# Amicus Curiae Brief — District of Columbia v. Greater Washington Bd. of Trade

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385013_0245%3A09

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1992
- **Citation:** 506 U.S. 125

## Text

BEST AVAILABLE COPY

TABLE OF CONTENTS

Page
pp ys. i
ee ie da pas kbs decease 2
SUMMARY OF ARGUMENT .................. 3
EE re 5
I. THE ACT RELATES TO ERISA PLANS,
CONFLICTS WITH ERISA AND IS
eee aan kk 6 oes e646 Rae OO 5
A. The Act Refers Expressly To and
Obviously "Relates To" ERISA
EI a ae 5
1. The Act Seems To Have Been Designed
To Evade Erisa Preemption .............. 5
2. The Act Is Inextricably Tied to
BRIBA-Covered PIQMS 0... ees 7
B. Whether an Employer Amends an Existing
Health Benefits Plan or Sets Up a New
Separate Plan to Comply With the Act,
the Act Will "Relate To" an ERISA
EE er ee eee 9

Il. NO SEPARATE HEALTH INSURANCE PLAN
EXCLUSIVELY FOR WORKERS’ COMPENSATION
com eee eee eee

A. A Typical Example Shows the Problems
ee

B. No Workers’ Compensation Insurance Carrier
Could Write a Separate Health Insurance
Policy To Fulfill the Act’s Requirements .......

Page

Ill. THE ACT’S INTRUSION INTO THE HEALTH
INSURANCE AREA GOES WELL BEYOND THE
PURPOSE, REACH AND MECHANICS OF
WORKERS’ COMPENSATION .............. 15

A. Workers’ Compensation Is Mandatory,
Narrowly Limited and Entorced By
an Elaborate System of Administrative
LOW .. ccc nccee eens be a 15

B. Health Insurance Is Voluntary, Complex,
Has Many Variations and Is Governed By
Contract, Not Administrative Enforcement .... . 17

C. The Act Creates an Unworkable Scheme ...... 19

IV. THE PRINCIPLE OF SHAW V. DELTA
AIRLINES DOES NOT SAVE THE ACT
FROM PREEMGPUIIN «0 nce cceseese eee 22

A. In Shaw New York Tied ERISA-Exempt
Disability Benefits to a Disability
Benefits Statute. Here the District
of Columbia Hangs ERISA-Covered Health
Insurance Benefits Onto a Workers’

Compensation Gimme ... sins sede ee 22
B. Alessi Precludes Approval of the Act ........ 23

C. The Principle Behind the District's
Position Reaches Too Far ............4-. 25
COMCLUGIUM on ccc cece essen eee 27

ee eee

TABLE OF AUTHORITIES

Page
Cases

Alessi v. Raybestos-Manhattan, Inc., 451

ee weet eee ees ccece 4,23,24,26
FMC Corp. v. Holliday, 498 U.S. _, 111 S.Ct.

CMD occ ces scsesecese 9
Fort Halifax Packing Co. v. Coyne, 482

ee cece eee eece 8
Gade v. National Solid Wastes Management

Ass'n, No. 90-1676 (June 18, 1992) ............. 9
Greater Washington Board of Trade v. District of

Columbia, 948 F.2d 1317 (D.C. Cir.

ees es 65 6660s sec e 7,8,9-10
Ingersoll-Rand Co. v. McClendon, 498 U.S.

__, IND S.Ct.__, 112 L.Ed.2d 474 (1990) ......... 9
Mackey v. Lanier Collections Agency, 486 U.S.

Thee ce kee ecco cececesce. 8
Metropolitan Life Ins. Co. v.

Massachusetts, 471 U.S. 724 (1985) ........... 9,18
Morales v. TWA, No. 90-1604, October Term 1990,

60 U.S.L.W. 4444 (June 1, 1992).............. 8-9
Pilot Life Ins. Co. v. Devereaux, 481

PPT TTTETTEL TTT 9
R.R. Donnelley & Sons, Inc. v. Prevost, 915 F.2d

787 (2nd Cir. 1990), cert. denied, _—US.

__, 111 $.Ce. 1415, L.Ed.2d (2991)..... 8,22

Schulist v. Blue Cross of lowa, 717 F.2d 1127
EEE 2!

il
Page
Cases (con't)
Shaw v. Delta Air Lines, Inc., 463 U.S. 85
EE ‘ek si-is sade date e eats eats ... 4,9,22,23
Standard Oil Co. of California v. Agsalud,
633 F.2d 760 (9th Cir. 1980), aff'd,
ee es ee ee Gueeadenmdeaverencase: 17
Statutes and Regulations
Federal
29 U.S.C.
Pre ra ar ore rrr rrr T 2,10
DR .¢6 0066 CSines Cae eee eens cee 8
hs is oe eS oes oa a ceane ee 21
DL cr66<ck ene cee eee ae eee e eae enn l
Dt ib eéeneteeneh ene ne uns sane 17
Employee Retirement Security Act (ERISA)
DT 6606800660665 06%0b606 650 00 45s 2,7,10
DE aenneene66000 600655600 6aSuEeeen 22
Dt csoekeseteesasdoesecanbbeaweeneaee 22
A errrrrrire re cee 8,19,22,25
Dut. Wao oe 66606 e404686% babe 0s OER 21
Dt hee seees ¢eenenne ees eenvaseene 1,8
P.L. 97-473, 96 Stat. 2611, 97th
es SP ED on nccctecesceesessecs 17
29 C.F.R. § 2520.101-l et seg... 2.22. 2 2. 18,21
42 C.F.R. Parts 405, 413, 415, 56 Fed.
SE 3c cebu neeééesn bu berunune 21

