Amicus Curiae Brief — Metropolitan Life Insurance v. Massachusetts

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Nos. 84-325 and 84>356 | caret STEVAS

In the Supreme Court of the United States

OCTOBER TERM, 1984

METROPOLITAN LIFE INSURANCE COMPANY,

v. Appellant,

COMMONWEALTH OF MASSACHUSETTS,

Appellee.

THE TRAVELERS INSURANCE COMPANY,

Vv. Appellant,

COMMONWEALTH OF MASSACHUSETTS,

Appellee.

On Appeal From The Supreme Judicial Court

Of The Commonwealth Of Massachusetts

AMICUS CURIAE BRIEF OF THE STATE OF

CONNECTICUT, JOINED BY THE STATES OF

CALIFORNIA, KANSAS, LOUISIANA, MAINE,

MARYLAND, MICHIGAN, MINNESOTA, MONTANA,

NEW JERSEY, NEW MEXICO, NEW YORK, NORTH

CAROLINA, NORTH DAKOTA, SOUTH CAROLINA,

VERMONT, WISCONSIN AND THE COMMONWEALTH

OF VIRGINIA, IN SUPPORT OF APPELLEE

JOSEPH I. LIEBERMAN

Attorney General of the

State of Connecticut

Amicus Curiae

ELLIOT F. GERSON

Deputy Attorney General

ARNOLD B. FEIGIN

Assistant Attorney General

Counsel of Record

30 Trinity Street

Hartford, Connecticut 06106

(203) 566-4990

(Additional List of Counsel on Inside Pages)

—_—_—— ——

—_—_— SL

JONATHON L. ENSIGN

JOHN G. HAINES

RICHARD T. SPONZO

ROBERT E. WALSH

Connecticut Assistant Attorneys General

JOHN K. VAN DE KAMP

Attorney General of the

State of California

Amicus Curiae

ROBERT T. STEPHAN

Attorney General of the

State of Kansas

Amicus Curiae

WILLIAM J. GUSTE, JR.

