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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1994
- **Citation:** 511 U.S. 1067

## Text

? | Inte .
Supreme Coot of the United States

OcToOBER TERM, 1994

NEw YorkK STATE CONFERENCE OF BLUE Cross &
BLUE SHIELD PLANS, et al.,
v. Petitioners,

TRAVELERS INSURANCE CO., et al,
Respondents.
Mario M. Cuomo, ef al.,

v, Petitioners,

TRAVELERS INSURANCE Co., et al.,
Respondents.

HOSPITAL ASSOCIATION OF NEW YorK,
vy, Petitioners,

TRAVELERS INSURANCE Co., et al.,
Respondents.

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

BRIEF AMICI CURIAE OF THE ASSOCIATION
OF PRIVATE PENSION AND WELFARE PLANS
AND THE ERISA INDUSTRY COMMITTEE
IN SUPPORT OF RESPONDENTS

TABLE OF CONTENTS

Page
TABLE OF AUTHORITIES ii
INTEREST OF AMICI CURIAE 2
SUMMARY OF ARGUMENT 3
ARGUMENT ..... 4

I. THE SECOND CIRCUIT’S CONSTRUCTION
OF SECTION 514(a) OF ERISA IS CONSIST-
ENT WITH THE CONGRESSIONAL PUR-
POSE UNDERLYING ERISA PREEMPTION
AND THIS COURT’S PRECEDENTS IN THIS
AREA flttiincias 4

B. A State Law Relates to an ERISA Plan if It
Affects Plan Choices with Respect to Plan

Design 7
C. New York’s Hospital Surcharges Relate to
ERISA Plans Because They Affect Plan
Design as tin 8
Il. THE SECOND CIRCUIT’S DECISION DOES

NOT PREVENT STATES FROM REGULAT-
ING PUBLIC HEALTH AND SAFETY 12

CONCLUSION : 13

ii

TABLE OF AUTHORITIES
CASES Page

District of Columbia v. Greater Washington Bd.

of Trade, —— U.S. ——, 118 S. Ct. 580 (1992)... 7
FMC Corp. v. Holliday, 498 U.S. 52 (1990) ........... 5
Fort Halifax Packing Co. v. Coyne, 482 U.S. 1

CRSP cccinutienieisnis 5
Hillsborough County v. Automated Medical Labs.,

Inc., 471 U.S. 707 (1985) 12
Ingersoll-Rand Co. v. McClendon, 498 U.S. 188

(1990) , 5, 10, 11
Mackey v. Lanier Collection Agency & Serv., Inc.,

PE a 10
Metropolitan Life Ins. Co. v. Massachusetts, 471

U.S. 724 (1985) a. %
Pilot Life Ins. Co. v. Dedeauz, 481 U.S. 41 (1987).. 5

Shaw v. Delta Air Lines, Inc., 468 U.S. 85 (1988).. 6,7
Travelers Ins. Co. v. Cuomo, 818 F. Supp. 996
(S.D.N.Y.), aff'd in part and rev'd in part, 14

se £. B. oe 6 —— eaihaewidon i ae 10
Travelers Ins. Co. v. Cuomo, 14 F.8d 708 (24 Cir.
a eee ere he ET ae 4,9,12

United Wire, Metal & Mach. Health & Welfare
Fund v. Morristown Memorial Hoep., 995 F.2d
1179 (83d Cir.), cert. denied, 114 S. Ct. 3838
CRITI wisonniccectnncdenssninsticiniiiiteealndmamainamsadadtiaaasmnmnatiiae 12

Federal
Employee Retirement Income Security Act of 1974,
Pub. L. No. 98-406, 88 Stat. 829 (1974) (codified
as amended at 29 U.S.C. §§ 1001-1461 (1988) ).. 3

SD USSR 8 BERGA GRS CE ccirctetcrcncscstisencsecsncsenseniécnred passim
29 U.S.C. § 1144(b) (2) (A) (1988) 2.0. 11
State

N.Y. Pub. Health Law § 2807-c(1)(a) (McKin-

ney’s Supp. 1995) ...... 8
N.Y. Pub. Health Law § 2807-c(1) (b) (McKin-

ney’s Supp. 1995) x
N.Y. Pub. Health Law § 2807-c(2-a) (a) (McKin-

gg SF RR eee 9

Pee eo era eee ee I Te eee eee ee ee

iii
TABLE OF AUTHORITIES—Continued

N.Y. Pub. Health Law § 2807-c(11) (i) (McKin-
ney’s Supp. 1995) ............-.---c----c-s-e00

Page

In THE
Supreme Court of the Wuited States

OcTOBER TERM, 1994

No. 93-1408

New YorkK STATE CONFERENCE OF BLUE Cross &

BLUE SHIELD PLANS, et al.,

2. Petitioners,

TRAVELERS INSURANCE Co., ef al.,

Respondents.

