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Bar Journal - March 1, 2003

NH's Managed Care Law and Unfair Insurance Trade Practices Law

Effective Attempts to Increase Access to Health Care Benefits or Impermissible Intrusion into an Exclusive Federal Regime?


According to Justice Souter, determining whether various state laws are preempted by the Employee Retirement Income Security Act of 1974 ("ERISA") "occupies a substantial share of [the Supreme] Court’s time . . ."1 It is no surprise that ERISA preemption issues often make their way to the Supreme Court. These issues can be complex and confusing, and they invariably implicate important and competing public policy concerns.

This article addresses ERISA preemption in the health care arena in general and specifically with respect to health care benefits litigation. It traces the historical underpinnings of ERISA preemption as well as its practical significance, application and scope, up through the most recent Supreme Court pronouncement on the topic in Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355 (2002). It then specifically examines the implications of Rush on the New Hampshire legislature’s efforts to regulate the claims decisions of health plans through New Hampshire’s "Managed Care Law" (RSA 420-J:5) and New Hampshire’s "Unfair Insurance Trade Practices Act" (RSA 417). It concludes that the New Hampshire statutes cannot escape ERISA preemption and that preemption furthers the Congressional objectives that underlie ERISA.


Congress’ objective in enacting ERISA was to induce employers to establish plans that would provide employees with increased access to pension and welfare benefits.2 In order to accomplish that objective, Congress sought "to ensure that plans and plan sponsors would be subject to a uniform body of benefits law."3 As the Supreme Court described, "[t]o require plan providers to design their programs in an environment of differing state regulations would complicate the administration of nationwide plans, producing inefficiencies that employers might offset with decreased benefits."4

The mechanism by which Congress sought to establish such uniformity was an express preemption provision in the statute which states that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan. . . ."5 Preemption is implicated in the context of health care benefits claims at the point where a health care plan has denied benefits and a claimant wishes to press the claim further and recover those benefits and/or other damages through intervention by state insurance regulators or in Court.

If it is determined that the particular claim falls within the ambit of the "uniform body of benefits law" Congress sought to establish, the claimant acquires – and is limited to – those remedies that are provided in section 502(a) of ERISA itself. State laws that create additional remedies are pre-empted.6

Those remedies provided by ERISA consist generally of the following:

  1. The plaintiff may sue in federal court to recover benefits due under the plan. 7
  2. The plaintiff may seek declaratory or injunctive relief.8
  3. The plaintiff acquires certain technical notice and disclosure rights that may be enforced by an award of per diem penalties.9
  4. The plaintiff, if she prevails, may recover her attorneys’ fees.10

While the plaintiff thus acquires certain remedies that may not have been available under state law (e.g., a right to recover attorneys’ fees), the plan fiduciary is shielded from contractual and extra-contractual claims that might otherwise be brought under state law, including punitive damage claims. Additionally:

  1. There is no right to jury trial.11
  2. The defendant has broad rights to remove preempted actions from state to federal court even if the ERISA claim itself is not pleaded.12
  3. In the court’s discretion, a prevailing defendant may recover attorneys’ fees.13
  4. Depending on the language of the plan and the nature of any conflicts, the court may defer to the fiduciary’s factual determinations and its interpretations of the plan’s language, if they are reasonable.14


Since ERISA only preempts state law if that law "relates" to an ERISA plan, it is important to first define what an ERISA plan is. Under section 3 of ERISA, 29 U.S.C. § 1002, generally speaking (and there are exceptions too peculiar and complex for the scope of this article), an "ERISA plan" is any "plan, fund, or program ... established or maintained by [a non-governmental] employer or by an employee organization" in order to provide employees, former employees, or members, or their beneficiaries, any of a broad range of "benefits" including life, disability, and health benefits.

A. Is There A "Plan, Fund, Or Program"?

A "plan, fund or program" exists if "from the surrounding circumstances a reasonable person can ascertain the intended benefits, a class of beneficiaries, the source of financing, and the procedures for receiving benefits."15

For a "plan" to be an "ERISA plan," it must in addition provide benefits to at least one person who is "an employee."16 It is clear that, for purposes of establishing the existence of a "plan," neither a sole owner, nor a partner, nor the spouse of either, will be deemed an "employee."17

B. Establishment Or Maintenance By The Employer

Where the employer directly pays benefits, or administers the program, no dispute can arise about whether the employer has established or maintained the plan. Where, however, the benefits are paid by an insurance carrier under an insurance policy and the carrier administers the policy, the issue of whether the employer’s role is sufficient to qualify the policy as an ERISA plan may arise. This is especially so in cases involving small businesses with a few employees covered under individual health care policies.