Page
Statutes and Regulations (con’t)
District of Columbia
D.C. Code

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Page
Statutes and Regulations (con't)
D.C. Code (con't)
ta din an aaa a 6 awe a8 pererr rT Ta
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ES a ay 16
0 ee ree ‘eeeksaena se 16
Ti. so id's aa Gao ewes wae ead ery,
D.C. COMM Tile SS... ee. Tree eee 21
7 DCMR
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Other
Hawaii Prepaid Health Care Act................ 17
Miscellaneous
1982 U.S. Code Cong. & Admin. News 4595 ....... 17

No. 91-1326

In The
SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1991

DISTRICT OF COLUMBIA
AND SHARON PRATT KELLY, MAYOR,

Petitioners,
Vv.

THE GREATER WASHINGTON BOARD OF TRADE,
Respondent.

On Writ of Certiorari to the
United States Court of Appeals
for the District of Columbia Circuit

Brief of the District of Columbia Insurance
Federation, the National Association of
Independent Insurers, The Alliance of American
Insurers, Liberty Mutual Insurance Company,
PMA Group and Metropolitan Washington Association
of Independent Insurance Agents as Amici Curiae
Urging Affirmance of the Decision Below

The issue in this case is whether the federal Employee
Retirement Income Security Act ("ERISA") § 514(a), 29
U.S.C. § 1144(a), preempts an amendment to the District
of Columbia workers’ compensation legislation styled the

5
_

Equity Amendment Act ("the Act"). D.C. CODE §
36-307(a-1) (1990). The Act would impose a new health
insurance Obligation (a "welfare benefit" under ERISA §
3(1), 29 U.S.C. § 1002[1]), not on all District employers,
but only on District employers who already provide health
insurance to their employees, and only for employees who
have elected to enroll in the health insurance plans offered
by their employers.
INTEREST OF AMICI

The District of Columbia Insurance Federation is an
association of insurance companies that write insurance in
the District of Columbia. Its membership includes most of
the insurers who provide workers’ compensation insurance
to District of Columbia employers. The Alliance of
American Insurers and the National Association of Inde-
pendent Insurers are national associations of insurance
companies that write insurance, including workers’ com-
pensation insurance, in the District of Columbia. Liberty
Mutual Insurance Company is the largest writer of
workers’ compensation insurance in the District and
throughout the United States. PMA Group is a major
regional workers’ compensation insurer in the mid-Atlantic
region, including the District. The Metropolitan Washing-
ton Association of Independent Insurance Agents is an
association of agents who sell insurance policies, including
workers’ compensation insurance policies, in the District.

Collectively, amici represent the major portion of
insurers writing workers’ compensation insurance in the
District and the agents selling such insurance. Although
the Act directs employers to provide the new health
insurance benefits, the burden of carrying out the Act’s
commands falls almost entirely on the workers’ compensa-

3

tion insurance industry; by statute and regulation all
obligations of employers under the workers’ compensation
statute must be secured by insurance unless the employer
is seli-insured. As we show below, the Act is essentially
unworkable. It would place an intolerable burden on
workers’ compensation insurance carriers. They would
fird themselves obliged to provide health insurance benefits
that many workers’ compensation insurers have neither the
experience nor the expertise to write and which in many
circumstances cannot be written at all.

SUMMARY OF ARGUMENT
l.

The District of Columbia has attempted to impose a
health insurance obligation on employers by calling it a
workers’ compensation benefit. No matter how the
employer attempts to comply with the Act, the Act still
would "relate" to ERISA-covered welfare benefit, health
insurance plans. ERISA’s preemption clause covers and
voids this statute.

2.

Under District law most employers would have to
comply with the obligation through their workers’ compen-
sation insurance. Because of the vast differences between
health insurance and workers’ compensation insurance, it
would be impossible for any employer to obtain a separate
insurance policy to cover this obligation, leaving amend-
ment of ERISA-covered existing health insurance plans the
only way to comply.

3.
The Act improperly tacks health insurance benefits onto

a

4

a workers’. compensation statute. States universally

provide for workers’ compensation by law as a trade-off
for relieving employers of tort liability. Health insurance
is voluntary, governed by contract and often comes out of
the tug and pull of collective bargaining. The two insur-
ance systems and the insurance carriers that provide the
coverage are too different to be linked in this way.

4.

Shaw v. Delta Airlines, Inc., 463 U.S. 85 (1983), does
not save the Act from preemption.

a. Shaw held that a New York disability insurance
statute that imposed disability benefits requirements for
pregnancy on employers was not preempted by ERISA.
Disability benefits plans are exempt from ERISA preemp-
tion. A disability insurance plan set up specifically to
comply with the New York statute was within the excep-
tion for disability benefits. The Act is a workers’ compen-
sation statute that imposes health insurance plan obligations
on employers. Health insurance is not exempt from
ERISA preemption.

b. A health insurance plan set up to comply with the
Act is still a health insurance plan and not within the
exception for workers’ compensation benefits. The Act
thereby encroaches on an area of exclusively federal
concern by going beyond the usual purpose and reach of
workers’ compensation. As the Court held in Alessi v.
Raybestos-Manhattan, Inc. , 451 U.S. 504, 525-26 (1981),
ERISA preempts any state enactment that attempts to do
this.

c. If the Act is not held preempted, the door is open to
the states to impose all kinds of health and pension benefits

5

obligations on employers not only through workers’
compensation legislation but also through unemployment
compensation legislation, forcing changes in the terms of
ERISA-covered plans. ERISA’s preemption clause surely
was intended to prevent this.