No. 93-1414
Mario M. Cuomo, et al.,
. Petitioners,

TRAVELERS INSURANCE CoO., et al.,
Respondents.
No. 93-1415

HOSPITAL ASSOCIATION OF NEW YORK,
Petitioners,

Vv.
TRAVELERS INSURANCE CoO.., ef al.,

Respondents.

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

BRIEF AMICI CURIAE OF THE ASSOCIATION
OF PRIVATE PENSION AND WELFARE PLANS
AND THE ERISA INDUSTRY COMMITTEE
IN SUPPORT OF RESPONDENTS

2

INTEREST OF AMICI CURIAE

The Association of Private Pension and Welfare Plans
(“APPWP”) and The ERISA Industry Committee
(“ERIC”) submit this brief amici curiae, pursuant to
Rule 37 of the Rules of this Court, with the consent of
Petitioners and Respondents. Their letters of consent have
been filed with the Clerk of the Court.

The APPWP is a broad-based, non-profit trade asso-
ciation founded in 1967 to protect and foster the growth
of this Nation’s private employer-sponsored employee
benefit plan system. The members of the APPWP in-
clude both small and large employer sponsors (includ-
ing many Fortune 500 companies) of employee bene-
fit plans, as well as numerous plan support organiza-
tions, such as consulting and actuarial firms, investment
firms, banks, insurers and other professional benefit or-
ganizations. Collectively, its more than 240 members
sponsor or administer plans covering more than 100 mil-
lion plan participants. This broad-based membership pro-
vides the APPWP with substantial expertise and experi-
ence in the entire spectrum of issues relating to all types
of benefit plans.

ERIC is a non-profit association committed to the ad-
vancement of employee retirement, health, and welfare
benefit plans of the Nation’s largest employers. All of
ERIC’s members do business in more than one state,
and many have employees in all fifty states. The associa-
tion has a strong interest in matters affecting its mem-
bers’ ability to deliver benefits, their cost and effective-
ness, as well as the role of those benefits in the Nation’s
economy. The APPWP and ERIC have filed amicus

The outcome of this case will have a direct effect on
the viability of the private “sponsored employee
benefit plan system. The ability of employers to maintain
pends in large part on the absence of conflicting and bur-

a
|

— —— —_—-. —_ I ee oe ee Ee ae ea ‘

3

densome state laws. Members of the APPWP and ERIC,
as well as the entire private employer-based system of
voluntarily providing health care coverage, will be affected
adversely if the Court reverses the decision below, there-
by narrowing the scope of the preemption provision in the
Employee Retirement Income Security Act of 1974
(“ERISA”).*

SUMMARY OF ARGUMENT

1. Surcharges on hospital rates imposed by the State
of New York on some but not all third-party payors
“relate to” ERISA plans because they are intended to,
and they do, affect fundamental plan decisions with re-
spect to health care coverage. The 13% surcharge im-
posed on all payors other than Blue Cross/Blue Shield
(the “Blues”), Health Maintenance Organizations
(“HMOs”) and government plans such as Medicare, and
the 11% surcharge on commercial irsurers, are aimed at
inducing ERISA plans to provide health care coverage to
plan participants through a favored provider (i.e., the
Blues) rather than the panoply of other available options
(i.e., a wide range of commercial insurers or self-funding).
Similarly, the surcharge of up to 9% imposed on HMOs
based on the HMO’s enrollment of Medicaid recipients
discourages coverage through an HMO in favor of the
Blues and encourages ERISA plans to select particular
HMOs that are not subject to the surcharge. Each of the
surcharges raises the cost of providing health care through
ERISA plans unless such plans either tailor their admin-
istrative and funding structure to avoid the surcharges or
reduce benefits to offset their increased costs. As laws
that “relate to” ERISA plans, and that do not regulate
insurance, the surcharges are preempted.

2. The Second Circuit’s conclusion that ERISA pre-
empts the hospital surcharges at issue does not prevent
states from regulating public health and safety. Preemp-

1 Pub. L. No. 93-406, 88 Stat. 829 (1974) (codified as amended at
29 U.S.C. §§ 1001-1461 (1988) ).

4

tion of state-imposed marketplace incentives—such as the
surcharges at issue here—that affect the structure of
ERISA plans does not impinge upon legitimate exer-
cises of states’ traditional police powers.

