Mid-Atlantic Health Law TOPICS

Last fall, the Supreme Court declined to review the 1996 Fifth Circuit decision in State of Louisiana v. CIGNA. That action rendered Louisiana's any-willing-provider (AWP) statute unenforceable, because the Fifth Circuit had determined that the AWP statute was preempted, or superseded, by the federal Employee Retirement Income Security Act (ERISA). (The Fifth Circuit is the federal appellate court with jurisdiction for Louisiana, Mississippi and Texas.)

The Louisiana AWP statute, enacted in 1984, authorized the formation of preferred provider organizations, and required that "no licensed provider who agrees to the terms and conditions of the preferred provider contract shall be denied the right to become a preferred provider."

A. ERISA Preemption

The Fifth Circuit reached its conclusion by first analyzing ERISA's preemption language. ERISA provides that it supersedes any and all state laws insofar as they "relate to" any employee benefit plan that is covered by ERISA. Since the AWP statute denied insurers, employers and HMOs the right to structure their benefits in a particular manner, namely the use of a closed panel of providers, the Fifth Circuit found that the AWP statute was "related" to ERISA plans because of the statute's substantial, though indirect, impact on such plans.

B. The Savings Clause

The Fifth Circuit then considered ERISA's savings clause. The savings clause provides that, even if a state law relates to an employee benefit plan, the law is not preempted by ERISA if the state law regulates "insurance, banking, or securities."

Whether a statute regulates insurance essentially depends on the so - called "Metropolitan Life" test, which examines the following three factors: (1) whether the statute has the effect of spreading the policyholder's risk; (2) whether the statute is an integral part of the policy relationship between the insurer and the insured; and (3) whether the practice is limited to entities within the insurance industry.

Since Louisiana's AWP statute was not limited to entities within the insurance industry (it specifically applied to employers who establish or participate in self-funded trusts or programs), the statute failed to meet the third prong of the Metropolitan Life test. Therefore, the statute was not saved from ERISA preemption.

C. Rule in the Fourth Circuit

Interestingly, in the 1993 case of Stuart Circle Hospital v. Aetna, the Fourth Circuit, the federal appellate court with jurisdiction for Maryland, Virginia, West Virginia, South Carolina and North Carolina, found that Virginia's AWP statute was saved from ERISA preemption as an insurance regulation. However unlike Louisiana's AWP statute, Virginia's statute only applied to insurance companies and HMOs, and not to self-funded plans. Accordingly it remains to be seen whether the Fifth Circuit would uphold Louisiana's AWP statute if it were similarly narrowed.

 In sum, it appears that AWP statutes that apply to self-funded health benefit plans are preempted by ERISA, while those that only apply to insurance companies and HMOs may not be preempted by ERISA.