Attorney General of the

State of Louisiana

Amicus Curiae

JAMES E. TIERNEY

Attorney General of the

State of Maine

Amicus Curiae

STEPHEN H. SACHS

Attorney General of the

State of Maryland

Amicus Curiae

FRANK J. KELLEY

Attorney General of the

State of Michigan

Amicus Curiae

HUBERT H. HUMPHREY, III

Attorney General of the

State of Minnesota

Amicus Curiae

MIKE GREELY

Attorney General of the

State of Montana

Amicus Curiae

IRWIN I. KIMMELMAN

Attorney General of the

State of New Jersey

Amicus Curiae

PAUL G. BARDACKE

Attorney General of the

State of New Mexico

Amicus Curiae

ROBERT ABRAMS

Attorney General of the

State of New York

Amicus Curiae

LACY H. THORNBURG

Attorney General of the

State of North Carolina

Amicus Curiae

NICHOLAS SPAETH

Attorney General of the

State of North Dakota

Amicus Curiae

T. TRAVIS MEDLOCK

Attorney General of the

State of South Carolina

Amicus Curiae

JEFFREY L. AMESTOY

Attorney General of the

State of Vermont

Amicus Curiae

BRONSON C. LA FOLLETTE

Attorney General of the

State of Wisconsin

Amicus Curiae

GERALD L. BALILES

Attorney General of the

Commonwealth of Virginia

Amicus Curiae

TABLE OF CONTENTS

TABLE OF AUTHORITIES.......--+++ee-

INTEREST OF AMICI CURIAE........---

SUMMARY OF ARGUMENT......--+-+eeee05

ARGUMENT

A STATUTE OF THE COMMONWEALTH

OF MASSACHUSETTS MANDATING

THAT INSURANCE COMPANIES PRO-

VIDE MINIMUM MENTAL HEALTH

BENEFITS IN GENERAL HEALTH

INSURANCE POLICIES WHICH MAY

BE SOLD TO EMPLOYEE BENEFIT

PLANS ESTABLISHED PURSUANT TO

THE EMPLOYEE RETIREMENT INCOME

SECURITY ACT OF 1974, 29

U.S.C. § 1001 ET SEQ.,. IS NOT

PREEMPTED BY 29 U.S.C. §

1144(@) ccc ccccccccccccccscces

A. The Statute Does Not

Relate To Employee Benefit

2) SaPrrrrrrrr re eee

B. The Statute Is Expressly

Excepted From ERISA Pre-

emption by 29 U.S.C.

§ 1144(b)(2)(A)......-----

Page

II. THE MASSACHUSETTS STATUTE IS

NOT PREEMPTED BY THE NATIONAL

LABOR RELATIONS ACT........---- 27

A. The Massachusetts Statute

Lacks a Substantial Effect

On Negotiation Of An Agree-

ment And The Balance Of

Power In Collective

Bargaining...........-+++5- 27

1. Preemption Requires

a Substantial Effect

On Negotiation of an

| Agreement and the

| Balance of Power in

| Collective Bargain-

t ” PPPTTIEPI CLE 27

2. The Massachusetts

Statute Lacks a Sub-

stantial Effect On

) Conduct Intended by

| Congress to be Un-

| SOMEEGEES cc ccecccccess 35

a. The Massachusetts

Statute Lacks a Sub-

stantial Effect On

Negotiation of an

Agreement...........--- 35

b. The Massachusetts

Statute Does Not

Affect the Balance

of Power in Collective

Bargaining... .cccccee 36

hasan

Page

B. The Balancing Test Between

State and Federal Interests

Requires a Holding Against

Preemption.......--+++eee% 37

1. The Test for Preemption

Requires a Balancing of

the State Interest in

Regulation Against the

Potential for Inter-

ference With the

Federal Interest...... 37

2. The State Interest in

Health Under the Mass-

achusetts Statute Out-

weighs Its Limited

Effect on the Federal

Policy of Leaving Un-

regulated the Terms

of Agreements.......-- 40

C. The McCarran-Ferguson Act

Establishes a Congressional

Intent to Allow the

Massachusetts Statute..... 42

CONCLUSION... .- cee eee eer ereeeereeere 46

iii

TABLE OF AUTHORITIES

CASES Page

Alessi v. Raybestos-

Manhattan, Inc., 451 U.S. 504..... 8, 14,

4} eer TT TTT 15, 18

Attorney General v. Travelers

Insurance Co., 385 Mass. 598,

433 6.8.24 1223 (1982)... ccccccces 43

Belknap, Inc. v. Hale,..........-- 28, 29,

U.S. — fF XX Sarr. 30, 31,

Bae EOP oe cesecececccecccccoces 33, 35

Blue Cross and Blue Shield of

Kansas City v. Bell, No. 84-2255

(D.Kan., Nov. 7, 1984).......-..+.+-- 17

California Auto. Assn. v.

Maloney, 341 U.S. 105 (1951)...... 2

Donovan v. Dillingham, 688 F.2d

1367 CALS CLE. TOSS). cccccccccces 7

Farmer v. United Brotherhood

of Carpenters & Joiners of

America, Local 25, 430 U.S. ...... 37,

290 (C1977). ccccesccccccccscccccces 38, 40

Page

Hamilton Life Insurance Co. v.

Republic National Life

Insurance Co., 408 F.2d 606

(24 Cir. 1969)... cc cece eeeeeeesees 43

H. K. Porter Co., Inc. Vv.

NLRB, 397 U.S. 99 (1970).........-. 34

Local 24, International

Brotherhood of Teamsters v.

Oliver, 358 U.S. 283

@. ) ) ) er 34

Lodge 76, International

Association of Machinists v.

