105 F.3d 1035 (5th Cir. 1997), 95-50807, Texas Pharmacy Ass'n v. Prudential Ins. Co. of America

Docket Nº:95-50807.
Citation:105 F.3d 1035
Party Name:TEXAS PHARMACY ASSOCIATION, et al., Plaintiffs, Texas Pharmacy Association, formerly known as Texas Pharmaceutical Assn., Ron's Apothecary, Inc., Tri Cities' Pharmacy, Inc., City Pharmacy, Hamlin Pharmacy, Anderson Drug, Twelve Oaks Pharmacy, South Houston Pharmacy, Davila Pharmacy, Medical Center Pharmacy, Eilers Discount Pharmacy, Professional Ph
Case Date:February 14, 1997
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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105 F.3d 1035 (5th Cir. 1997)

TEXAS PHARMACY ASSOCIATION, et al., Plaintiffs,

Texas Pharmacy Association, formerly known as Texas

Pharmaceutical Assn., Ron's Apothecary, Inc., Tri Cities'

Pharmacy, Inc., City Pharmacy, Hamlin Pharmacy, Anderson

Drug, Twelve Oaks Pharmacy, South Houston Pharmacy, Davila

Pharmacy, Medical Center Pharmacy, Eilers Discount Pharmacy,

Professional Pharmacy, Hart Pharmacy, Hays Hometown

Pharmacy, Ward's Pharmacy, Good's Pharmacy, Klein's Discount

Pharmacy, Avondale Pharmacy, Home Care Associates, Inc.,

Winn's Pharmacy, Tomball Atrium Pharmacy, Rosebud Pharmacy,

Maxwell Pharmacy, Save-Mor # 1 Pharmacy, McCrory's Pharmacy,

Nichols Southside Pharmacy, Nichols Westwood Pharmacy,

Pfenning Prescriptions Pharmacy, Bel-Aire Drugs, S & L Drug

Mart and Prescription Lab of Spring Branch, Plaintiffs-Appellees,

v.

The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Defendant-Appellant.

No. 95-50807.

United States Court of Appeals, Fifth Circuit

February 14, 1997

Rehearing Denied March 17, 1997.

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C. Dean Davis, Mark Alan Keene, Davis & Davis, Austin, TX, for plaintiffs-appellees.

Katherine S. Youngblood, Youngblood & White, Houston, TX, Daly D. Temchine, Epstein, Becker & Green, Washington, DC, for defendant-appellant.

Joel L. Michaels, Barbara H. Ryland, Michaels, Wishner & Bonner, Washington, DC, George Upshur Carneal, American Association of Health Plans, Washington, DC, for American Ass'n of Health Plans, Inc., amicus curiae.

Appeal from the United States District Court for the Western District of Texas.

Before REAVLEY, GARWOOD and BENAVIDES, Circuit Judges.

REAVLEY, Circuit Judge:

This appeal concerns whether a Texas "any willing provider" statute applicable to pharmacies is preempted by the Employee Retirement Income Security Act (ERISA). 1 The Texas Pharmacy Association (TPA) and several pharmacies brought suit in Texas state court seeking a declaratory judgment that the statute compels appellant Prudential Insurance Company of America (Prudential) to contract with any pharmacy in Texas willing to accept Prudential's contractual terms and conditions. Prudential removed the case to federal court, claiming that the statute is preempted by ERISA. The district court ruled by summary judgment that the 1991 statute is not preempted because it regulates insurance under ERISA's savings clause. We hold that the current statute is preempted, but we agree that the statute prior to 1995 amendments is not preempted.

BACKGROUND

The essential facts are few and undisputed. Prudential offers group health insurance policies to employers in Texas. It also contracts to provide administrative services only to self-funded employer health plans. For participants and beneficiaries of both types of plans--the employees and their covered family members--Prudential maintains several health care networks, including pharmacy networks. In these networks, Prudential contracts with certain pharmacies and allows participants to fill their prescriptions at these pharmacies at predetermined dispensing fees and drug prices. Prudential claims that the networks provide for quality control and lower prices.

