Amicus Curiae Brief — New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co.

i wl

COME ES

Nos. 93 - 1408, 93-1414, 93-14

In The | cies

, 13 1994

Wnited States ————2 2

Supreme Court of | the,"

October Term, 1994

ae

NEW YORK STATE CONFERENCE OF BLUE

CROSS AND BLUE SHIELD PLANS and

EMPIRE BLUE CROSS AND . BLUE SHEILD,

Petitioners,

~against-

THE TRAVELERS INSURANCE COMPANY, ET AL.,

Respondents.

(caption continued on reverse)

On Writ of Certiorari to the United States

Court of Appeals for the’ Second Circuit

BRIEF FOR TRUSTEES OF AND THE PENSION,

HOSPITALIZATION BENEFIT PLAN OF THE

ELECTRICAL INDUSTRY AND TRUSTEES OF

AND UNITED FOOD AND COMMERCIAL

WORKERS LOCAL 174 HEALTH CARE FUND,

TRUSTEES OF AND UNITED FOOD AND

COMMERCIAL WORKERS LOCAL 174 RETAIL

WELFARE FUND AND TRUSTEES OF AND

UNITED FOOD AND COMMERCIAL WORKERS

LOCAL 174 COMMERCIAL HEALTH CARE FUND

AS AMICI CURIAE SUPPORTING RESPONDENTS

EDWARD J. GROARKE

COLLERAN, O’HARA & MILLS

Attorneys for Amici Curiae

¥ 1225 Franklin Avenue - Suite 450

: Garden City, New York 11530

(516) 248-5757

BEST AVAILABLE COPY!

od

‘"

‘va. %

—™

. aim Je bbe thd)! § Ro eee Oe. ©. 6 FT /=" ) a +

MARIO M. CUOMO, ET AL.,

Petitioners,

~against-

THE TRAVELERS INSURANCE COMPANY, ET AL.,

Respondents.

HOSPITAL ASSOCIATION OF NEW YORK. STATE,

Petitioner,

-against-

THE TRAVELERS INSURANCE COMPANY, ET AL.,

Respondents.

“BE

ee ees Ei ee

T AVAILABLE COPY) "m=

Peay

~~ “AE

te i ee ee i Re ee i

a vw’ i) A i _ 77, >? 7 7) ae ANY sTTi pam. ia 3 + BP i we ~ o> be Oe XA wr 7 AD ov VvvNqw™}

a

nN Y w

eae

¥ ."< 7 \ a : 4

TEN Tere aay NAY i

TABLE OF CONTENTS

. ™ £47 Vi >> 7 \. 8 wR oo bakes bee By Sa Me » oF

Are Pay waa), PP a all VQ A ay | \) ay Saver Ss

li

Contents

Page

Table of Authorities

Cases Cited:

Connecticut Hospital Assn. v. Pogue,

F. Supp. (@. Conn. Nov. 17, 1994)............... 10

District of Columbia v. Greater Washington Board of Trade,

506 U.S. S FSS | See 5

Fort Halifax Packing Co. v. Coyne,

Oe ile i 5

Ingersoll-Rand v. McClendon,

ee ee EF nn cm 5

New England Health Care Employees Union District 1199,

SELU. etal v. Mount Sinai Hospital,

846 F. Supp. 190 (D. Conn. 1994)... 9, 10n

NYSA-ILA and Clinical Services Fund v. David Axelrod

MD.,

££ 3 § { BF Grae a 11

Rebaldo v. Cuomo,

749 F.2d 133 (2d Cir. 1984), cert. denied 472 US.

ET AAT: Re aa, On TR 7

Shaw v. Delia Air Lines, Inc.,

I i 5

Travelers Ins. Co. v. Cuomo,

PO ee Cy i cetientiiecteceecsteenstnienisnnttven 6, 7,9

; Trustees of and The Pension, Hospitalization Benefit Plan

of the Electrical Industry et al. v. Cuomo,

WI SU ROY OO Ra OL IAI SPU Sa gy ee

iti

Contents

Page

Cases Cited: (continued)

United Wire, Metal & Mach., Health & Welfare Fund v.

Morristown Memorial Hosp.,

995 F.2d 1179 (3d Cir.), cert. denied, 114 S.Ct 382

EES LS Ae le ea 7 7,9

Statutes. Laws and Rules Cited:

Labor-Management Relations Act §302 0000000000000. l

i ee 1

i l

__ 1

29 U.S.C. §§1103(cX1) and 1104(a\1A)..................... 3n

ET 10

Se 10

ERLS.A. §403(cX1) amd 404(a) 1A) oo ccc cccccceceeeeeee. 3n

Ia 2, 5,

ee ae Se a ee ee 6, 10

DEE a a ea aa 10

Internal Revenue Code §162(m) ........0.0.....cccccccesecceceseeeeeeeveeee 8n

New York Public Health Law (“P.HLL.”) §2007-c(1)()...... I

aT 11

§2807-<( 1 Xa\iii) 2

§2807-<(1)d)...... 3

§2807-<(14\a)-{c) 2

Omnibus Budget Reconciliation Act of 1993, Pub. L. No.