Wisconsin Employment

Relations Commission, ...........-- 28, 33,

427 U.S. 132 (1976). cccccccccceecs 38, 39

McDonald v. Thompson,

305 U.S. 263 (1938). cc cccccccccee 23

New York Telephone Co. v.

New York State Department of...... 28, 33,

Labor, 440 U.S. 819 .~. cc ceccccves 39, 40,

6, ) RSSPrTT rrr ree 41

Page

Pressroom Union-Printers

League Income Security Fund

v. Continental Assurance Co.,

700 F.2d 889 (2d Cir.), cert.

denied, 104 S.Ct 148 (1983)......-.- 17

San Diego Building Trades

Council v. Garmon, 359 U.S.

236 (1959)... eee cere cence eenrereees 27

S.E.C. v. National Securities,

393 U.S. 453 (1969)... 2.22 e ee eees 19

Shaw v. Delta Air Lines, Inc.,

U.S. » B03 B.CE. coccccecces 8. 15,

2890 (1983)... weer eee eee n er eerees 18

Tuvia Convalescent Center, Inc.

v. National Union of Hospital

and Health Care Employees,

717 F.2d 726 (2d Cir. 1983).......- 17

Wadsworth v. Whaland, 562

F.2d 70 (lst Cir. 1977), cert.

denied, 435 U.S. 980 ....- eee eeeee 21, 22,

CDOTS) cccccccccccccscccccccccccccs 23

STATUTES

Federal

Employees Retirement Income

Security Act of 1974, 29

BS BOGE OR BOR. cdcccccccess

U.S.C.

(ERISA)

Ss.

Cc.

L0O0Z(1). cc cccccces

1003 (8)... ccccccces

1144(G).. cc cccccecs

1132(8). ccc ccccces

Fair Labor Standards Act,

29 U.S.C. § 201 et seq. .......

McCarran-Ferguson Act,

15 U.S.C. § 1011 et seg. ......

1S U.S.C. § LLL. ce ccccccccces

1§ U.S.C. § 1012(a).........26-

156 U.S.C. § 1012(b)....... 0c

156 U.S.C. § 1014... ccc eevece

vii

Page

ll, 22,

25, 26

6, 8,

ll, 13,

14, i7.

18, 25

8, 11

13, 18

20, 25

9, 12,

25. 26

2. 8,

10, 26,

26, 42,

43, 44,

National Labor Relations Act,

29 U.S.C. § 151 et seq. .....-.--. 6. 7.

CWLRA) . ccccccccccccescccccecrccs 9, 27.

TTT TLLILE TLL 35, 41

Pere TT TUTTLE LLL 42

State

Conn. Gen. Stat. Sections:

SES oe ee 3, 4

OOS 8 oe tai oc eeeeen 4

ES. _.bb4sn060800005 000% 4

ee bcc e kee nhehehe’ 4

AUS . 4. i babheeedeseeee 4

| 4

ees i ekheedeena en 4

LO Lee ates eeeceues 4

0a 4

rth S64 ee bebucteccees 4

Er 4

Ee 4

PL cot tee pennsevsaves 4

Ce cue seas bape beneebes 5

TE ee eee cea ee 5

DP. hc kieehescocecenes 7

PLY Oo. SGUb ceeseeeneees 5

DT. pieces eentehnstsivenes 5

Th cen neunneesneeeeenes 5

sn ce ceneneeeeeunees 5

ee bee Cee eens hen eee ©

Conn. Gen. Stat. ch. 692........+.- 5

viii

K.S.A 40-2, 105... cccccceecescces 3

24A M.R.S.A. § 2843

(Supp. 1983-84)... eee eee eee vness 3

Md. Ann. Code Art. 48A,

§ 477E (Michie Supp. 1984)..... 3

Mass. Gen. Laws, ch. 175,

§ 47B (Section 47B)......-+-+++-+- passim

Minn. Stat. Ann. § 62A.152

(West Supp. 1984)........-----: 3

Mont. Code Ann. §§ 33-22-701 to

TOG (1983)... cece cece eccreees 3

N. Y. Insur. Law 162 (16)......---- 3

N.D. Cent. Code § 26-39-03 to

—O4 (1978)... cee eee eee neeeereess 3

Va. Code § 38.1 - 348.7

0) ) 5 eee 3

Wis. Stat. Ann. § 632.89

(West 1980 and Supp.