ARGUMENT

I. THE SECOND CIRCUITS CONSTRUCTION OF
SECTION 514(a) OF ERISA IS CONSISTENT WITH
THE CONGRESSIONAL PURPOSE UNDERLYING
ERISA PREEMPTION AND THIS COURT'S PRECE-
DENTS IN THIS AREA.

Applying preemption analysis to New York’s hospital
surcharges, the Second Circuit concluded:

The 13% and 11% surcharges are designed to
increase hospital costs for patients covered by health
plans other than the Blues, and thus make these com-
peting plans less attractive than the Blues. Obviously,
the surcharges will affect ERISA plans’ health care
benefits. Likewise, the 9% assessment imposed on
HMOs will interfere with a plan’s selection of the
most effective method to provide benefits. Thus, the
surcharges purposely interfere with the choices that
ERISA plans make for health care coverage. Such
interference is sufficient to constitute “connection
with” ERISA plans.

Travelers Ins. Co. v. Cuomo, 14 F.3d 708, 719 (2d Cir.
1993) (emphasis added). This holding is consistent with
both the congressional purpose underlying ERISA pre-
emption and the precedents set by this Court.

A. The Purpose of ERISA Preemption Is to Eliminate

ERISA’s framers sought a balance between encourag-
ing a voluntary employer-based system and creating a
regulatory framework for employee benefit plans. To
avoid upsetting the careful balance that it sought, Con-

»

gress enacted a preemption provision that would encour-
age employers to maintain plans and expand coverage.
Thus, ERISA’s preemption provision was neither inad-
vertent nor casual. Rather, Congress intended ERISA’s
preemption provision, a a provision that this Court has
called “conspicuous for its breadth” (FMC Corp. v. Hol-
liday, 498 U.S. 52, 58 (1990)), to provide national uni-
formity in the regulation of voluntary employer-sponsored
plans.

Specifically, Congress provided in section 514(a) of
ERISA that except as specified in certain narrow excep-
tions, ERISA preempts any state laws that “relate to”
any ERISA plan. 29 U.S.C. § 1144(a) (1988). In lan-
guage that is “deliberately expansive” (Pilot Life Ins. Co.
v. Dedeaux, 481 U.S. 41, 46 (1987)), Congress rec-
ognized that a voluntary private employer-based system
of providing benefits depends on federal preemption of
state laws relating to ERISA plans.

The clear purpose behind ERISA’s broad preemption
provision was to eliminate conflicting and burdensome
state regulation of ERISA plans:

ERISA’s pre-emption provision was prompted by rec-
ognition that establishing and maintaining
employee benefit are faced with the task of
coordinating complex administrative activities. A
patchwork scheme of regulation would introduce con-
siderable inefficiencies in benefit program operation,
which might lead those employers with existing plans
to reduce benefits, and those without such plans to
refrain from adopting them. Pre-emption ensures
that the administrative practices of a benefit plan will
be governed by only a single set of regulations.

Fort Halifax Packing Co. v. Coyne, 482 US. 1, 11
(1987) (emphasis added). The Court’s precedents con-
sistently recognize the pivotal role of preemption in achiev-
ing the goal of uniformity in ERISA plan regulation. /n-
gersoll-Rand Co. v. McClendon, 498 U.S.. 133, 142

6

(1990) (stating that “[s]ection 514(a) was intended to
ensure that plans and plan sponsors woud be subject to a
uniform body of benefits law” and that “[o]therwise, the
inefficiencies created could work to the detriment of plan
beneficiaries”); Shaw v. Delta Air Lines, Inc., 463 U.S.
85, 105 (1983) (stating that “[b]y establishing benefit
plan regulation ‘as exclusively a federal concern,’ Con-
gress minimized the need for interstate employers to ad-
minister their plans differently in each State in which they
have employees”) (citation omitted).