ARGUMENT

I. THE ACT RELATES TO ERISA PLANS,
CONFLICTS WITH ERISA AND IS
PREEMPTED.

A. The Act Refers Expressly to and Obviously
"Relates to" ERISA Welfare Plans.

1. The Act Seems To Have Been Designed
To Evade ERISA Preemption

The Act and its applicable regulations purport to fold
ERISA-controlled health insurance benefits into ERISA-

exempt workers’ compensation plans. As written, the Act
would

-- require employers who provide health insurance for
their employees to provide "equivalent" health insurance
coverage for participating employees who are injured on
the job and become eligible for worker’s compensation,
including coverage for other family members where the
employee has elected family coverage. D.C. CODE §
36-307(a-1)(1).

-- provide that such health insurance benefits are
payable only when injured employees are "away from
work" due to the work-related injury. /d. § (a-1)(2)(A).

-- require employers to continue such coverage for the
duration of the injury and any recurrences, up to a maxi-
mum of 52 weeks. /d. § (a-1)(1), (3).

6

-- require employers to pay employees’ normal contri-
bution towards their coverage under the health insurance
policy even if, as nearly all employer health plans provide,
employees are obliged to pay a portion of the health insur-
ance premium themselves. /d. § (a-1)(4).

-- appear to require employers to pay the normal
deductible (ordinarily anywhere from $100 to $1,000) and
co-payment (often 20%) that employees usually pay before
the insurer’s obligation kicks in. /d.

-- fix the health insurance benefits to be provided to
injured workers’ compensation-eligible employees as of the
date of an injury, even if the employer or its health
insurance carrier makes a change in the plan or policy
provisions thereafter. /d. § (a-1)(1), 7 DCMR § 213.2

(pending).

-- do not impose any equivalent burden on employers
who provide self- funded health care reimbursement plans,
for example by direct payment to health maintenance
organizations.

-- impose the duties of paying injured employees’
premium shares and providing the health insurance benefits
(i.e. paying the provider or reimbursing employees for
payments to providers for treatment of employees and their
families) on employers’ workers’ compensation insurance
carriers; except for the very few self-insured employers, all
workers’ compensation benefits in the District of Columbia
must be paid for and provided by insurance, D.C. CODE
§ 36-334, and the workers’ compensation insurance
carriers are expressly made responsible for providing the
Act’s health insurance benefits, 7 DCMR § 214.5, 7
DCMR § 213.7 (pending).

7

-- provide no such health insurance benefits for
employees injured on the job whose employers do not offer
health insurance as a fringe benefit or who have declined
employer-offered health insurance.

In summary, the Act requires employers who have
ERISA § 3(1) health insurance plans either to change their
plans to conform with the Act or, theoretically, to maintain
separate health insurance plans for workers who are injured
on the job. By the Act the District seeks to evade ERISA
preemption and substitute state for federal ERISA regula-
tion of employers’ ERISA-covered health insurance plans.

2. The Act Is Inextricably Tied
To ERISA-Covered Plans

On its face the Act’s requirement that employers provide
health insurance coverage to injured workers is couched as
a workers’ compensation benefit. But the Act does not
require all employers to provide health insurance benefits
for all workers’ compensation eligible employees. Greater
Washington Board of Trade v. District of Columbia, 948
F.2d 1317, 1323, 1324 text at n. 21 (D.C. Cir. 1991)
("GWBT"). It reaches only those employers who have
health insurance plans already in place. Its benefits reach
only those employees who already participate in their
employers’ plans. Its mechanism is for the new workers’
compensation health benefit to duplicate whatever benefit
the plan happens to provide as of the date the worker is
injured. It does not cover employers who provide health
benefits to their employees by means other than insurance.
In the simplest terms announced by this Court, the Act
"refers to -- indeed solely applies to -- ERISA employee
benefit plans," is a "state law which singles out ERISA
plans, by express reference, for special treatment," and it

8

therefore "is preempted." Mackey v. Lanier Collections
Agency, 486 U.S. 825, 829, 838 n. 12 (1988).

Both the Second Circuit and the D.C. Circuit agree that
the virtually identical Connecticut and District of Columbia
statutes "relate" to employee benefit plans within the
meaning of ERISA § 514(a). R. R. Donnelley & Sons,
Inc. v. Prevost, 915 F.2d 787, 791-92 (2nd Cir. 1990),
cert. denied, _ U.S. ___, 111 S.Ct. 1415, 113 L.Ed.2d
468 (1991) ("Donnelley"); GWBT, 948 F.2d at 1322.
Donnelley held that the Connecticut statute survived
preemption because it permitted employers to provide the
required health insurance benefits by setting up a separate
health insurance plan for injured employees. The Second
Circuit considered that this would be a plan established
"solely for the purpose of complying with applicable
workmen’s compensation laws," excluded from ERISA
coverage altogether by § 4(b)(3), 29 U.S.C. § 1003(b)(3).
915 F.2d at 793. GWBT held that the Act was preempted
despite § 4(b)(3), because (1) even a separate plan would
tie "the new benefits to existing benefits," 948 F.2d at
1324, (2) the requirements of the Act burdened only
"employers already providing benefits through ERISA
plans," id., and (3) it would undermine "the broad purpos-
es of ERISA preemption," id. at 1325.