1983-84). ccc ccccccccescccccess 3

Page

OTHER AUTHORITIES

Brummond, Federal Preemption

of State Insurance Regulation

Under ERISA, 62 Iowa L. Rev.

oe Date web ekaeaesecececes 3, 6

125 Congressional Record

St SPs see eaeeeecedbeoaneeocecec 23

The ERISA Improvements Act

of 1979: Summary and Analysis of

Consideration, United States

Senate Committee on Labor

and Human Resources, 1979......... 23

Kilberg and Inman, Preemption

of State Law Under ERISA:

Drawing the Line Between Laws

That Do and Laws That Do Not

Relate to Employee Benefit

i. Be DUE BEMcceecoceccssccocs 21

Manno, ERISA Preemption and

the McCarran-Ferguson Act: The

Need for Need for Congressional Action,

Se wae me Ge Be BEE Pcccccecece 3

Okin, Preemption of State

Insurance Regulation by ERISA,

Ss. § ££: ,, :) Ferrer 3

Page

Rottman, Rawls, and Gollaher,

National Association of Insurance

Commissioners Statement on

Federal Preemption of State

Insurance Regulation Under

Section 514 of ERISA, 1 NAIC

Proceedings 1977, 237 (July 21.

WTS) acccccccescssecescesccccccces

IN THE SUPREME COURT OF THE UNITED STATES

October Term, 1984

Nos. 84-325 and 84-356

METROPOLITAN LIFE INSURANCE COMPANY,

Appellant,

Vv.

COMMONWEALTH OF MASSACHUSETTS,

Appellee.

THE TRAVELERS INSURANCE COMPANY,

Appellant,

Vv.

COMMONWEALTH OF MASSACHUSETTS,

Appellee.

On Appeal From The Supreme Judicial Court

Of The Commonwealth of Massachusetts

AMICUS CURIAE BRIEF OF THE STATE OF

CONNECTICUT, JOINED BY THE STATES OF

CALIFORNIA, KANSAS, LOUISIANA, MAINE,

MARYLAND, MICHIGAN, MINNESOTA, MONTANA,

NEW JERSEY, NEW MEXICO, NEW YORK, NORTH

CAROLINA, NORTH DAKOTA, SOUTH CAROLINA,

VERMONT, WISCONSIN AND THE COMMONWEALTH

OF VIRGINIA, IN SUPPORT OF APPELLEE

INTEREST OF AMICI CURIAE

This brief is submitted by the

amici states pursuant to Supreme Court

Rule 36.4.

By the McCarran-Ferguson Act. 15

u.S.C. § 1011, et seqg-., Congress re-

established the states' right under their

police powers to regulate the business of

insurance. The Court has recognized the

great public interest which the states

have in regulating insurance and their

commensurate authority: “(Tjhe power of

the state is broad enough to take over

the whole business, leaving no part for

private enterprise." California Auto.

Assn. v. Maloney, 341 U.S. i105, 110

(1951).

Pursuant to this authority, the

amici states have regulated the business

of health insurance by mandating policy

provisions, particularly in group po-

licies. i/ For example, the State of

Connecticut mandates that the following

1/ See generally Brummond, Federal Pre-

emption of State Insurance Regulation

Under ERISA, 62 Iowa L.Rev. 57 (1976);

Manno, ERISA Preemption and the

McCarran-Ferguson Act: The Need for

Congressional Action, 52 Temp. L. Q. 51

(1979); Okin, Preemption of State In-

surance Regulation by ERISA, 13 Forum

652 (1978); Rottman, Rawls, and

Gollaher, National Association of In-

surance Commissioners Statement on

Federal Preemption of State Insurance

Regulation under Section 514 of ERISA, 1

NAIC Proceedings 1977, 237 (July 21.