The importance of preemption and national uniformity
in ERISA plan regulation has never been more acute than
it is now. Over 150 million Americans receive their
health care coverage through voluntary employer-spon-
sored plans that are subject to ERISA. The ERISA
plans of large multistate employers are not designed
with the parochial requirements of a particular state
in mind; they are designed to provide a uniform sys-
tem of benefits for the employer’s workforce. Indeed,
even many small employers with facilities in a single state
sponsor plans that cover employees who reside in different
states. ERISA, through its broad preemption provision,
makes it possible for employers of all sizes to maintain
health benefit plans under a single administrative and
design structure regardless of where they do business or
the number of states in which their employees reside. This
uniformity in the benefits provided to plan participants
and beneficiaries yields significant savings in administra-
tive expenses, reduces the contributions that employees
and employers must make to their benefit plans, and
enables employers to devote a higher percentage of their
benefit budget to providing benefits rather than paying
plan expenses.

Sky-rocketing health care costs already subject ERISA
plans to severe economic strain, challenging the most
innovative employers to explore and develop cost-effective
programs to serve the needs of plan participants while

7

minimizing plan administrative burdens. In the face of
existing cost escalation, it would be no small task to also
attempt to comply with inconsistent and burdensome state
regulations that interfere with fundamental plan design
issues—such as the selection of a service provider. ERISA
already imposes significant administrative responsibilities
on a plan sponsor through its reporting and disclosure
requirements. The multiple tasks that would be created
if each of the fifty states mandates a “different plan”
would impose staggering obligations that Congress foresaw
and rejected.

B. A State Law Relates to an ERISA Plan if It Affects
Plan Choices with Respect to Plan Design.

In order for preemption to apply, a state law must
“relate to” ERISA plans. 29 U.S.C. § 1144(a). A state
law “relate[s] to” ERISA plans if it “‘has a connection
with or reference to such a plan.’” District of Columbia
v. Greater Washington Bd. of Trade, 113 S. Ct. 580, 583
(1992) (quoting Shaw v. Delta Air Lines, Inc., 463 U.S.
85, 97 (1983)). The Second Circuit correctly concluded
that state laws which affect plan design decisions fall
within the scope of section 514(a) of ERISA.

Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S.
724 (1985), establishes that state laws which affect plan
design decisions “relate to” ERISA plans. In Metropoli-
tan Life, the Court considered whether ERISA preempted
a Massachusetts mandated benefit law that required group
health insurance policies to include specified mental health
benefits. The Court had little difficulty concluding that
the Massachusetts law related to ERISA plans:

Though § 47B [the relevant statutory provision]
is not denominated a benefit-plan law, it bears in-
directly but substantially on all insured benefit plans,
for it requires them to purchase the mental-health
benefits specified in the statute when they purchase
a certain kind of common insurance policy. . . . we

agree . . . that the mandated-benefit law as applied
relates to ERISA plans and thus is covered by
ERISA’s broad pre-emption provision set forth in
§ 514(a).

Id. at 739. Thus, the Court recognized that state laws
affecting a plan sponsor’s fundamental decisions about
which benefits will be provided and how they will be pro-
vided under the plan “relate to” ERISA plans.

C. New York’s Hospital Surcharges Relate to ERISA
Plans Because They Affect Plan Design.

New York’s regulatory scheme with respect to hospital
rates has several components, two of which are relevant
here. First, New York Public Health Law § 2807-c(1) (a)
directs hospitals to charge for in-patient services on the
basis of classifications of hospital discharges known as
diagnosis-related groups (DRGs) as opposed to actual
charges. This aspect of New York’s regulation of hospital
rates applies uniformly to all third-party payors, including
all ERISA plans and is not challenged here. A second
component of New York’s regulatory scheme, the sur-
charges that are at issue, apply selectively to certain third-
party payors. Specifically, the 13% surcharge above the
DRG rate set forth in New York Public Health Law
§ 2807-c(1)(b) applies when a patient is covered by an
employer’s ERISA plan whether insured through commer-
cial insurance or self-insured, or by any other form of
health plan, except for patients covered by the Blues, an
HMO or government plans like Medicare. The surcharge
set forth in New York Public Health Law § 2807-c(11) (i)
imposed an additional 11% surcharge above the DRG
rate on payments made by commercial insurers.* Finally,
a third surcharge of up to 9% above the DRG
rate applies only to HMOs based on the HMO’s enroll-

2 The 11% surcharge applied for the period April 1, 1992 through
March 81, 1993. N.Y. Pub. Health Law § 2807-c(11) (i) (McKin-

ney’s Supp. 1995).

3 2
- 7 - % 7 : - :
| a. ‘Lt | . en ty TO i i a i ee ee i al

9

ment of Medicaid recipients. N.Y. Pub. Health Law
§ 2807-c(2-a)(a) (McKinney’s Supp. 1995).