Those purposes include protecting ERISA plans from a
"patchwork scheme of regulation" by different states,
which might discourage employers from adopting or
maintaining ERISA plans. /d., quoting Fort Halifax
Packing Co. v. Coyne, 482 U.S. 1, 11 (1987). To serve
those purposes the Court has construed ERISA preemption
broadly and has construed exceptions from preemption
narrowly. The Court reaffirmed § 514(a)’s "broad pre-
emptive purpose" just a month ago. Morales v. TWA, No.

9

90-1604, 60 U.S.L.W. 4444, 4446 (U.S. S.Ct., June 1,
1992), quoting and citing this Court’s ERISA preemption
cases: Ingersoll-Rand Co. v. McClendon, 498 U.S.
(1990); FMC Corp. v. Holliday, 498 U.S. __ (1990);
Pilot Life Ins. Co. v. Devereaux, 481 U.S. 41 (1987);
Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724
(1985), and Shaw v. Delta Air Lines, Inc., 463 U.S. 85
(1983). See also Gade v. Nativnai Solid Wastes Manage-
ment Ass'n, No. 90-1676, 60 U.S.L.W. 4587, 4591-97
(plurality opinion), 4593 (concurring opinion) (U.S. S.Ct.,
June 18, 1992).!

B. Whether an Employer Amends an Existing
Health Benefits Plan or Sets Up a New
Separate Plan to Comply With the Act,
the Act Will "Relate To" an ERISA
Welfare Plan.

If the employer complied with the Act by amending its
existing health insurance plan, the Act not only would
"relate to" but would force a change in an ERISA-covered
plan. The alternative is for employers to set up separate
health insurance plans with benefits "equivalent" to the
covered plan’s benefits (but with a 52 week limit and
100% employer-paid premiums, deductibles and co-
payments). GWBT, 948 F.2d at 1325. The D.C. Circuit
pointed out that even this would "have a serious impact on

"Gade indicates that if there were any doubt about express
preemption here ERISA would nonetheless impliedly preempt the Act.
It "sufficiently interferes with federal regulation" of welfare benefit
plans “to be deemed preempted, because it “directly, substantially,
and specifically regulates" health insurance plans. 60 U.S.L.W. at
4592 (plurality opinion).

10

the administration and context of the ERISA-covered plan."
Id. Any employer contemplating a change in the
ERISA-covered plan would have to consider the equivalent
change in the workers’ compensation health insurance plan
and. as we also noted (p. 8 supra) this could persuade
employers that health insurance plans were more bother-
some than beneficial. /d. Such a resuit is surely contrary
to Congress’ intentions, especially in a time when greater,
not lesser, access to health insurance is a national impera-
tive.

Of course any such new, separate health insurance plan
would itself be an ERISA-covered “welfare benefit plan”
under ERISA § 3(1), 29 U.S.C. § 1002(1), providing
medical, etc. benefits in the event of accident. So however
employers decided to meet the Act's demands, the Act
would "relate" to ERISA- covered plans by tying the
workers’ compensation mandated health insurance to the
benefits stated in the existing ERISA-covered plan and by
requiring employers either to amend their existing ERISA-
covered plans or set up new ERISA-covered plans.

No insurance company will sell and no employer will be
able to purchase such a separate workers’ compensation-
limited health insurance plan.

Il. NO SEPARATE HEALTH INSURANCE
PLAN EXCLUSIVELY FOR WORKERS’
COMPENSATION RECIPIENTS IS
FEASIBLE

Petitioner, its supporting amici and the Second Circuit
all ignore a stubborn fact. In the real world of workers’
compensation, which in the District of Columbia most
employers must provide by insurance, the notion of
separate health insurance plans exclusively for injured

1]

workers, "maintained solely" to comply with the Act,
purportedly a workers’ compensation law, is pure fiction.

A. A Typical Example Shows the Problems
the Act Would Create

Let us consider Mary Smith. Ms. Smith, employed in
the District of Columbia, develops “carpal tunnel syn-
drome," a painful inflammation of the wrists, from the
repetitive motions of her job. It is typical with this
common work-related condition that Ms. Smith is better on
some days than on others. She may be out of work for
several days or several weeks at a time, returning to work
whenever her condition permits. She applies for and
receives workers’ compensation for the wages lost during

the days she does not report for work and for her medical
expenses.

| Ms. Smith has health insurance as a member of a group
insured through her employer. Ms. Smith has family
coverage of her husband and two minor children. The plan
happens to include dental coverage. The cost of the plan
is $450 a month; Ms. Smith pays $100 for her own
coverage and $100 for her family’s coverage. Her em-
ployer pays the other $250, or 55.56% of the total.

Ms. Smith is initially out of work for seven days. For
those seven days, under the Act her employer would be
obligated to pay 100% of her health insurance premium.
So during that month of 21 working days, the employer
would pay the full premium, $150, for the seven days, plus
$144.44 for the rest of the month. Ms. Smith would pay
$166.67. Every time Ms. Smith loses a day of work the
employer would make a similar calculation and every time
the employer would submit a claim for the additional
premium to its workers’ compensation insurance carrier.