1976).

Amici states of Connecticut, Kansas,

Maine, Maryland, Minnesota, Montana, New

York, North Dakota, Virginia, and Wis-

consin have mandated benefit statutes

requiring that benefits be provided for

mental health treatment. Conn. Gen.

Stat. § 38-174d; K.S.A. 40-2,105;: 24A

M.R.S.A. § 2843 (Supp. 1983-84); Md.

Ann. Code Art. 48A, § 477E (Michie Supp.

1984); Minn. Stat. Ann. § 62A.152 (West

Supp. 1984); Mont. Code Ann. §§ 33-22-

701 to 704 (1983): N.Y. Insur. Law 162

(16); N.D. Cent. Code § 26-39-03 to -04

(1978); Va. Code § 38.1-348.7 (1981);

Wis. Stat. Ann. § 632.89 (West 1980 and

Supp. 1983-84).

provisions be included in group health

policies: Conn. Gen. Stat. §§ 38-174d

(minimum mental illness benefits).

38-174e (non-termination of coverage for

mentally retarded or physically handi-

capped dependent children), 38-1749

(minimum newborn benefits), 38- 174h

(certain payments to dentists), 38-1741

(minimum drug overdose benefits),

38-174} (prohibition of offsets based on

disability benefits), 38-174k (minimum

home health care benefits), 38-1741

(minimum home health care benefits pro-

vided by a recognized nonmedical

system), 38-174m (minimum loss ratio in

medicare supplement policies), 38-174n

(lien on workers' compensation awards),

38-1740 (standards for third party

prescription programs), 38-174p (offer

of coverage for comprehensive

rehabilitation services), 38-174q

(minimum occupational therapy benefits).

38-262b (minimum alcoholism treatment

benefits), 38-262c (standards for can-

cellation or discontinuance of cover-

age), 38-262d (conversion and extension

rights), 38-262f (offer of coverage for

outpatient treatment of alcoholism),

38-2629 (limitation on spousal premium

charges), 38-262h (spousal coverage as

employee and dependent), 38-262i (mini-

mum benefits for treatment of tumors and

leukemia), 38-262} (prohibition against

age discrimination) and Conn. Gen.

Stat., Chapter 692 (minimum benefits and

policy provisions for group Con-

prehensive Health Care Plans).

Although the statute before the

Court, Massachusetts General Laws,

Chapter 175, 8 47B (Section 47B),

pertains only to mandatory minimum men-

tal health benefits, a holding of pre-

emption under § 514(a) of the Employee

Retirement Income Secucity Act of 1974

(ERISA), 29 U.S.C § 1144(a), would re-

move many other benefits and protections

provided in group health insurance po-

licies enjoyed by the citizens of var-

ious states and throw them into what

some commentators have referred to as

2/ Moreover,

“the requlatory void."

Appellants’ arguments of preemption

under ERISA and the National Labor Rela-

tions Act, 29 U.S.C. § 151 et

2/ Brummond, supra, at 117-20; Rottman,

supra, at 291-97. Additionally, a hold-

ing of preemption would place both the

industry and the state regulators in the

aifficult position of ascertaining

Continued on next page.

ea eC

seq.. (NLRA), if adopted by the Court,

would seriously erode, if not eliminate,

state supremacy in the regulation and

control of the health insurance busi-

ness. Thus, the amici states have sub-

stantial interests in the proper resolu-

tion of the questions presented in these

appeals.

Amici states file this brief in

support of the Commonwealth of Mass-

achusetts urging that the judgment of

the Supreme Judicial Court of the

Commonwealth of Massachusetts be

affirmed.