"The ERISA definition of ‘employee welfare benefit plan’ specifically allows that ERISA plans may be established through the purchase of insurance or otherwise."18 "Under this statutory definition, employers may easily establish ERISA plans by purchasing insurance for their employees."19

Although the purchase of insurance, standing alone, is not sufficient to establish a plan, "when an employer deals directly with the insurer and actually purchases an insurance policy for an employee, [as opposed to merely paying an employee enough to purchase his or her own insurance policy] there may be sufficient participation to meet the "established or maintained" requirement under ERISA."20 Thus, "an employer’s payment of insurance premiums, standing alone, is substantial evidence of the existence of an ERISA plan."21

Where insurance has been purchased by an employer, the "crucial factor in determining if a ‘plan’ has been established is whether the purchase of the insurance policy constituted an expressed intention by the employer to provide benefits on a regular and long term basis."22 Additionally, the purchase of "a group policy or multiple policies covering a class of employees offers substantial evidence that a plan ... has been established."23

"Furthermore, the fact that an employer delegates part of the operational responsibility for the plan to the insurer does not mean that it did not ‘establish or maintain’ a plan."24 "There is no requirement that the employer play any role in the administration of the plan in order for it to be deemed an ‘[employee] welfare benefit plan’ under ERISA."25

Whether a policy is "established or maintained" by an employer or employee organization is the subject of a so-called "Safe Harbor" exception promulgated by the Department of Labor.26 Generally speaking, if the employer does anything more than publicize the insurance program and process premium payments through payroll deduction, the insurance policy becomes an ERISA plan. Thus, making employer contributions, requiring employee participation, endorsing or touting the policy as a benefit, or processing claims render the insurance program an ERISA plan.27

C. Who is a "Participant" or "Beneficiary"?

1. Participants

ERISA defines "participant" as "any employee or former employee of an employer ... who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer ..."28

The most common issue concerning this definition that arises in health care benefits litigation is whether a shareholder or owner is a participant or beneficiary. In Kwatcher v. Mass. Serv. Emp. Pension Fund, 879 F.2d 957, 959-960 (1st Cir. 1989), the First Circuit held that pursuant to an "economic reality test," a sole shareholder of a corporation does not fall within the statutory definition of "employee" because sole shareholders function as "employers" under ERISA. The Court went on to hold that a person cannot simultaneously be an "employer" and an "employee."29

In Nationwide Mutual Ins. Co. v. Darden, 503 U.S. 318 (1992), the Supreme Court rejected the rationale employed by the Kwatcher Court and directed lower courts to use common law principles to determine whether an individual is an "employee" under ERISA.

After Darden, the majority of circuits have held that pursuant to the common law test mandated by Darden, "a corporation is a legal entity separate and distinct from its shareholders," and therefore sole or co-shareholders of closely held corporations, can be "employees" under ERISA.30

2. Beneficiaries

A "beneficiary" is a "person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder." 29 U.S.C. § 1002(8).

Every circuit court that has considered the issue has interpreted the plain language of the statute to hold that partners or shareholders, if "designated to receive benefits" under the insurance policies at issue, have standing under ERISA as "beneficiaries" even if not "employees."31


ERISA implicates two different modes of preemption analysis: express preemption and conflict preemption.

A. Express Preemption

First, ERISA section 514, 29 U.S.C. § 1144, expressly preempts any and all state civil laws that "relate to" employee benefit plans save those state laws that regulate insurance, banking, or securities. Under this broad, "express" preemption, state laws need not be in actual conflict with ERISA in order to be preempted. Rather, even state laws that are fully consistent with the provisions of ERISA are preempted by section 514 unless they fall within the saving clause applicable to state insurance, banking, or securities regulations.32

1. When Does A Law "Relate To" An ERISA Plan?

A state law "relates to" an ERISA plan "if it has a connection with or reference to such a plan."33 The concept of "relates to" is "clearly expansive in its scope."34 It nevertheless has limits short of its literal meaning. The complexity of issues relating to state regulation over employee health care plans engenders difficult questions concerning the degree to which a state law impinges on the scope of ERISA freedom.35

2. The "Savings Clause:" When Is A Law One "Which Regulates Insurance"?

A law which otherwise "relates to" an ERISA plan is nonetheless saved from preemption pursuant to ERISA’s "savings clause," if that law "regulates insurance . . ." § 1144(a). The Supreme Court requires a two-step examination in order to determine if a state law is a law that regulates insurance within the meaning of ERISA section 514(b)(2)(A).