12

Then (as they always do) health insurance premiums go
up. To keep its costs from rising, the employer drops the
dental benefits. Ms. Smith’s children need dental work.
Since Ms. Smith had dental benefits on the day she first
"became eligible for workers’ compensation benefits," the
Act requires her employer somehow to provide a dental
benefits insurance plan for the Smith children -- but only
during those days when Ms. Smith is unable to come to
work because her wrist hurts too much. Where is the
employer to find a health insurance plan that provides
dental benefits for only one of its employees (and her
family) and then only on those days when she is away from
work?

Ms. Smith’s carpal tunnel injury does not get better.
She cuts her work back to half time. Now Ms. Smith is
“away from work" half of every day. The employer’s
workers’ compensation insurance policy pays two thirds’
of her lost wages for the half day she does not work. Does
the Act require payment of half of her share of the premi-
um for health insurance? It is common for employer group
health plans to cover only employees who work more than
half time. The Act would seem to require Ms. Smith's
employer to find a separate plan to cover her and her
family for half of each day.

Ms. Smith goes to a new job where no health insurance
is provided at all, or where the health insurance plan
excludes pre-existing conditions. Whenever Ms. Smith's
carpal tunnel syndrome recurs and she is unable to go to
work, her former employer’s workers’ compensation

2See the discussion of the workings of workers’ compensation
at IIIA, pp. 15-17 infra.

13

insurance policy pays her two thirds of her wages lost for
those days. The Act requires the former employer,
through its workers’ compensation insurance carrier, to
provide her and her family with her old health insurance
coverage for those days until 52 weeks are exhausted.’

Ms. Smith’s former employer goes out of business and
its group insurance health plan lapses -- except for Ms.
Smith, since workers’ compensation insurance coverage
(that under the Act now includes health insurance) contin-
ues as long as the worker remains disabled by the work-
related injury. The employer’s workers’ compensation
insurance carrier becomes a health insurance carrier by
force.

The workers’ compensation insurer must calculate the
prospective, combined long-term risks of loss under the
Act taking all of these imponderables into account. It must
charge a premium to the employer that reflects that risk.
For the workers’ compensation insurance industry the Act
would create a nightmare.

B. No Workers’ Compensation Insurance
Carrier Could Write a Separate Health
Insurance Policy To Fulfill the Act’s
Requirements

Mary Smith’s case, repeated many times but with
virtually infinite variations, demonstrates why in the real
world there is no possible separate plan alternative avail-
able even arguably to save the Act from interfering with
ERISA-covered welfare benefit plans or save it from

5Or for the rest of Ms. Smith’s working life if she happened
to work in Connecticut instead of the District of Columbia. The
Connecticut statute does not limit coverage to 52 weeks.

14

preemption. The only kind of separate plan that would
satisfy it is a separate health insurance policy covering an
unknown and unknowable number of Mary Smiths, with
unknown and unknowable health conditions, and for
unknown periods of time up to a potential total of 52 weeks
that could be interpreted to stretch intermittently over
entire working lives. Under the Act that policy would
have to be procured or written by workers’ compensation
insurance carriers that are casualty, not life or health
companies, that ordinarily are not licensed to write or sell
health insurance, that may have no experience in calcu-
lating the risks involved in health insurance to set premium
rates and whose premium rates would have to be approved
by regulators.

No workers’ compensation insurance carrier presently
writes such a policy or is likely to be able to do so.
Employers would be able to satisfy the Act only in one
way. They would have to amend their existing health
insurance plans and claim reimbursement from their
workers’ compensation insurance carriers for the additional
costs. In turn, the workers’ compensation carriers would
then satisfy their statutory duties by reimbursing employers
for the premium share of injured employees who are
participants in the plan, the additional premium for family
coverage of such injured employees with family coverage
and the deductible and co-payment obligations of injured
employees in the event of non-work-related illness or injury
a the period of work-injury-related disability (up to 52
weeks).

There can be no doubt that Congress’ ERISA preemption
provision was designed to prevent such results of state
meddling with ERISA-covered plans.

15

Ill. THE ACT’S INTRUSION INTO THE HEALTH
INSURANCE AREA GOES WELL BEYOND
THE PURPOSE, REACH AND MECHANICS
OF WORKERS’ COMPENSATION

A. Workers’ Compensation Is Mandatory,
Narrowly Limited and Enforced By
an Elaborate System of Administrative
Law

The District’s workers’ compensation statute is a typical,
comprehensive procedural and substantive scheme for
accomplishing a specific, narrow purpose -- payments for
all work-related injuries -- in a speedy, efficient way. It
covers work-related injury to or death of all employees
working in the District of Columbia for all employers
except the United States and District of Columbia govern-
ment and the United States Congress. D.C. CODE §§ 36-
301(9), (10), (12), 36-303(a). Compliance is mandatory.
Employers’ liability attaches regardless of fault, § 36-
303(b). Employers are absolved from any other liability to
anyone and employees’ right to workers’ compensation is
exclusive of other remedies, § 36-304(a), (b). That is, the
workers’ compensation remedy replaces any tort remedy.

Compensation payable for permanent total disability as
income replacement is limited to two thirds of an
employee’s average weekly wage, §§ 36-308, 36-311. It
is further limited to the overall average weekly wage in the
District of Columbia or $396.78, whichever is greater, §
36-305. The base for the two thirds figure is the
employee’s “wage loss," i.e. it is reduced by the amount
he is able to earn despite the disability, § 36-308. The
average weekly wage includes the value of board and
lodging, but no other fringe benefits like health insurance.

