funds. To a far lesser extent, but for the same purposes, Congress sought to regulate welfare plans. When Congress enacied ERISA and broadly preempted state laws relating to pensions and employee welfare plans, Congress specifically saved from preemption state insurance laws. Throughout the development of ERISA, Congress always con- templated the continued regulation of insurance by the states. Congress recognized in ERISA, as it earlier had in the McCar- ran-Ferguson Act, 15 U.S.C. §§ 1011 et seq., that state insur- ance laws constituted a well-developed body of laws which the states had created and enforced and which should not be interfered with by federal legislation. Accordingly, by explic- itly exempting state insurance laws from preemption, Congress made a conscious policy decision to allow the states to continue to regulate insurance, including insurance purchased to provide benefits in employee welfare plans. Section 47B is a state insurance law within the meaning of ERISA’s savings clause. Section 47B, which was enacted prior to the enactment of ERISA, lies squarely within the traditional realm of state regulation of insurance enunciated by this Court in SEC v. National Secur., Inc., 393 U.S. 453 (1969) because it regulates the terms of the contract between the insured and the insurer, alters the voluntary insurance market and spreads the risk and cost of mental illness among Massachusetts’ citi- zens, thereby ensuring that the benefits of treatment are avail- able at a reasonable cost to all citizens in need. Finally, the insurers’ policy arguments regarding the effect of mandated benefit laws, such as § 47B, on employee benefit plans and’ insurance are misdirected, overstated and find no support in the record or in the literature of insurance regulation, economics or mental health. 11 2. Because § 47B is a law which simply requires that all health insurance policies issued in the state provide minimum coverage for health benefits, it does not impact on the collective bargaining process nor interfere in any way with federal labor law policy; hence, given the presumed validity of state laws, it should not be preempted by the NLRA. The declared policy of Congress in enacting the NLRA was the promotion of the collective bargaining process and the encouragement of labor and management to negotiate their differences in good faith to achieve industrial peace and elimi- nate obstructions to the free flow of interstate commerce. Preemption of state laws requires a clear conflict with or frust- ration of this policy. Those state laws which have been preemp- ted by the NLRA have suffered invalidation because they frus- trated the federal scheme in some way, either by interfering with the National Labor Relations Board’s (NLRB’s) ability to referee the collective bargaining process, or by “stacking the deck” in favor of one party over the other by denying a party an economic weapon in the collective bargaining process which Congress meant it to have. As a law which prescribes the types of insurance policies sold in Massachusetts, § 47B falls into neither of these categories of impermissible interfer- ence. The appellants argue that § 47B does not merely regulate the types of health insurance which may be sold in Massachu- setts; they maintain that § 47B dictates specific terms which must be contained in collective bargaining agreements, and consequently, that the exercise by the state in compeiling the agreements to contain certain terms is a frustration of congres- sional intent in fashioning federal labor policy. The Common- wealth demonstrates, however, that the argument is fallacious. Nowhere in the federal scheme of labor-management relations is there an indication of congressional intent to permit the practice that the appellants hope to achieve, namely that unions and employers, acting together, may agree to terms in a collec- tive bargaining agreement which employers would otherwise 12 be prohibited by state law from establishing. Collective bar- gaining was not intended by Congress to be a refuge for em- ployers and unions from the operation of state laws which they perceive to be burdensome. Congress has long recognized that states have the right to legislate and protect their citizens’ health and their workers’ employment conditions. Similarly, Congress has historically deferred to state regulation in the field of insurance. Congres- sional recognition of state authority in these areas is indicative of its intent to permit the states to continue to so regulate, in spite of any remote effect on labor-management relations. Argument. I. As A STATE LAW REGULATING THE CONTENT OF INSURANCE POoL.iciges, § 47B is Not PREEMPTED BY ERISA. A. Preemption is Not Lightly Inferred, Particularly in an Area of Law Such as Insurance Regulation which has His- torically Been a Concern of the States. In determining whether § 47B is preempted, “our task is to ascertain Congress’ intent in enacting the federal statute at issue.” Shaw v. Delta Air Lines, Inc., 103 S. Ct. at 2890. A thoughtful examination of ERISA and its legislative history leads inexorably to the conclusion that Congress intended state insurance laws like § 47B to survive preemption. This is so first because “[t}he exercise of federal supremacy is not lightly to be presumed.” New York State Dept. of Social Services v. Dublino, 413 U.S. 405, 413 (1973), quoting Schwartz v. Texas, 344 U.S. 199, 202-203 (1952). This black letter proposition is no different with respect to ERISA. Indeed, in Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504 (1981), the first case construing the preemption lan- eo we 13 guage of ERISA, this Court reiterated this basic principle gov- erning preemption in the following terms: [p]reemption of state law by federal statute or regulation is not favored ‘in the absence of persuasive reasons either that the nature of the regulated subject matter permits no other conclusion, or that Congress has unmistakably so ordained.’ Chicago & North Western Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 317 (1981), quoting Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142 (1963). See, Jones v. Rath Packing Co., 430 U.S. 519, 526-526 (1977); Perez v. Campbell, 402 U.S. 637, 649 (1971); Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947); Hines v. Davidowitz, 312 U.S. 52, 61-62 (1941). Alessi v. Raybestos-Manhattan Inc., 451 U.S. at 522. This is especially true where, as here, the law sought to be preempted lies in an area such as insurance that Congress has historically left to the states to regulate. We start with the assumption that the historic police pow- ers of the states were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress. Jones v. Rath Packing Co., 430 U.S. 519, 525 (1977), quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947). Insurance law is perhaps the paradigm of such an area, since in the McCarran-Ferguson Act Congress has used its plenary authority to effectively approve what would otherwise amount to discriminatory commercial regulation by the states. Western & Southern Life Ins. Co. v. State Bd. of Equalization, 451 U.S. 648, 652-653 (1981); Prudential Ins. Co. v. Benjamin, 328 U.S. 408 (1946). The Commonwealth submits, therefore, that only the clearest manifestation of a congressional intent 14 to supersede state insurance laws would support appeliants’ claim of preemption. No such intent can be inferred in this case. B. ERISA was Not Intended to Displace State Laws Govern- ing Insurance and Instead Explicitly Provides for Contin- ued Enforcement of Such Laws. |. The Plain Language of the Statute. The search for manifestations of congressional purpose is unusually easy in this case because the text of the statute itself makes it clear that no intent to preempt state insurance laws exists. As this Court has recently observed in the context of Statutory construction, the exercise “must begin with the lan- guage employed by Congress and the assumption that the or- dinary meaning of that language accurately expresses the legis- lative purpose.” Park 'n Fly, Inc. v. Dollar Park and Fly, TG mais : , 53 U.S.L.W. 4044, 4046 (Jan. 8, 1985); Mills Music, Inc. v. Snyder, U.S. , . 53 U.S.L.W. 4035, 4038 (Jan., 1985). It is to the text of the Statute, therefore, that we first turn. ERISA contains a series of preemption clauses, each of which must be read together to give the entire statute meaning. E.g., Philbrook v. Glodgett, 421 U.S. 707, 708-719 (1975). Section 514(a), 29 U.S.C. § 1144(a), ERISA’s general preemption clause, provides that, Except as provided in subsection(b) of this section, the provisions of this subchapter and subchapter III shall supersede any and all state laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title. 15 This general rule of preemption is followed by a “savings clause,” § 514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A), on which the Commonwealth primarily relies in asserting that its statute may operate in the face of ERISA. That clause provides in pertinent part that ERISA shall not relieve any person from compliance with state insurance laws: Except as provided in subparagraph (B), nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insur- ance, banking, or securities. These two clauses are followed by the “deemer clause” which provides: Neither an employee benefit plan . . . nor any trust estab- lished under such a plan, shall be deemed to be an insur- ance company or other insurer, . . . or to be engaged in the business of insurance . . . for purposes of any law of any State purporting to regulate insurance companies, [or] insurance contracts... . 29 U.S.C. § 1144(b)(2)(B).’ Finally, this last clause is further modified by a congressional directive that ERISA is not con- strued to invalidate other federal legislation: Nothing in this subchapter shall be construed to alter, amend, modify invalidate, impair or supersede any law of the United States... . 29 U.S.C. § 1144(d). Conceptually, then, ERISA’s general preemption clause is limited by the insurance savings clause. It, in turn, is explicated ’The language of the deemer clause constitutes explicit recognition that Congress was aware that insurance regulation included regulation of the “con- tracts” issued by insurers, as well as the insurers themselves. 16 by the d2emer clause, which serves to limit and define the breadth of the insurance savings clause. By forbidding the states from deeming or considering employee benefit plans to be insurers, Congress expressly stopped the practice of several of the states of regulating employee benefit plans by treating them as insurers.* Congress’ express prohibition against considering employee benefit plans to be insurance companies or insurance contracts reveals the breadth of the insurance savings clause because the deemer clause functions as the only explicit limitation in ERISA on the insurance savings clause. It would not be neces- Sary to even insert such a deemer clause, unless the insurance Savings clause is extremely broad — so broad that it would otherwise permit the savings clause to swallow up the rule of general preemption and allow the states to directly regulate employee benefit plans through state insurance laws. What these successive provisions mean, therefore, is simply that ERISA permits continued state regulation of insurance, but rejects state regulation of employee benefit plans.’ That Congress should choose this path accords with the central premise of the McCarran-Ferguson Act (McCarran Act) that the states are the primary regulators of insurance. 15 U.S.C. §§ 1011 et seq. By virtue of Congress’ later inclusion in ERISA of the insurance savings clause and its express acknowledgment that ERISA does not alter or supersede exist- ing federal law, 29 U.S.C. § 1144(d), Congress affirmed this basic McCarran-Ferguson principle. This reading of ERISA’s preemption clauses is further but- tressed by Congress’ express acknowledgment and acceptance of the role of insurance in the ERISA scheme. ERISA, for ex- ample, provides that employee benefit plans may provide bene- “See historical discussion of state regulation of employee welfare plans at 27-29, infra. *Pfennigstorf & Kimball, Employee Legal Service Plans: Conflicts Between Federal and State Regulation, 1976 A. B. Found. Research J. 787, 818 (hereinafter Pfennigstorf). 