First, one must apply a "common sense" test. To pass this test, "a law must not just have an impact on the insurance industry, but must be specifically directed toward that industry."36

Second, one must consider the three factors that define the "business of insurance" under the McCarran-Ferguson Act.37 The Supreme Court has held that these three factors (whether the law transfers or spreads risk, whether the law is an integral part of the policy relationship between the insurer and the insured, and whether the law is limited to entities within the insurance industry) need not all be satisfied, but rather are helpful "guide posts" to be considered. 38

B. Conflict Preemption

ERISA also preempts state laws to the extent that they "conflict with the provisions of ERISA or operate to frustrate its objects."39 The analysis is complicated in the context of state regulation of health insurance due to the obvious tension between the express preemption provision and the savings clause. The Supreme Court has stated that the preemption and savings clauses "are not a model of legislative drafting."40


The issue before the Court in Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987), was whether a common law claim for bad faith denial of insurance benefits cognizable under Mississippi common law was preempted by ERISA where the insurance policy in question was an employee welfare benefit plan. The Supreme Court found preemption of both types (express and conflict).

First, it determined that Mississippi’s common law bad faith cause of action "related to" ERISA plans, was not a law which regulates insurance. Any attempt to use that common law bad faith claim in order to challenge, punish, or remedy the denial of benefits under an ERISA plan was therefore preempted.

Second, the Supreme Court found that allowing a beneficiary to maintain a cause of action arising under state law would conflict with and frustrate Congress’s intent that ERISA section 502(a) serve as the exclusive civil enforcement scheme for ERISA plans.

In sum, the detailed provisions of § 502(a) set forth a comprehensive civil enforcement scheme that represents a careful balancing of the need for prompt and fair claims settlement procedures against the public interest in encouraging the formation of employee benefit plans. The policy choices reflected in the inclusion of certain remedies and the exclusion of others under the federal scheme would be completely undermined if ERISA-plan participants and beneficiaries were free to obtain remedies under state law that Congress rejected in ERISA ... the deliberate care with which ERISA’s civil enforcement remedies were drafted and the balancing of policies embodied in its choice of remedies argue strongly for the conclusion that ERISA’s civil enforcement remedies were intended to be exclusive.41

The Court stated that the importance of preserving the exclusivity of ERISA’s civil enforcement remedies was the "most important" reason for concluding that the bad faith claim was preempted.42

Specifically addressing the insurance savings clause of ERISA, the Court found that the savings clause itself had to be "informed by the legislative intent concerning the civil enforcement provisions provided by ERISA section 502(a)."43 In the instance of claims brought by beneficiaries against ERISA fiduciaries, the Court determined that allowing any state cause of action would conflict with Congress’s clear intent "that the federal remedy provided by [section 502(a)] displace[d] state causes of action."44

To summarize, the Supreme Court in Pilot Life clearly held that Mississippi’s bad faith cause of action was preempted both because the claim was not an insurance regulatory law and because, in any event, allowance of such a claim would conflict with the exclusive remedial scheme of ERISA.


In 1999, a unanimous Supreme Court held in Unum Life Insurance Co. v. Ward, 526 U.S. 358 (1999) that a California common law rule regarding a policyholder’s obligation to provide notice of claim to the insurer, was "saved" from preemption by virtue of the savings clause. In a footnote, the Court noted that "applying the States’ varying insurance regulations creates disuniformities" for plans operating in multiple states but that "‘[s]uch disuniformities ... are the inevitable result of the congressional decision to "save" local insurance regulation.’"45 In another footnote, the Ward Court distinguished Pilot Life and noted that the Mississippi tort of bad faith at issue in Pilot Life constituted "law not specifically directed to the insurance industry and therefore not saved from ERISA preemption."46

After Ward, claimants argued that these two footnotes changed the applicable conflict preemption analysis and that state laws are now "saved" from preemption under the savings clause as long as those statutes "regulate insurance," regardless of whether they conflict with the ERISA’s civil enforcement scheme. The vast majority of Circuit and District Courts faced with this argument rejected it, including the First Circuit.47