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(A few states do include the value of health insurance
premiums in the wage base.)

Weekly payments for total disability continue as long as
the disability continues. Partial permanent disability is
compensated according to a schedule specifying a certain
number of weeks of compensation for the loss, e.g., of an
arm (312 weeks), eye (160 weeks), hearing in both ears
(200 weeks), etc. § 36-308.

Compensation also includes 100% of employees’ medical
expenses resulting from the injury, including rehabilitation
services. § 36-307(a). There are no deductibles or co-
payments. In the case of death the employee's relicts
receive up to $5,000 for funeral expenses; his widow or
her widower receive 50% of the deceased’s average wages;
surviving children divide another 16 2/3%, raised to 50%
upon the death or remarriage of the widow or widower.
§ 36-309. Employers must report all worker injuries to
District authorities and keep a record of them, §§ 36-332,
36-331. They must post notices regarding workers’
compensation rights and coverage.

An employer may challenge an employee’s claim for
workers’ compensation on the ground, inter alia, that the
injury was not work related. §§ 36-303(d), 36-320, 36-
322. If one does, a full evidentiary hearing is held and the
decision is appealable to the District of Columbia Court of
Appeals, §§ 36-322, 36-329. If the employee then pre-
vails he is entitled to payment of his attorney’ fees by the
employer. § 36-330.

Employers are required to "secure" payment of workers’
compensation benefits by insurance issued by an approved
insurance carrier. §§ 36-334, 36-336, 36-338. Premium
rates are regulated. §§ 35-1514(2)(A), 35-1702(3). Policy

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provisions are clear and simple; they cover whatever the
applicable workers’ compensation law requires. Employers
may apply for and obtain permission to self-insure. § 36-
334. Only a few very large employers do so.

All carriers and self-insured employers contribute to a
special "second injury" fund that is used primarily to pay
compensation for recurrence of an injury. § 36-340. The
Act uses the special fund as the means for payment of the
new health insurance benefits. Carriers and self-insured
employers would pay into the fund and be reimbursed from
the fund for the costs of the new benefits. D.C. CODE §
36-307(a-1)(5); 7 DCMR § 213.4 (pending).

B. Health Insurance Is Voluntary, Complex,
Has Many Variations and Is Governed By
Contract, Not Administrative Enforcement

None of these administrative, procedural and substantive
requirements apply to employer-provided health insurance.
No state does, nor consistently with ERISA may, require
employers to provide health insurance. By Congress’
design in.ERISA, non-unionized employers are free to
design plans that make economic sense for them, while
unionized employers are free to negotiate such plans with
the employees’ unions as their relative bargaining strength

“Except Hawaii, by Congress’ express but limited exemption
of the Hawaii Prepaid Health Care Act from § 514(a) of ERISA.
P.L. 97-473, § 301(a), 96 Stat. 2611, 97th Cong., 2nd Sess. (1983),
codified as 29 U.S.C. § 1144(6)(5). The exemption was enacted to
reverse Standard Oil Co. of California v. Agsalud, 633 F.2d 760 (9th
Cir. 1980), aff'd, 454 U.S. 801 (1981), in which the Hawaii Act was

held preempted by ERISA and void. See 1982 U.S. Code Cong. &
Admin. News 4595.

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permits and the economic mix of wages and benefits
commend to them. Some plans offer a choice (a "cafete-
ria") of benefits for employees to choose from. Many
plans provide optional coverage for the employee’s family.

By Congress’ design in ERISA’s preemption clause,
States may neither interfere with, mandate changes in nor
regulate such employer welfare plans, save as they may
regulate the business of insurance, see, e.g., Metropolitan
Life Ins. Co. v. Massachusetts, 471 U.S. 724 (1985).°
Employer welfare benefit plans need not file reports about
employee claims with state authorities. Instead they must
file elaborate reports with the Secretary of Labor, see 29
C.F.R. §§ 2520.101-1 et seg. No administrative agency
adjudicates disputes over the validity of a health insurance
claim or over the amount to be paid to a provider.

Employers and their plans are under no legal obligation
to provide 100% or any percentage of medical expenses for
a covered illness or non-work-related injury. Employers
and their plans may require employees to pay any percent-
age of the premium cost for themselves and for their
families. Plans normally require employees to pay a flat

‘The District has enacted several provisions regulating the health
insurance industry. Statutes prescribe coverage for Medicare
supplement policies, D.C. CODE §§ 35-2201 ef seqg., require
coverage for newborn infants, drug abuse, alcohol abuse and mental
illness in all health insurance policies, §§ 35-1101 et seg., 35-2601
et seq., restrict health insurers’ ability to exclude coverage of HIV
infections or AIDS, §§ 35-221 ef seg., require approval of the
coverage and premium rates of and prescribe that certain provisions
be included in all individual (i.e. non-ERISA-covered) health
insurance and accidental injury policies, §§ 35-517, 35-1532, require
coverage for treatment by psychologists and optometrists, § 35-530,
and regulate credit health insurance, §§ 35-1001 et seq.

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deductible amount and co-pay a percentage (typically 20%)
of medical expenses incurred up to some maximum.
Employees are free to decline coverage for themselves (if,
for example, a spouse’s plan is cheaper or has better
coverage) or for their families, keeping the premium
contribution they otherwise would have to pay.