BOS-G6 §13442, 107 Gems. SOG... cccccecececececcocecececereses 8n

‘ ; -

~ shh ; 7" ,&

@h

eh | ite PS ay paw

) 4 ‘. 4 ; : a Lut, i

aE SAS 2) a 2p Ae

SARS PR NYG RQ PC DAY RY OMAR AQ NE OL Qa LGD HA

Nos. 93 - 1408, 93-1414, 93-1415

SSsSseGVGSC7T3TVNNN—"wwwowowsxyoepamaDl]™"SSSSS

In The

Supreme G@ourt of the

Gnited States

MARIO M. CUOMO, ET AL.,

Petitioners,

THE TRAVELERS INSURANCE COMPANY, ET AL.,

Respondents.

HOSPITAL ASSOCIATION OF NEW YORK STATE,

Petitioner,

-gainst-

THE TRAVELERS INSURANCE COMPANY, ET AL.,

Respondents.

On Writ of Certiorari to the United States

Court of Appeals for the Second Circuit

SS

BRIEF FOR

aS

WOK yy Ay i BIRT, SR PM YO “PP Oe Youu en gaye

STATEMENT OF THE AMICI CURIAE

This Memorandum is submitted on behalf of the

amici curiae, TRUSTEES of and THE PENSION,

HOSPITALIZATION BENEFIT PLAN of the ELECTRICAL

INDUSTRY (“ELECTRICAL INDUSTRY PLAN” or

“PLAN”) and THE TRUSTREES of and UNITED FOOD

AND COMMERCIAL WORKERS LOCAL 174 HEALTH

CARE FUND, TRUSTEES of and UNITED FOOD AND

COMMERCIAL WORKERS LOCAL 174 RETAIL

WELFARE FUND, as well as THE TRUSTEES of and

UNITED FOOD AND COMMERCIAL WORKERS LOCAL

174 COMMERCIAL HEALTH CARE FUND (collectively,

“U.F.C.W. FUNDS” or “FUNDS”), in support of the

arguments raised by the Respondents on this appeal

Each of the amici plans is an “employee welfare

benefit plan” as defined in the Employee Retirement

Income Security Act of 1974, as amended (“E.R.1S.A.”).

See 29 U.S.C. §1002(3). The trustees of each plan are

fiduciaries as defined in ERISA See 29 USC.

§1002(21). The plans are established and maintained

gpa Por Ma hr age 7 an 2m mm

(100%) percent coverage for all

hospitalization charges. Each plan was established

pursuant to the Labor-Management Relations Act §302,

29 U.S.C. §186, and operates on a self-insured basis

(“P.H.L.”) §2007-c{1)(b), the rate of reimbursement to

hospitals for care rendered to inpatients enrolled in a self-

el

we aye

(jee: MELEE bE

rt aide ih

Me LEA ; pits ip 7 i

Weebl thik Ue

ii a chuaitte

MEHTA ey HIE | hes

3

theories for the trial court in 7rustees v. Cuomo, as well

as to demonstrate to this Court the repercussions of its

holding at bar, the amici curiae submit this Memorandum

in support of the Respondents in this appeal.

funds are referenced in P.H.L. §2807-c(1\b), the thrust

of the underlying action has been focused on the

shall emphasize the concerns of Taft-Hartley self-insured

funds so that this Court will become cognizant of the

dramatic consequences of the thirteen (13%) percent

“payor differential” on all such plans which must live

with its wrath.

ARGUMENT

The ELECTRICAL INDUSTRY PLAN and the

U.F.C.W. FUNDS each pay approximately six (6%)

percent on bills it receives from its participants and their

beneficiaries for bad debt and charity care (“B.D.C.C.”).

When coupled with the thirteen (13%) payor differential,

this Court can see that these surcharges create a

a

a

!

cripple

plans.

PLAN

balance

Ske r

deductible for both individual and family subscriptions to

that welfare plan. The schedule of reimbursement for

5

The PHL. subjects the ELECTRICAL

INDUSTRY PLAN (which has participants in numerous

states) to inconsistent state regulation since the PLAN is

required to pay for services rendered in hospitals in other

states. For instance, the B.D.C.C. surcharge is not

universal. It is just such “patchwork regulation” which

E.R.ILS.A. was designed to eliminate. Fort Halifax

Packing Co. v. Coyne, 482 U.S. 1, 9 (1987); Shaw v.

Delia Air Lines, Inc., 463 U.S. 85, 99 (1983) quoting

Representative Dent and Senator Williams.

As _ self-insured funds, the amici curiae have

demonstrated in 7rustees v. Cuomo that these surcharges

result in direct out-of-pocket losses constituting reduction

in fund reserves. As a result, the self-insured welfare

Washington Board of Trade, 506 U.S. , 113° S.Ct.