Footnote 2 continued:

whether the purchaser of a group health

insurance policy is a qualified employee

benefit plan under 29 U.S.C. §§ 1002(1)

and 1003(a) to determine whether state

insurance law applies to the policy.

Donovan v. Dillingham, 688 F.2d 1367

(llth Cir. 1982), provides insight into

some of the difficylties in determining

whether an ERISA-qualified employee

benefit plan does exist.

SUMMARY OF ARGUMENT

A statute of the Commonwealth of

Massachusetts mandating that insurance

companies provide minimum mental health

benefits in general insurance policies

which may be purchased by employee bene-

fit plans does not relate to employee

benefit plans within the meaning of 29

U.S.C. § 1144(a) as construed in Alessi

v. Raybestos-Manhattan, Inc., 451 U.S.

504 (1981), and Shaw v. Delta Air Lines,

Inc., U.S. ° 103 §$.Ct. 2890

(1983).

Even if it were to be found that

such a statute relates to employee bene-

fit plans, it would be saved from pre-

emption under the terms of ERISA'sS sav-

ings clause, 29 =+U«.S.C. § 1144(b)

(2)(A). This is the only result con-

gsonant with the Mccarran-Ferguson Act

and ERISA, 29 U.S.C. § 1144(d), and is

necessary to avoid rendering the savings

clause and the deemer clause, 29 U.S.C.

§ 1144(b)(2)(B) surplusage.

Preemption under the National

Labor Relations Act is based on two doc-

trines, the first preempting state regu-

lation concerning conduct arguably pro-

tected or prohibited by the NLRA and the

second preempting state regulation of

conduct intended by Congress to be un-

regulated. The latter doctrine, which

governs this case, is restricted to

state regulation affecting the balance

of power in collective bargaining nego-

tiations and requires a substantial

effect on such balance of power. The

Massachusetts statute does not affect

the balance of power in negotiations and

does not have a substantial effect on

the negotiation of terms of agreements

in view of its tangential relation as

health legislation to the collective

bargaining process and its tolerance of

the alternative of providing benefits

without insurance.

The doctrine governing this case

recognizes also a balancing of the state

interest in regulation against the

potential interference with the federal

interest. The state incerest in health

underlying the Massachusetts statute

outweighs the limited effect on ne-

gotiation of terms of agreements.

Furthermore, the statute is not

preempted since Congress intended to

allow state regulation of insurance

under the McCarran-Ferguson Act. The

provision of the McCarran-Ferguson Act

for application of the NLRA to the busi-

ness of insurance refers only to the

labor relations of insurance companies.

ARGUMENT

A STATUTE OF THE COMMONWEALTH OF

MASSACHUSETTS MANDATING THAT IN-

SURANCE COMPANIES PROVIDE MINIMUM

MENTAL HEALTH BENEFITS IN GENERAL

HEALTH INSURANCE POLICIES WHICH

MAY BE SOLD TO EMPLOYEE BENEFIT

PLANS ESTABLISHED PURSUANT TO THE

EMPLOYEE RETIREMENT INCOME SE-

CURITY ACT OF 1974, 29 U.S.C. §

1001 ET SEQ.. IS NOT PREEMPTED BY

29 U.S.C. § 1144(a)

The Employee Retirement Income

Security Act of 1974, 29 U.S.C. §

1144(a), provides in part: “Except as

provided in subsection (b) of this

section, the provisions of this sub-

chapter...shall supersede any and all

State laws insofar as they may now or

hereafter relate to any employee benefit

plan...." The noted exception to this

preemption clause, 29 u.S.C. § 1144(b)

(2)(A). is a _ broad savings clause for

certain state laws and reads as

follows: “Except ac provided in

subparagraph (B), nothing in this sub-

chapter shall be construed to exempt or

relieve any person from any law of any

State which regulates insurance, bank-

ing, or securities."