In 1991, the Texas legislature passed an "any willing provider" statute pertaining to pharmacies. The statute was amended in 1995 and now provides in part:

Sec. 2. (a) A health insurance policy or managed care plan ... may not:

(1) prohibit or limit a person who is a beneficiary of the policy from selecting a pharmacy or pharmacist of the person's choice to be a provider under the policy to furnish pharmaceutical services offered or provided by that policy or interfere with that person's selection of a pharmacy or pharmacist;

(2) deny a pharmacy or pharmacist the right to participate as a contract provider under the policy or plan if the pharmacy or pharmacist agrees to provide pharmaceutical services that meet all terms and

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requirements and to include the same administrative, financial, and professional conditions that apply to pharmacies and pharmacists who have been designated as providers under the policy or plan;

(3) require a beneficiary of a policy or participant in a plan to obtain or request a specific quantity or dosage supply of pharmaceutical products. 2

The emphasized portions of the statute were added by the 1995 amendments. The amendments also added a section broadly defining a "managed care plan" to include "a health maintenance organization, a preferred provider organization, or another organization that, under a contract or other agreement entered into with a participant in the plan ... provides health care benefits...." 3

The parties argue the effect of the 1995 statute in this appeal and, unless otherwise announced, it is that current statute we will discuss.

The effect of the statute is that any pharmacist willing to abide by the terms of a Prudential network contract must be admitted to the network. The statute declares void any provision of a health insurance policy or managed care plan that conflicts with it. 4 The statute does however exempt from the any-willing-provider requirement "a self-insured employee benefit plan that is subject to [ERISA]." 5

DISCUSSION

  1. ERISA's Preemption Clause

    Prudential argues that the Texas statute is preempted by ERISA. We agree that the current statute is preempted. ERISA's preemption clause provides that it preempts any and all state laws which "relate to" an ERISA benefit plan. 6 The Supreme Court has held that this preemption clause is "deliberately expansive" 7 and that a state law relates to an ERISA plan "if it has a connection with or reference to such a plan." 8 We have held that the preemption clause "is to be construed extremely broadly." 9

    As the district court found and as the TPA concedes, the state statute relates to ERISA benefit plans under the preemption clause. Garden variety employer health insurance plans, which are regulated by the Texas statute, are "employee benefit plans" under ERISA, defined to include "any plan ... established or maintained by an employer ... for the purpose of providing ... through the purchase of insurance or otherwise ... medical, surgical, or hospital care or benefits, or benefits in the event of sickness...." 10 In CIGNA Healthplan of Louisiana v. Louisiana, 11 discussed below, we held that a Louisiana any-willing-provider statute fell within the preemption clause. 12 As with the Louisiana statute at issue in CIGNA, the Texas statute relates to ERISA plans because it "eliminates the choice of one method of structuring benefits," 13 by prohibiting plans from contracting with pharmacy networks that exclude any willing provider.

  2. ERISA's Savings Clause

    1. The Current Statute

    Although the state statute relates to ERISA benefit plans under ERISA's preemption clause, the TPA argues that it nevertheless

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    is not preempted because of ERISA's savings clause, which provides that "nothing in this title shall be construed to exempt or relieve any person from any law of any State which regulates insurance...." 14 The TPA contends that the statute, which exempts employer self-insured ERISA plans, falls within the savings clause.

    We hold that the statute does not fall within the savings clause, as this result is compelled by our recent decision in CIGNA, where we held that a Louisiana any-willing-provider statute did not fall within the savings clause. The Louisiana statute provided that any willing provider may join a preferred provider organization if he agrees to the terms and conditions of the contract between a preferred provider organization and its health care providers. 15 We followed the test given in Metropolitan Life Ins. Co. v. Massachusetts 16 in deciding whether the statute fell within the savings clause:

    In [Metropolitan Life ], the Supreme Court delineated the requirements that a statute must meet to come within the insurance facet of the savings clause. As we have noted in prior opinions, the Court took a conjunctive two-step approach: "First, the court determined whether the statute in question fitted the common sense definition of insurance regulation. Second, it looked at three factors: (1) Whether the practice (the statute) has the effect of spreading the policyholders' risk; (2) whether the practice is an integral part of the policy relationship between the insurer and the insured; and (3) whether the practice is limited to entities...

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