Health insurance policies contain elaborate provisions
regarding, for example, coverage of pre-existing conditions
and "experimental" treatment, and respecting "participat-
ing" vs. non-participating providers, upper limits of
liability, restrictions on reimbursable hospital accommoda-
tions, and so forth. Benefits and premiums vary widely.

By loading a health insurance benefit onto a workers’
compensation law, the Act strays too far from the generally
understood definition, scope, purpose and mechanics of
workers’ compensation to be considered a "“workers’
compensation law" under ERISA § 4(b)(3). Most impor-
tant, by limiting its reach to employees who already
participate in employer-paid health insurance, the Act does
violence to a cardinal principle that has informed workers’
compensation statutes since the first one enacted in 1910:
that they protect all employees of all covered employers.

C. The Act Creates An Unworkable Scheme”

By definition, the Act applies only to employers who
already provide medical benefits to their employees
through health insurance policies. Those insurance policy
plans would continue to be covered by ERISA and federal
regulation. They would continue to be administered by
experienced health insurance carriers. They would contin-
ue to provide specified benefits that may change by
contract between employers and carriers. Such plans
feature employee-paid premium contributions, deductions

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and co-payments and cover illnesses and injuries of all
participating employees and their families (if family
coverage has been elected) at all times.

Any plan amended or created to comply with the Act
would create, in the guise of a workers’ compensation
benefit, a special, constantly changing class of health
insurance beneficiaries with benefits and premium obliga-
tions governed by District of Columbia law and regulation
and not by contract, ERISA and federal regulation. The
members of this class would be absolved from premium
contributions (and perhaps from deductibles or co-pay-
ments). They would receive benefits that do not change as
they do for all other covered employees if the contract
changes. Their benefits would be fixed as of the date of
injury, but only for the time that they were away from
work and only up to a maximum of 52 weeks. As soon as
they return to work their benefits revert to the provisions
of the employer's general health insurance plan, which may
have changed since the injury. The Act’s lack of a
contrary provision indicates that the 52 week period may
be a "bankable," as opposed to a calendar, 52 weeks; i.e.
the benefits may be available during recurrences of the
injury however separated in time until the 52 weeks are
used up, even if that is many years. -

The separate class of employees would number between
none and many at any particular time. It would change
constantly, including only those employees who were
injured on the job and are away from work, but not even
all of them; the Act’s benefits cover only injured employ-
ees whose employers provide medical benefits through
insurance, and who already participate in the employer’s
insurance plan.

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Workers’ compensation insurance carriers would have to
provide these benefits. Workers’ compensation insurance
carriers are Classified as "casualty" insurers, regulated
under Chapter 15 of D.C. CODE Title 35. Health insurers
are classified as "life and health" insurers and are regulated
under Chapter 5 of D.C. CODE Title 35. Workers’
compensation insurers often have no experience in health
care claims evaluation, health care costs, health benefits
administration or the increasingly complex federal- private
cost limitation and reimbursement system.® They never-
theless may well become subject to a whole range of
ERISA reporting obligations respecting their performance
of the Act’s health insurance requirements. See ERISA §
103, 29 U.S.C. § 1023; 29 C.F.R. § 2520.101-1 et seq.;
Schulist v. Blue Cross of lowa, 717 F.2d 1127, 1132-33
(7th Cir. 1983).

To sum up: the problem the Act creates for the work-
ers’ compensation insurance industry arises directly from
the difficulty of attempting to force one kind of insurance
-- health insurance -- into a totally different kind of insur-
ance scheme, namely workers’ compensation.

*See, e.g., the new federal Health Care Financing Administration
("HCFA") regulations which mandate specific allowable physician,
hospital, therapist and other health care provider fees for over 10,000
different medical services. 42 C.F.R. Parts 405, 413, 415, 56 Fed.
Reg. 59501 et seg. (1991), “Medicare Program; Fee Schedule for
Physicians’ Services, Fee Schedule Update for Calendar Year 1992
and Physician Performance Standard Rates of Increase for Federal FY
1992; Final Rules and Notice."

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IV. THE PRINCIPLE OF SHAW V. DELTA
AIRLINES DOES NOT SAVE THE ACT
FROM PREEMPTION

A. In Shaw New York Tied ERISA-
Exempt Disability Benefits to a
Disability Benefits Statute. Here the
District of Columbia Hangs ERISA-
Covered Health Insurance Benefits
Onto a Workers’ Compensation Statute.

Petitioner, its allied amici and the Second Circuit all
have ignored a crucial and dispositive difference between
the disability insurance law that Shaw approved and a
health insurance law that is labeled "workers’ compensa-
tion" like the Connecticut statute approved in Donnelley
and the Act at issue here.

The Shaw statute required employers to extend disability
insurance to pregnant women. State-mandated disability
insurance is a plan expressly exempted from ERISA § 4(a)
coverage by § 4(b). The statute’s impingement on ERISA-
covered plans was accidental. It arose only from the
circumstance that many employers included disability
benefits in multibenefit welfare plans that included other
benefits such as health insurance. Shaw, 463 U.S. at 92,
106-07. What saved the New York statute was the
hypothesis that employers could satisfy it by setting up a
separate pregnancy-disability plan. That would be a plan
set up "solely" to comply with a state disability insurance
law, exempt from ERISA under § 4(b)(3). It would be an
employer disability income plan set up to comply with a
disability insurance statute: apples and apples.