The subparagraph (B) exception to

this savings clause protects only en-

ployee benefit plans and their trusts by

providing that they shall not be deemed,

inter alia, to be an “insurance 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] in-

surance contracts...."

Finally. Congress clearly in-

dicated its intent that ERISA was to

have no effect on any existing federal

legislation by the following language in

29 U.S.C. § 1144(d):

Nothing in this subchapter

shall be construed to alter,

amend, modify, invalidate,

impair, or supersede any law

of the United States (except

as provided in sections 1031

and 1137(b) of this title)

or any rule or regulation

issued under any such law.

Thus, in order to hold that a

state statute mandating that insurance

companies provide specific health bene-

fits in general insurance policies is

preempted by ERISA, the Court must first

find that the statute “relates to" en-

ployee benefit plans for the purposes of

the general preemption clause, 29 U.S.C.

§ 1144(a). If a determination is made

that the statute relates to employee

welfare benefit plans. and a further

finéding is made that the statute does

not regulate insurance within the sav-

ings clause, 29 U.S.C. § 1144(b) (2)(A).

oniy then will the state law be held to

be preempted.

A. The Statute Does Not Relate To

Employee Benefit Plans

In order to come within the ambit

of ERISA preemption, a state law must

“relate to" an employee benefit plan.

In Alessi v. Raybestos-Manhattan,

Inc., 451 U.S. 504, 524 (1981), a New

Jersey workers' compensation statute

banning pension benefit offsets based on

workers' compensation was held to relate

to employee benefit plans within the

meaning of 29 U.S.C. § 1144(a). Having

found that ERISA permitted all employee

benefit plans to make pension benefit

offsets based on workers’ compensation,

the Court concluded that the “relate to”

requirement was met since the New Jersey

statute directly deprived employee bene-

fit plans of a “calculation technique"

permissible under federal law. Id. at

524-25.

In Shaw _v. Delta Air Lines,

Inc., U.S. » 103 $.Ct. 2890, 2900

(1983), the Court held that the New York

Human Rights Law related to employee

benefit plans to the extent that it pro-

hibited practices (providing dis-

criminatory benefits) permitted by

federal law and that, similarly, the New

York Disability Benefits Law related to

employee benefit plans insofar as it

required employers offering the plans to

provide specific disability benefits.

All three state statutes under

consideration in Alessi and Shaw did

“relate to" employee benefit plans be-

cause they applied directly to the plans

and gave the plans no choice but to

significantly change or alter the bene-

fits payable under the plans. In the

present case, however, the state

statute applies only to insurance con-

panies issuing general health insurance

policies which may or may not be pur-

chased by employee benefit plans. The

plans clearly are not forced to comply

with these laws, but may elect to become

self-insurers.

That the state statute at issue

here, Section 47B, applies only to group

insurance policies and not ' employee

benefit plans, is evidenced by the fact

that the action was brought only against

insurance carriers who issue the af-

fected policies and not against en-

ployers or employee organizations who

offer employee benefit plans or the

plans themselves. 3/

To hold that a state statute

applicable only to insurance companies

issuing general health insurance

policies relates to employee benefit

plans and is therefore within the

3/ Indeed, the insurance carriers who

raise the issue of preemption under 29

U.S.C. § 1144(a) in this action would

appear to lack the requisite standing

under ERISA, 29 U.S.C. § 1132(a). had

they attempted to bring suit in their

own right to enforce the preemption pro-

vision of ERISA. Blue Cross and Blue

Shield of Kansas City v. Bell, No.

84-2255 (D. Kan., Nov. 7, 1984) (citing

Tuvia Convalescent Center, Inc. Vv.

National Union of Hospital and Health

Care Employees, 717 F.2d 726 (2d Cir.