580, 583 (1992); Ingersoll-Rand v. McClendon, 498 U.S.

133, 111 S.Ct. 478, 483 (1990). Specifically,

Hi

im

i

[

iF

Bus

ne

ih

ft

ps

The Circuit Court in Travelers Ins. Co. v. Cuomo,

14 F.3d 708 (2d Cir. 1993), held that the thirteen (13%)

percent payor differential was preempted by E.R.1S.A.

§514(a) since the state law has a “connection with” an

Hl

it

af

:

i

£

f

,

4

\o

7

employee welfare benefit plan. The Circuit Court

rationalized its holding by stating that the state statute

had an indirect economic impact upon E.RILS.A. plans

which was substantial and impermissibly affected the

structure, administration, or the type of benefits furnished

by the welfare plan. “The surcharges substantially increase

the cost to ERIS.A. plans of providing beneficiaries

with a given level of health care benefits.” Jd at 720.

Additionally, the thirteen (13%) percent payor differential

effects the plan’s determination of how best to fund their

level of benefits.

In the Travelers case, the Circuit Court drew the

following conclusions of law which are of great

importance to the amici curiae in Trustees v. Cuomo

which they would like to see this Court adhere to in its

decision on this appeal:

a) the challenged surcharges “relate to” E.R.1S.A.

plans because they have a “connection with” such plans;

b) Rebaldo v. Cuomo, 749 F.2d 133 (2d Cir.

1984), cert. denied 472 U.S. 1008 (1985) is no longer

good law;

c) disavowed the Third Circuit’s majority ruling in

United Wire, Metal & Mach., Health & Welfare Fund v.

Morristown Memorial Hosp., 995 F.2d 1179 (3d Cir.),

cert. denied, 114 S.Ct. 382 (1993) and cited favorably to

Judge Nygaard’s dissent in that case;

d) the thirteen (13%) percent payor differential

“ force[s] E.R.1.S.A. plans to increase either plan costs

or reduce plan benefits”, id. at 720, thus, impermissibly

affects the structure, administration, or the type of

benefits furnished by a plan; and

e) found that differentials in rates of payment to

hospitals by various classes of payors “...purposely

interfere with the choices that E.R.1.S.A. plans make for

benefits.” Jd. at 719-720.°

4.

Hs;

i ul

benefit

of their employees. “The Act provides a conduit by

which money is transferred from, among others,

E.R.1S.A. plans to hospitals. Rather than spend its own

general funds, New Jersey implemented a money transfer

scheme where E.R.1.S.A. plans subsidize the medical bills

of those who are favored by law.” United Wire, Ibid,

995 F.2d 1179, __ (3d Cir. 1993), quoting from Judge

Nygaard’s dissent.

5. Recent Law:

Despite Petitioners’ claim to the contrary in

Trustees v. Cuomo, the B.D.C.C. add-on is

cost of doing business. Such surcharge differs from

knew could not pay in full. Additionally, in the

marketplace, vendors spread their bad loss (as the amici

curiae contend is appropriate) throughout its entire

customer base and not a few “well-heeled” customers.

Recent opinions filed since the Circuit Court ruled

in Travelers further justify the amici curiaes’ claims and

negate: Petitioners’ defenses in Trustees v. Cuomo. In

New England Health Care Employees Union District

1199, S.E1.U. etal. v. Mount Sinai Hospital, 846 F.

Supp. 190, 198-199 (D. Conn. 1994), then Chief Judge

10

Cabranes held that Connecticut's Uncompensated Care

ieeedegpiiay 4% P

Pari ite He ii TE A ay i!

HEN HL

HEA HAE wy ae

: : s/t}

e

U.S.C. §1144(a). Judge Cabranes also denied kA yt

“impair” another federal statute, thus, it gh

by ERIS.A. §514(d), 29 U.S.C. 11

Pool Act was preempted by ERISA §514(a), 29

onan is ba a general

ll

two medical centers operated by an employee welfare

benefit fund was preempted by E.RIS.A. NYSA-ILA and

Clinical Services Fund v. David Axelrod, M.D., 27 F.3d

823 (2d Cir. 1994). The Court reasoned that P.H.L.

§2807-d has a “connection with” the employee welfare

benefit fund since the state mandated tax will cause the

fund to reduce benefits and/or increase costs. It is just

should be continued if the cost of health care is to be

equitably financed in our nation.

CONCLUSION

For the foregoing reasons, this Court should affirm

the Judgment below.

Dated: December 7, 1994

Respectfully submitted,

Colleran, O’Hara & Mills

Attorneys for Electrical Industry Plan

and U.F.C.W. Funds, Amici Curiae

by: Edward J. Groarke

Counsel of Record

1225 Franklin Avenue - Suite 450

Garden City, New York 11530

(516) 248-5757