17 fits “through the purchase of insurance or otherwise.” 29 U.S.C. § 1002(1). Read with the “savings” and “deemer clauses,” one must conclude that Congress intended continued state regulation of insurance and its concomitant protection of the insureds. '° 2. The Prior Opinions of this Court Addressing ERISA Preemption Support the Reading of ERISA Advanced by Massachusetts. In spite of the literal language of ERISA, the insurers assert that ERISA’s preemption scheme somehow alters the tradi- tional preemption test. They assert that this Court’s two deci- sions addressing ERISA preemption, Alessi v. Raybestos-Man- hattan, Inc., 451 U.S. 504 (1981), and Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 103 S. Ct. 2890 (1983), confirm their view that through ERISA Congress sought to foreclose any non-federal regulation that affects employee benefit plans. But the insurers substantially mischaracterize the holdings and discussions in Alessi and Shaw. Both cases explicitly confirm that preemption is not favored unless the state law in question is specifically and clearly excluded by ERISA. Alessi at 522; Shaw at 2905. Because this case involves state regulation of insurance, Alessi does not avail the petitioners. In Alessi, this Court struck down a state law which prohibited a practice, “set-off,” which ERISA explicitly permits. 451 U.S. at 517-525. Given the clear conflict between the two statutes and the breadth of ERISA’s preemption clause, the Court concluded that the op- eration of ERISA evidenced an unmistakable intent of Congress that the New Jersey statute fall to the Supremacy Clause. Nevertheless, the Court rejected the notion, now advanced by the insurers, that ERISA expresses a congressional desire to When employee benefit plans supply benefits through the purchase of insurance, the covered employees acquire significant rights under state law against the insurer. See Wayne Chemical, Inc. v. Columbus Agency Service Corp., 567 F.2d 692 (7th Cir. 1977). 18 foreclose any state regulation which relates in any way to employee benefit plans, noting that “[tjhe scope of federal concerns, however, is limited by ERISA itself. The statute explicitly preserves state regulation of insurance, banking and securities.” 451 U.S. at 523 n.19. In Shaw, this Court considered whether the New York Human Rights Law and Disability Benefits Law fell within any of the specific exceptions in ERISA to the general rules of preemption contained in § 514a, 29 U.S.C. § 1144(a). In construing those statutory provisions this Court followed the plain meaning of the pertinent exemptions from preemption. 103 S.Ct. at 2903, 2905.'' In considering the Human Rights Law, the Court first found that it was a law which relates to an employee benefit plan and then proceeded to weigh the effect of an exemption that is not a subject of the case at bar, the exemption contained in § 514(d) providing that § 514(a) shall “not be construed to alter, amend, modify, invalidate, impair or supersede any law of the United States.” Section 514(d), 29 U.S.C. § 1144(d). The Court’s analysis carefully tracked the language of the exemption and relied heavily on the congressional intent ex- pressed in Title VII of the Civil Rights Act of 1964, 78 Stat. 253, as amended, 42 U.S.C. §§ 2000e et seq. Noting the significant role of state laws in the enforcement of Title VII, the Court concluded that complete preemption of the Human Rights Law would disrupt the joint federal-state enforcement scheme contemplated by Title VII and would therefore “modify and impair federal law” within the meaning of § 514(d). 103 S.Ct. at 2903. Thus, the Court found no preemption to the the same as other occupational disabilities. The Disability Benefits Law required employers to pay certain benefits to employees unable to work because of non-occupational injuries or illnesses and as amended, mandated the same benefits for pregnancy as for any other disability. The employers in Shaw provided their employees with various medical and disability benefits through welfare plans subject to ERISA, but did not provide pregnancy benefits. 19 extent that the Human Rights Law extended the same substan- tive protections as Title VII, but found that the Supremacy Clause prohibited its application insofar as the Human Rights Law created substantive rights additional to those provided by Title VII. In making this ruling, the Court strongly intimated that the reading of the savings clause advanced here by the Common- wealth is correct. The Court compared and contrasted the ex- tremely broad scope of § 514(b), the savings clause relied on by the state, with the narrow exemption worked by § 514(d). In analyzing the Human Rights Law vis a vis § 514(d), the Court looked at its precise relationship to Title VII and upheld it only in part. The Court contrasted this piecemeal approach to the general § 514(b) exemption for state banking, insurance and securities laws. /d. at 2903-2904. It is also significant to the arguments advanced by the insur- ers that the Court acknowledged that while a state may not force an employer to comply with the state disability law as part of its multi-benefit plan, a state may force an employer to maintain a separate disability benefit plan and thereby com- ply with the Disability Benefits Law: In other words, while the state may not require an em- ployer to alter its ERISA plan, it may force the employer to choose between providing disability benefits in a sepa- rately administered plan and include the state-mandated benefits in its ERISA plan. If the state is not satisfied that the ERISA plan comports with the requirements of its disability insurance law, it may compel the employer to maintain a separate plan that does comply. 103 S.Ct. at 2905-2906. In other words, the Court n [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0138%3A22. Public record. Not legal advice.