The hospital surcharges are state-imposed marketplace
incentives that are directed at affecting plan design. See
Brief for the United States as Amicus Curiae Supporting
Petitioners at 18 (filed Nov. 16, 1994) (Nos. 93-1408,
93-1414, 93-1415). The 13% and 11% surcharges aim at
inducing health plans, including ERISA plans, to subscribe
to the Blues. Travelers Ins. Co. v. Cuomo, 14 F.3d at 712.
Conversely, these surcharges discourage ERISA plans
from providing health care coverage to participants
through self-insurance or through policies with commercial
insurers. While the HMO surcharge on its face encourages
HMOs to enroll individuals who are eligible for Medicaid
in order to avoid the 9% surcharge, it also makes HMOs
a more expensive coverage alternative relative to the
Blues. In addition, it induces health plans, including
ERISA plans, that decide nonetheless to offer an HMO
coverage option to select HMOs that are exempt from
the surcharge. In each case, the surcharges affect funda-
mental decisions made by an ERISA plan about the
method of providing coverage to plan participants and
beneficiaries, i.e., whether to self-insure, to obtain insur-
ance from a commercial carrier, or to provide coverage
through the method favored in the New York hospital
surcharge laws.*

*The Secretary of Labor recognized this result in its brief as
amicus curiae in the Second Circuit: “The surcharges are designed
to induce self-insured plans to become insured, in order to avoid
the 18% surcharge, and to encourage already-insured plans to
purchase coverage from the Blues, in order to avoid the 18% and
11% charges. Finally, plans that contract with HMOs are given
a strong incentive to rewrite their plan documents so as to cover
more Medicaid recipients and reduce or eliminate the 9% sur-
charge.” Brief for the Secretary of Labor as Amicus Curiae in
the Second Circuit at 20 (filed Mar. 17, 1998) (Nos. 98-7134, 7148).

10

The hospital surcharges expose ERISA plans to ad-
ditional costs‘ that can be avoided only by altering
plan design and structure in New York. Indeed, if each
state is permitted to enact laws of this type, ERISA plans
will be forced to tailor their fundamental structure for pro-
viding benefits to comport with incentives imposed by
each of the different states in which plan participants
receive hospital services. For example, New York’s mar-
ket incentives favor coverage through the Blues, but an-
other state may use its hospital rates to reflect different
incentives (for example, self-insurance or insurance
through commercial carriers that cover certain experi-
mental treatments). Because states are likely to design
incentives that are flatly inconsistent with each other, a
plan sponsor would have to establish separate plans for
each jurisdiction in which plan participants are likely to
receive hospital services. The clear purpose of ERISA
preemption is to shield ERISA plans from precisely this
type of state interference in plan design.

The assertion that the hospital surcharges do not “impose
obligations upon plan conduct” (Brief for Petitioners
Mario M. Cuomo, et al. at 27 (filed Nov. 16, 1994)
(Nos. 93-1408, 93-1414, 93-1415)) is not dispositive of
whether the surcharges “relate to” ERISA plans. On the
contrary, the Court’s precedents recognize that the policy
of uniformity requires an interpretation of section 514(a)
of ERISA that is not limited to state laws that purport
to regulate plan terms and conditions. Ingersoll-Rand, 498

U.S. at 141-42 (expressly rejecting an argument that sec- -

tion 514(a) preempts only state laws that affect plan terms
or conditions); Mackey v. Lanier Collection. Agency &
Serv., Inc., 486 U.S. 825, 830 (1988) (holding that

4 The record below establishes that commercial insurance carriers
will pass the surcharges along to their ERISA plan customers.
Travelers Ins. Co. v. Cuomo, 813 F. Supp. 996, 1008 (S.D.N.Y.),
aff'd in part and rev'd in part, 14 F.3d 708 (1993). Of course, the
13% surcharge applies directly to third-party payors that are self-
funded ERISA plans.

11

ERISA preempts a state garnishment law that excluded
ERISA plan benefits from garnishment and that did not
affect any plan terms or conditions). For example,
Ingersoll-Rand considered whether ERISA preempted a
state law cause of action for wrongful discharge based on
an employer’s desire to avoid paying benefits due under an
ERISA plan. In holding that the state law cause of action
was preempted, the Court wrote:

Allowing state based actions like the one at issue
here would subject plans and plan sponsors to bur-
dens not unlike those that Congress sought to fore-
close through § 514(a). . .. It is foreseeable that
state courts, exercising their common law powers,
might develop different substantive standards appli-
cable to the same employer conduct, requiring the
tailoring of plans and employer conduct to the pecu-
liarities of the law of each jurisdiction. Such an out-
come is fundamentally at odds with the goal of uni-
formity that Congress sought to implement.