This debate was put to rest by the Supreme Court in Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 122 S. Ct. at 2151 (2002). In Rush, the plaintiff employee received medical coverage from her employer’s ERISA welfare benefit plan issued by the defendant HMO. The terms of the policy dictated that the defendant would provide insureds only with services it deemed "medically necessary" through its exercise of the "broadest possible discretion."48 After the plaintiff developed chronic shoulder pain, the defendant denied the plaintiff’s requests for a certain type of unconventional surgery. The plaintiff then made a written demand for an independent medical review of her claim as provided by the Illinois HMO Act, which requires HMOs to provide a second opinion from a physician unaffiliated with the HMO on the medical necessity of a covered service proposed by the primary care physician in the event of a dispute between the primary care physician and the HMO. Pursuant to the statute, if the independent physician finds that the service is "medically necessary," the HMO is required to provide it.49

The defendant HMO did not provide the independent review, and the plaintiff had the surgery and submitted a reimbursement claim to the defendant.50 After the HMO refused to reimburse her, plaintiff sued and the case went all the way to the Supreme Court.

Justice Souter delivered the Opinion of a 5-4 majority which held that the Illinois Medical Review law was not preempted. The Court held that the law satisfied the common sense test and the second and third prongs of the McCarran-Ferguson test and thus regulated insurance within the meaning of ERISA savings clause.51

The Court reaffirmed, however, Pilot Life’s "categorical bar," regardless of the savings clause, on state statutes that provide "a form of ultimate relief in a judicial forum that add[s]. . . to the judicial remedies provided by ERISA. Any such provision patently violates ERISA’s policy of inducing employers to offer benefits by assuring a predictable set of liabilities . . ."52 The Court distinguished the Illinois regulatory scheme on the grounds that it "provides no new cause of action under state law and authorizes no new form of ultimate relief. . . [T]he state statute does not enlarge the claim beyond the benefits available in any action brought under [ERISA]."53

Justice Thomas authored the dissent, joined by the Chief Justice, Justice Scalia and Justice Kennedy. The dissent found that the Illinois law ran afoul of the rule set forth in Pilot Life, because the statute "cannot be characterized as anything other than an alternative state-law remedy or vehicle for seeking benefits . . . [I]t is in fact a binding determination of whether benefits are due. . . Section 4-10 is thus most precisely characterized as an arbitration-like mechanism to settle benefits disputes."54 Since the dissent found that the law "provides a separate vehicle to assert a claim for benefits outside of, or in addition to, ERISA’s remedial scheme . . . the exclusivity and uniformity of ERISA’s enforcement scheme must remain paramount and the [Illinois] law is preempted in accordance with ordinary principles of conflict preemption."55

The majority responded to the dissent’s critique by acknowledging that "a State might provide for a type of "review" that would so resemble an adjudication as to fall within Pilot Life’s categorical bar," but maintaining that the Illinois Act was not such a scheme.56 The majority noted that "the Act does not give the independent reviewer a free-ranging power to construe contract terms," and the reviewer does "not hold the kind of conventional evidentiary hearing common in arbitration . . .". "Once this process is set in motion, it does not resemble either contract interpretation or evidentiary litigation before a neutral arbiter, as much as it looks like a practice (having nothing to do with arbitration) of obtaining another medical opinion."57

Notwithstanding the point of disagreement between the majority and the dissent; whether the Illinois Act constitutes an alternative enforcement mechanism in violation of Pilot Life, the overall impact of Rush on conflict preemption is nonetheless clear. State laws which do constitute alternative enforcement mechanisms with respect to recovery of health plan benefits continue to be preempted under Pilot Life, regardless of the savings clause.


A. New Hampshire’s "Unfair Insurance Trade Practices" Law RSA 417

RSA 417 proscribes a number of "unfair" insurance practices, including unfairly discriminating between individuals of "essentially the same hazard" in the provision of health care benefits, failing to adopt reasonable standards for the prompt investigation of benefits claims, failing to effectuate settlement promptly in claims where liability has become reasonably clear, and attempting to delay investigation or payment of claims.58 The statute empowers the Insurance Commissioner to issue subpoenas, administer oaths and hear evidence at hearing concerning whether or not a violation of the statute has occurred.59