1983); Pressroom Union-Printers League

Income Security Fund v. Continental

Assurance Co., 700 F.2d 889 (2d Cir.).

cert. denied, 104 S.Ct. 148 (1983)).

preemptive ambit of ERISA, 29 U.S.C. §

1144(a), would be an unwarranted ex-

tension of the holdings in Alessi and

Shaw, and would make any state law which

regulates or affects a product which an

employee benefit plan may purchase or an

activity in which an employee plan may

engage susceptible to a claim of ERISA

preemption.

B. The Statute Is Expressly Excepted

From ERISA Preemption by 29

U.S.C. § 1144(b)(2)(A)

Expressly excepted from the gen-

eral preemption provided in 29 U.S.C. §

1144(a) is “any law of any State which

regulates insurance...." 29 U.S.C. §

1144(b)(2)(A). A state statute which

mandates minimum benefits in general

health insurance policies sold by in-

surance companies is a law which

regulates insurance. Such a_ statute

directly regulates the relationship be-

tween the insurer and the insured and

has been considered to be at the center

of insurance regulation by this Court:

The relationship between

insurer and insured,’ the

type of policy which could

be issued, its reliability,

interpretation, and en-

forcement-- these were the

core of the ‘business of

insurance.' Undoubtedly,

other activities of in-

surance companies relate so

closely to their status as

reliable insurers that they

too must be placed in the

same class. But whatever

the exact scope cf the stat-

utory tern, it is clear

where the focus was-- it was

on the relationship between

the insurance company and

the policyholder. Statutes

aimed at protecting or regu-

lating this relationship,

directly or indirectly, are

laws regulating the _ ‘busi-

ness of insurance. '

S.E.C. v. National Securities, 393 U.S.

453, 460 (1969).

Several factors dictate that

state mandatcry benefit statutes were

intended by Congress to come within the

savings clause exception, 29 U.S.C. §

1144(b)(2)(A), to the general preemption

provision of ERISA. First, the ex-

ception is written in the broadest lan-

guage possible: “any law of any State

which regulates insurance...." (Emphasis

added). It has been noted that this

savings clause exception to the general

rule of preemption was s0 broad as to

envelop the general rule and made it

necessary to include the deemer clause

exception, 29 U.S.C. § 1144(b)(2)(B). to

the savings clause to prevent the direct

application of state insurance laws

to employee benefit plans and, in ef-

fect, require them to become insurance

4/ The deemer clause

companies.

would be surplusage if Congress did not

consider the savings clause exception to

be extremely broad.

Since the direct application of

state insurance laws to employee benefit

plans is prevented by the deemer clause,

the savings clause must be construed to

encompass insurance laws which in-

directly affect employee benefit plans,

or it, too, would be rendered sur-

plusage. Wadsworth v. Whaland, 562 F.2d

70, 78 (lst Cir. 1977), cert. denied,

435 U.S. 980 (1978).

4/ Kilberg and Inman, Preemption of

State Law Under ERISA: Drawing the Line

Between Laws That Do and Laws that Do

Not Relate to Employee Benefit Plans, 19

Forum 162, 163 (1983).

In 1979, Congress failed to enact

an amendment to ERISA that would have

taken state mandatory minimum coverages

in insurance out of the protection of

the broad exception for insurance laws.

The report of the Senate Committee on

Labor and Human Resources specifically

stated that the proposed amendment was

intended to legislatively overrule

decision of the First Circuit

Wadsworth v. Whaland, supra. The

guage proposed in Senate Bill 209

as follows:

A State insurance law which

provides that a specific

benefit or benefits must be

provided or made available

by a contract or policy of

insurance issued to an en-

ployee benefit plan is a law

which relates to an employee

benefit plan within the

meaning of subsection (a)

and is not a law which regu-

lates insurance within the

meaning of subparagraph

|) ea

the

lan-

read

The ERISA Improvements Act of 1979: Sum-

mary and Analysis of Consideration,

United States Senate Committee on Labor

and Human Resources, 1979, pp. 46, 88;