The Connecticut and D.C. statutes are not apple-apple
Statutes like the Shaw statute. Accepting (as the Second

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Circuit and D.C. Circuit did) the applicability of the Shaw
hypothesis of a separate health insurance plan for injured,
workers’ compensation eligible employees, the Connecticut
and D.C. statutes are apple-orange statutes. That is, they
would have employers -- but only employers who already
have ERISA-covered health insurance plans in place -- set
up a health insurance plan to comply with workers’ com-
pensation laws.

The impingement of these statutes on ERISA-covered
plans is not accidental as it is with the Shaw statute.
Rather it is the essence of the Connecticut and D.C.
statutes. Their reach is both defined by and confined to
ERISA-covered welfare plans and the employers who have
them. Their purpose and effect is to impose new, non-
contractual burdens on employers who offer ERISA-
covered welfare benefits, which by definition are volun-

tary.
B. Alessi Precludes Approval of the Act

This Court already has rejected a similar state effort to
encroach on an ERISA-protected preserve via a purported
workers’ compensation law. In Alessi v. Raybestos-
Manhattan, Inc., 451 U.S. at 521-26, the Court struck
down New Jersey legislation that forbade employers to
offset workers’ compensation payments against retirement
pension benefits. ERISA preempted and voided the statute,
because it "related" to ERISA-covered pension plans and
was an impermissible intrusion into an ERISA governed
area.

The Court held that ERISA preempted "even indirect
state action bearing on private pensions" because it "may
encroach upon the area of exclusive federal concern....
ERISA’s authors clearly meant to exclude the States from

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avoiding through form the substance of the preemption
provision." 451 U.S. at 525. The holding applies equally
to ERISA welfare benefit plans, equally protected from
state encroachment by ERISA preemption.

Alessi also resolves the confusion about preemption and
exemption from preemption that infects petitioner’s and its
allies’ briefs. "The only relevant state laws, or portions
thereof, that survive ... preemption ... are those relating to
plans that are themselves exempted from ERISA’s scope."
451 U.S. at 523 n. 20. On the other hand, the ERISA
exemption "for plans maintained solely for compliance
with state workers’ compensation laws -- has no bearing
on ... plans ... which more broadly serve employee
needs...." /d. (emphasis is the Court’s).

Here the Act is a "portion" of a workers’ compensation
law that undeniably affects "plans which more broadly
serve employee needs," to wit, by requiring either amend-
ment of employers’ existing medical benefit health insur-
ance plans or by requiring establishment of new ones.
Health insurance "more broadly serves employee needs”
than the kind of benefits workers’ compensation laws
provide. The "need" it serves, comprehensive health
protection for the whole family, is not a need traditionally
served by the workers’ compensation legislation that
Congress had in mind when it exempted workers’ compen-
sation from ERISA coverage. See pp. 15-17 supra.

The Act impermissibly encroaches on an “area of exclu-
sive federal concern." Moreover, its approval would open
the door to far greater encroachments.

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C. The Principle Behind the District’s
Position Reaches Too Far

The potential reach of the principle behind petitioner's
position is vast. If this amendment to a workers’ compen-
sation law may lawfully expand ERISA health insurance
benefits, another amendment to a workers’ compensation
law could expand pension benefits. It could, for example,
require employers to begin paying pension benefits to
injured employees for the duration of their injuries (as in
Connecticut) or for 52 weeks (as in D.C.). It could
require these payments whether employees are vested or
not and whether they have reached retirement age or not.
Alternatively such an amendment could require employers
to continue contributing to injured employees’ pensions
even if the plan provided otherwise.

The principle would allow imaginative state legislators
to load similar provisions onto unemployment compensa-
tion laws, also exempt from ERISA under § 4(b)(3). If
petitioner’s argument is accepted, state legislatures could
require employers indefinitely to continue health insurance,
to contribute to pensions or to pay pension benefits for
fired or laid-off employees, no matter what their ERISA
plans provided.

The principle also could work the other way.
Petitioner’s and its allies’ position would permit state
legislatures to enact workers’ compensation amendments
that absolved employers from paying any health insurance
benefits to injured employees beyond paying for treatment
for the injury even though the bargained-for ERISA
welfare plan required their continuation. It would permit
workers’ compensation amendments that allowed employers
to stop contributing towards the injured employee’s pension

a
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even though the bargained-for plan required such contribu-
tions to continue.

In sum, the kinds of welfare and pension benefits that
employers provide to employees would not depend on
collective bargaining agreements protected since the
Wagner Act’ by federal regulation nor would they be
subject only to the commands of ERISA and its regula-
tions. Instead they would be subject to the political winds
blowing from whichever side, labor or management, had
more political influence from state to state. Congress
surely never intended such chaos.

"The Court noted in Alessi:

Where, as here, the pension plans emerge from
collective bargaining, the additional federal interest in
precluding state interference with labor-management
negotiations calls for preemption of state efforts to
regulate pension terms.

451 U.S. at 525.

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CONCLUSION

The decision of the U.S. Court of Appeals for the
District of Columbia Circuit should be affirmed.

Respectfully submitted,

LAWRENCE H. MIREL*
1614 Twentieth Street NW
Washington, DC 20009
(202) 265-8017

WILLIAM A. DOBROVIR
1614 Twentieth Street NW
Washington, DC 20009
(202) 483-7985

Attorneys for Amici Curiae

*Counsel of Record

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385013_0245%3A09. Public record. Not legal advice.