Upon finding a violation, the Commissioner may suspend or revoke the insurer’s license and may also issue a penalty up to $2,500 for each violation.60 Further, if the Commissioner determines that the insurer violated the statute, "any consumer claiming to be adversely affected by the act or practice giving rise to such finding or order may bring suit against said supplier to recover any damages or loss suffered because of such action or practice."61 The Commissioner’s finding is prima facie evidence against the defendant in any such civil suit and in addition to recovering any damages caused by the violation, a prevailing claimant is entitled to the costs of suit, including reasonable attorney’s fees.62

B. New Hampshire’s "Managed Care Law" RSA 420-J:5

RSA 420-J-5 provides for "External Review" of benefits determinations made by HMO’s. Under the statute, a claimant who has been denied benefits can request such external review pursuant to a process administered by the Insurance Commissioner. According to that process, the Commissioner selects an "independent review organization" to conduct the external review.63 Within 10 days of being notified of the review, the health carrier must provide "all information in its possession that is relevant to the adjudication of the matter in dispute. . ."64 The claimant is allowed to then submit new or additional information not previously provided to the HMO and to present oral testimony under certain circumstances.65

The independent review organization must review all of the information submitted and any testimony provided. It may consider any applicable guidelines, studies or research, and it must determine whether the claimant is entitled to benefits.66 In so doing, "[t]he independent review organization shall consider anew all previously determined facts, allow the introduction of new information, and make a decision that is not bound by decisions or conclusions made by the health carrier during the internal review."67

The review organization then must render a decision upholding or reversing the determination of the health carrier.68 The written decision must contain "findings of fact, and the clinical and legal rationale for the decision, including, as applicable, clinical review criteria and rulings of law."69

Under RSA 420-J:5-e, the health carrier must pay the costs of the external review and the external review decision is "binding upon the health carrier and enforceable by the commissioner pursuant to the penalty provisions of RSA 420-J:14." Under that provision, the Commissioner may fine the health care carrier up to $2,500 "per violation" or revoke or suspend its license if it fails to comply with the Commissioner’s order to pay benefits. "The external review decision of the independent review organization shall be binding on the covered person except to the extent the covered person has other remedies available under federal or state law."70

C. Both Statutes Constitute Alternative Enforcement Mechanisms That Are Preempted by ERISA

The conflict preemption analysis with respect to RSA 417 is simple and straightforward. RSA 417 provides both a regulatory and a civil enforcement scheme at odds with Congress’ intent that ERISA constitute the exclusive remedy for benefits claims with respect to ERISA plans. The statute provides both claims and remedies in addition to those set forth in ERISA. Both before and after Rush, courts have found that ERISA preempts similar state insurance statutes under Pilot Life, notwithstanding the savings clause.71

Resolving the question of whether RSA 420-J:5 is preempted is more difficult. Upon a cursory reading of Rush, one might conclude that all state external review statutes escape preemption under the savings clause. A careful reading reveals, however, that Rush requires a specific conflict preemption analysis with respect to each state provision in question.

Once that analysis is performed with respect to the New Hampshire Managed Care Law, it is clear that RSA 420-J:5 goes beyond the Illinois review law that escaped preemption in Rush. And an examination of the Rush majority’s response to the dissent’s critiques demonstrates that unlike Illinois §4-10, RSA 420-J:5 cannot avoid Pilot Life’s preemptive sweep.

The Rush majority described "arbitration" as "when parties in dispute choose a judge to render a final and binding decision on the merits of the controversy and on the basis of the proofs presented by the parties."72 That is precisely the nature of the proceeding set forth by RSA 420-J:5.

The Rush majority found that §4-10 was not an "arbitral scheme" because "[t]he Act does not give the independent reviewer a free-ranging power to construe contract terms, but instead, confines review to a single term: the phrase medical necessity."73 RSA 420-J:5 does give the independent reviewer free-ranging power to construe contract terms and is not limited to any particular phrase. The reviewer is in fact specifically required to deliver binding "findings of fact" and "rulings of law."74

The Rush majority also emphasized that the independent reviewer was not authorized to receive evidence but simply "reviewed medical records" and rendered an independent medical judgment akin to a "second opinion."75 RSA 420-J:5 is not so limited. The reviewer is authorized to receive supplemental evidence and even hear testimony from the claimant. Again, the statute is not limited to a single medical judgment and cannot be characterized as merely a "second medical opinion." It is, on the contrary, a final, binding determination of the claimant’s entitlement to benefits.