Ingersoll-Rand, 498 U.S. at 142. The same problem that
the Court recognized in Ingersoll-Rand in the context of
state law causes of action arises if state legislatures are
allowed to impose different market-based incentives and
penalties to a plan sponsor’s decisions with respect to the
method of providing health insurance coverage. The re-
sulting patchwork system would require employer plan
sponsors to tailor their plans and their conduct to the mar-
ket preferences of the legislatures of each jurisdiction. This
result is inconsistent with the Congressional purpose un-
derlying ERISA preemption and is precisely the outcome
that Congress sought to avoid.’ There is no doubt that this

5 The Second Circuit correctly concluded that the hospital sur-
charges are not saved from preemption under section 514(b) (2) (A)
of ERISA, 29 U.S.C. § 1144(b) (2) (A) (1988), as laws that regu-
late insurance. Amici believe that the savings clause issue of sec-
tion 514(b) (2) (A) is adequately addressed in the briefs of Re-
spondents. Accordingly, this brief amici curiae does not repeat
analysis of why the hcspital surcharges do not constitute laws
regulating insurance.

12

Court would strike down a state law that imposed a higher
tax on a plan that failed to cover mental illness than on
a plan that provided such coverage. See Metropolitan Life
Ins. Co. v. Massachusetts, 471 U.S. 724 (1985). The
New York laws imposing hospital surcharges are no less
intrusive and, if allowed to stand, will lead to no different
result.

II. THE SECOND CIRCUIT'S DECISION DOES NOT
PREVENT STATES FROM REGULATING PUBLIC
HEALTH AND SAFETY.

Amici National Governors’ Association, et al., attempt
to characterize New York’s hospital rate regulations as
legitimate exercise of a state’s power to regulate public
health and safety. See Brief of the National Governors’
Association et al., as Amici Curiae in Support of Peti-
tioners at 11 (filed Nov. 13, 1994) (Nos. 93-1408, 93-
1414, 93-1415). In support of this proposition, amici cite
Hillsborough County v. Automated Medical Labs., Inc.,
471 U.S. 707 (1985). Hillsborough analyzed whether
local regulations affecting plasma donors and collected
plasma were preempted by regulations of the Food and
Drug Administration. The regulations at issue here, un-
like those at issue in Hillsborough, are not the kind of
public health regulations that fall within a state’s exercise
of its police powers. The surcharges are regulations that
affect the health care marketplace, not health care gen-
erally. They aim at making certain kinds of coverage less
competitive than others. Travelers Ins. Co. v. Cuomo, 14
14 F.3d at 712. Certain quality control regulations, like
those at issue in Hillsborough or regulations with respect
to sanitary standards for hospitals and disposal of medical
wastes (see Brief of Petitioners Mario M. Cuomo, ef al.,
at 24 (filed Nov. 16, 1994) (Nos. 93-1408, 93-1414,
93-1415) and United Wire, Metal & Mach. Health &
Welfare Fund v. Morristown Memorial Hosp., 995 F.2d
1179, 1196 (3d Cir.), cert. denied, 114 S. Ct. 383
(1993)), can be characterized legitimately as exercises

13
of a state’s traditional police powers. State regulations
impose market incentives with respect to different
coverage are not susceptible to such

LE
g
:

characterization.

It is important to note that this case does not present
the issue of whether it is permissible for states to require
hospitals to load DRG rates to reflect uncompensated
care costs thereby shifting such costs to ERISA plans
directly (in the case of self-funded plans) or indirectly
(in the case of ERISA plans that provide insurance cov-
erage through commercial insurance or other third-party
payors). The New York surcharges represent market in-
centives that are designed to affect the decisions ERISA
plans make with respect to the source of health insurance
coverage. As such, the surcharges affect plan design and
consequently relate to ERISA plans.

CONCLUSION

For the reasons stated above, this Court should affirm
the Second Circuit’s decision below.

Respectfully submitted,

THEODORE E. RHODES
LAUREN TALNER SPILIOTES
EDWARD R. MACKIEWICz *
STEPTOE & JOHNSON
1830 Connecticut Avenue, N.W.
Washington, D.C. 20036
(202) 429-3000

* Counsel of Record Counsel for Amici Curiae

December 13, 1994

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385013_0498%3A32. Public record. Not legal advice.