November 27, 2019

Some states have responded to rising health care costs and dwindling retirement savings by passing legislation, triggering court challenges from business groups and others who say those statutes are trumped by federal benefits law.

The Employee Retirement Income Security Act was drafted with a broad preemption clause meant to ensure that benefit plans could be administered uniformly across the nation. ERISA has been invoked to fight anything from state wage rules to drug reimbursement regulations, and some plaintiff-side attorneys feel that the scope of preemption has been pushed too far.

“Honestly, I think over the years they developed this mantra of ‘ERISA must preempt everything,’” Karen Handorf, the chair of Cohen Milstein Sellers & Toll PLLC’s employee benefits and ERISA practice group, said of employers. “They’re not going to go back on it, because it’s like putting your finger in the dike.”

ERISA may be 45 years old, but litigants are still battling over where the boundaries of the 1974 statute's preemption powers lie. Here, Law360 looks back at three ERISA preemption disputes from 2019 that attorneys should have on their radar.

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High Court Shows Interest in Arkansas PBM Fight

Arkansas wasn’t as successful in its bid to regulate pharmaceutical benefit managers, with the Eighth Circuit affirming in June 2018 that a law governing their reimbursement rates was trumped by ERISA.

The Arkansas statute would have regulated PBMs' drug reimbursement rates for pharmacies and allowed pharmacies to appeal those rates.

The appeals court said that it was bound by an earlier panel’s finding that the federal benefits law preempted an Iowa statute regulating PBMs that the court concluded both implicitly and explicitly referenced ERISA plans and had a connection to them.

The Natural State appealed the ruling to the Supreme Court, and the high court asked the U.S. solicitor general to weigh in on the issue in April. The federal government has yet to file its brief in the case.

James Gelfand, senior vice president of health policy at ERIC, said that the high court right now favors preemption and has only gotten more “pro-preemption” in the past two years.

“My guess would be if they are offered a preemption case that gives them the opportunity to make strong law that stops multiple cases from being driven up to them, they’ll do it,” Gelfand said. “Is this the perfect case? Hard to say,” he added.

Handorf said that there was actually a stronger argument against preemption on the health care side of ERISA since the industry has been traditionally regulated by the states. In her experience, the solicitor general’s office has striven to be consistent over administrations, she said.

“I would think that it would be consistent with what the government said in other Supreme Court cases on preemption to say the Arkansas law is not preempted,” Handorf said.

 If the Supreme Court were to take up the Arkansas case, it wouldn’t be the high court’s first foray into ERISA preemption. However, the preemption case law in the past 40 years, as Gelfand put it, has seemed “like a roller coaster.”

The complete article can be accessed here.