Finally, the majority holding in Rush was dependent upon its conclusion that the Illinois statute did not "enlarge the claim beyond the benefits available in any action brought under §1132(a)" or provide an "additional claim or remedy." Justice Souter stated that "[i]n sum, §4-10 imposes no new obligation or remedy . . ."76

Under RSA 420-J:5, by contrast, an insurer who fails to provide benefits ordered by the independent reviewer, is subject to statutory penalties and the revocation or suspension of its license.77 Congress, however, did not provide for such penalties among the "panoply of remedial devices" available under ERISA in the event that benefits are denied.78 Rather, Congress intended that § 502(a) of ERISA constitute the "exclusive" remedy.79

In sum, pursuant to RSA 420-J:5, New Hampshire claimants are provided with a "remedial device" in addition to ERISA’s "exclusive remedial scheme." Namely, a de novo, final, binding, adjudication with respect to the facts of the claim, with respect to the proper interpretation of all relevant plan terms, and with respect to the application of those facts to those terms. And an insurer that fails to pay benefits upon a reviewer’s determination that it must do so, faces the additional threat of statutory penalties and/or the revocation or suspension of its license. This threat exists regardless of whether the claimant ever files an action under § 502(a). Accordingly, RSA 420-J:5 is an "alternative remedial scheme" that is preempted by ERISA.

D. Preemption of RSA 417 and RSA 420-J:5 is Consistent with Congressional Intent to Encourage Formation of Employee Benefit Plans

In the health care arena, insurance bad faith laws and independent review statutes are designed to increase the chances that patients will receive the treatments they desire and the benefits they seek. These are most certainly worthy goals.

But such state legislative efforts must be viewed through the lens of Congress’ intent when enacting ERISA. That intent was to "establish the regulation of employee welfare benefit plans as exclusively a federal concern."80That intent was also to ensure that health plans would be subject to a "uniform" benefits law in order to prevent "the potential for conflict in substantive law . . . requiring the tailoring of plans and employer conduct to the peculiarities of the law of each jurisdiction."81

More importantly, Congress was not concerned with uniformity simply for its own sake, but rather had employees’ interests in mind. As stated by the dissent in Moran, it is important to remember that

No employer is required to provide any health benefit plan under ERISA and that the entire advent of managed care, and the genesis of HMO’s, stemmed from spiraling health costs. To the extent that independent review provisions . . . make it more likely that HMO’s will have to subsidize beneficiaries’ treatments of choice, they undermine the ability of HMOs to control costs, which, in turn, undermines the ability of employers to provide health care coverage for employees.82

To be sure, some degree of disuniformity is a function of Congress’ conflicting decision to "save" insurance regulation from ERISA preemption. And a majority of the Supreme Court has held that certain external review procedures (i.e. a second medical opinion) escape ERISA’s broad preemptive sweep.

Both RSA 417 and RSA 420-J:5, however, go too far. By creating alternative enforcement schemes with penalties and provisions that supplement those set forth in ERISA, Congress’ paramount concern for uniformity is directly implicated. The New Hampshire legislature cannot be criticized for attempting to increase employees’ access to health care benefits. Subjecting plans to 50 different bad faith or independent review statutes, however, could have the opposite effect.


Due to the tension between ERISA’s preemption and savings clauses, issues relating to state regulation of health insurance are among the most difficult issues confronting federal courts. The level of frustration with the current health care system rises with the ever escalating costs. There are no easy answers to these difficult questions. Allowing each state to implement its own separate, alternative, enforcement scheme, however, is not the answer and may well be counterproductive. Attempts to reform the system are properly directed at Congress.



Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355 (2002).


Pilot Life v. Dedeaux, 481 U.S. 41, 54, 56 (1987).


New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656 (1995).

See also Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 98-100 & n.20 (1983) (excerpting quotes from the legislative record).


FMC Corp. v. Holliday, 498 U.S. 52, 60 (1990).


29 U.S.C. § 1144(a)


Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 57 (1987).


29 U.S.C. §1132(a)(3) & (9).


29 U.S.C. § 1132(a)(B).


29 U.S.C. §1132(a)(1)(A).


29 U.S.C. §1132(g)(1).


Blake v. Unionmutual Stock Life Ins. Co., 906 F.2d 1525 (11th Cir. 1990) (noting "overwhelming" authority).


Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58 (1987).


29 U.S.C. § 1132(g)(1).


Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989).


Sipma v. Massachusetts Cas. Ins. Co., 256 F.3d 1006, 1012 (10th Cir. 2001), (quoting Donovan v. Dillingham, 688 F.2d 1367 (11th Cir. 1982)).


29 C.F.R. §2510.3-3(b).


29 C.F.R. §2510.3-3(c).


International Resources, Inc. v. New York Life Ins. Co., 950 F.2d 294, 297 (6th Cir. 1991).


Madonia v. Blue Cross & Blue Shield, 11 F.3d 444 (4th Cir. 1993). See also Libbey-Owens-Ford Co. v. Blue Cross & Blue Shield Mutual, 982 F.2d 1031, 1034 (6th Cir. 1993) (employers may establish ERISA plans by purchasing insurance for their employees); Brundage-Peterson v. Compcare Health Servs. Ins. Corp., 877 F.2d 509, 511 (7th Cir. 1989) (plan under which employer arranges and pays for insurance plans invokes ERISA protection); Credit Managers Assoc. v. Kennesaw Life & Accident Ins. Co., 809 F.2d 617, 625 (9th Cir. 1987) (same).


New England Mut. Life Ins. Co. v. Baig, 166 F.3d 1 (1st Cir. 1999) (quoting Baig v. New England Life Ins. Co., 985 F. Supp. 11, 14 (D. Mass 1997)).


Sipma v. Massachusetts Ca. Ins. Co., 256 F.3d 1006 (10th Cir. 2001); Postma v. Paul Revere Life Ins. Co., 223 F.3d 533, 537 (7th Cir. 2000); Robinson v. Linomaz, 58 F.3d 365 (8th Cir. 1995); Randol v. Mid-West Nat’l Life Ins. Co., 987 F.2d 1547, 1551 (11th Cir. 1993); Kidder v. H & B Marine Inc., 932 F.2d 347, 353 (5th Cir. 1991).


Wickman v. Northwestern Nat’l Ins. Co., 908 F.2d 1077, 1083 (1st Cir. 1990).


Id.; Gaylor v. John Hancock Mut. Life Ins. Co., 112 F.3d 460, 464 (10th Cir. 1997).


Sipma, 256 F.3d at 1012.


Robinson v. Linomaz, 58 F.3d 365, 368 (8th Cir. 1995).


29 C.F.R. §2510.3-1(j).


See generally, Steen v. John Hancock Life Ins. Co., 106 F.3d 904 (9th Cir. 1997).


29 U.S.C. §1002(7).


Id. at 959-960.


Madonia, 11 F.3d at 449; Sipma, 256 F.3d at 1010; Vega v. National Life Ins. Services, 188 F.3d 287 (5th Cir. 1999); Prudential Ins. Co. of Am. v. Doe, 76 F.3d 206, 209 (8th Cir. 1996); Robinson v. Linomaz, 58 F.3d 365 (8th Cir. 1995). Contra In Re Watson, 161 F.3d 593 (9th Cir. 1998).


See Wolk v. UNUM Life Ins. of Am., 186 F.3d 352, 356 (3d Cir. 1999) (partner-employers nonetheless "beneficiaries" under ERISA); Prudential Ins. Co. of Am. v. Doe, 76 F.3d 206, 208 (8th Cir. 1996) (shareholders of corporation were "beneficiaries" of ERISA plan); Peterson v. American Life & Health Ins. Co., 48 F.3d 404, 409 (9th Cir. 1995) (partner satisfies definition of "beneficiary" under ERISA); Robinson v. Linomaz, 58 F.3d 365, 369 (8th Cir. 1995) (sole shareholders are "beneficiaries" even if they are not "employees" under ERISA); Harper v. American Chambers Life Ins. Co., 898 F.2d 1432, 1434 (9th Cir. 1990)(partner insured by policy that is part of an ERISA plan is a "beneficiary").


See, e.g., Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 829-30 (1988); Shaw v. Delta Airlines, Inc., 463 U.S. 85 (1983).


Id. at 1327.


Egelhoff v. Egelhoff, 121 S. Ct. 1322, 1327 (2001).


See New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995)(New York law imposing a surcharge on the bills of patients covered by commercial insurance purchased by employee health care plans did not "relate to" the plans because the state law affected the plans only by indirectly increasing the relative prices of insurance policies in an exercise of traditional local regulation).


Ward, 526 U.S. at 367; Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 740; Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 48 (1987).


Ward, 526 U.S. at 367.




Boggs v. Boggs, 520 U.S. 833, 841 (1997); John Hancock Mut. Life Ins. Co. v. Harris Trust & Savings Bank, 510 U.S. 86, 99 (1993) ("State law governing insurance generally is not displaced, but ‘where [that] law stands as an obstacle to the accomplishment of the full purposes and objectives of Congress,’ federal preemption occurs.").


John Hancock Mut. Life Ins. Co. v. Harris Trust & Sav. Bank, 510 U.S. 86, 99 (1993).


Id. at 54.


Id. at 57.


Id. at 52.


Id. at 57.


Id. at 376 n.6 (quoting Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S. 724, 747 (1985)).


Id. at 377 n.7.


Hotz v. Blue Cross, 292 F.3d 57 (1st Cir. 2002). See also, e.g., Gilbert v. Alta Health & Life Ins. Co., 276 F.3d 1292, 2001 WL 1657170 (11th Cir. 2001); Clancy v. Employers Health Ins. Co., 101 F. Supp.2d 463 (E.D. La. 2000), aff’d, 248 F.3d 1142 (5th Cir.), cert. denied, 151 L.Ed.2d 22 (2001); Nelson v. UNUM Life Ins. Co. of America, 1999 WL 33226241 (D.N. Cal. 1999), mandamus denied, Case No. 99-71367 (9th Cir.), cert. denied, 146 L.Ed.2d 794 (2000); Connors v. Maine Med. Ctr., 70 F. Supp.2d 40 (D. Me. 1999); Norris v. Continental Cas. Co., 2000 U.S. Dist. Lexis 9163, *4-7 (E.D. Pa. 2000); Estate of Cencula v. John Alden Life Ins. Co., 2001 U.S. Dist. Lexis 5519 (N.D. Ill. 2001); Chilton v. Prudential Ins. Co. of Am., 124 F. Supp.2d 673 (M.D. Fla. 2000).


122 S. Ct. at 2156.






Id. at 2164.


Id. at 2166.


Id. at 2167.


Id. at 2175.


Id. at 2177.


Id. at 2167.


Id. at 2168.


See RSA 417:4.


RSA 417:7.


RSA 417:10.


RSA 417:19.


RSA 417:20; RSA 417:21.


RSA 420-J:5-b(VI).


RSA 420-J:5-b(VII).


RSA 420-J:5-b(IV).


RSA 420-J:5-b(IX).




RSA 420-J:5-b(X).




RSA 420-J:5-e(II).


Caffey v. Unum Life Ins. Co., 302 F.3d 576 (6th Cir. 2002)(Tennessee insurance bad faith laws preempted under Pilot Life); Hotz v. Blue Cross, 292 F.3d 57 (1st Cir. 2002)(Massachusetts unfair trade practices act 93-A preempted by ERISA); Sprecher v. Aetna U.S. Healthcare, Inc., C.A. No. 02-00580, 2002 WL 1917711, at *7 (E.D.Pa. Aug. 19, 2002)(Pennsylvania "bad faith" insurance statute preempted as inconsistent with ERISA); Ramirez v. Inter-Cont’l Hotels, 890 F.2d 760, 763-64 (5th Cir. 1989) (Texas unfair insurance practices statute); Kanne v. Conn. Gen. Life Ins. Co., 867 F.2d 489, 494 (9th Cir. 1988), cert. denied, 492 U.S. 906 (1989) (California unfair insurance practices statute); In re Life Ins. Co. of N. Am., 857 F.2d 1190, 1194-95 (8th Cir. 1988) (Missouri statute prohibiting vexatious refusal to pay insurance benefits).


122 S. Ct. at 2168.




RSA 420-J:5(X).


122 S. Ct. at 2168.


122 S. Ct. at 2167.


RSA 420-J:5-e; RSA 420-J:14.


See Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 146 (1987).


Ingersoll-Rand Co. v McClendon, 498 U.S. 133, 142 (1990).


New York State Conference v. Travelers Ins. Co., 514 U.S. 645, 656 (1995).


Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142 (1990).


122 S. Ct. at 2179.


Byrne J. Decker is a partner in the law firm of Pierce Atwood with offices in Maine and New Hampshire. Byrne is a member of the litigation department and employee benefits practice group, and focuses his practice on life/health/disability/ERISA litigation. Contact him at



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