Metropolitan Life Insurance Company v. Massachusetts Travelers Insurance Company v. Massachusetts

• Decision Date: 03 June 1985
• Docket Number: 84-356,Nos. 84-325,s. 84-325
• Parties: METROPOLITAN LIFE INSURANCE COMPANY, Appellant, v. Commonwealth of MASSACHUSETTS. TRAVELERS INSURANCE COMPANY, Appellant, v. Commonwealth of MASSACHUSETTS
• Court: U.S. Supreme Court

471 U.S. 724

105 S.Ct. 2380

85 L.Ed.2d 728

METROPOLITAN LIFE INSURANCE COMPANY, Appellant,

v Commonwealth of MASSACHUSETTS.

TRAVELERS INSURANCE COMPANY, Appellant,

v. Commonwealth of MASSACHUSETTS.

Nos. 84-325, 84-356.

Argued Feb. 26, 1985.

Decided June 3, 1985.

Syllabus

A Massachusetts statute (§ 47B) requires that certain minimum mental-health-care benefits be provided a Massachusetts resident who is insured under a general health insurance policy or an employee health-care plan that covers hospital and surgical expenses. Appellant insurer in No. 84-325 contends that § 47B, as applied to insurance policies purchased by employee health-care plans regulated by the federal Employee Retirement Income Security Act of 1974 (ERISA), is pre-empted by that Act. Section 514(a) of ERISA provides that the statute shall "supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." But § 514(b)(2)(A) provides that, with one exception, nothing in ERISA "shall be construed to exempt or relieve any person from any law of any State which regulates insurance." The one exception is found in § 514(b)(2)(B), which states that no employee-benefit plan "shall be deemed to be an insurance company or other insurer . . . or to be engaged in the business of insurance . . . for purposes of any law of any State purporting to regulate insurance companies [or] insurance contracts." Appellant insurer in No. 84-356 contends that § 47B, as applied to insurance policies purchased pursuant to collective-bargaining agreements regulated by the National Labor Relations Act (NLRA), is pre-empted by that Act, because it effectively imposes a contract term on the parties that otherwise would be a mandatory subject of collective bargaining. Massachusetts brought an action in Massachusetts Superior Court to enforce § 47B against appellant insurers, and that court issued an injunction requiring the insurers to provide the coverage mandated by § 47B. The Massachusetts Supreme Judicial Court affirmed, finding no pre-emption under either ERISA or the NLRA.

Held:

1. Section 47B, as applied, is a law "which regulates insurance" within the meaning of § 514(b)(2)(A), and therefore is not pre-empted by § 514(a) as it applies to insurance contracts purchased for plans subject to ERISA. Section 514(b)(2)(A)'s plain language, its relationship to the other ERISA pre-emption provisions, and the traditional understanding of insurance regulations, all lead to the conclusion that mandated-benefit laws such as § 47B are saved from pre-emption by the operation of § 514(b)(2)(A). Nothing in ERISA's legislative history suggests a different result. Pp. 739-747.

2. Nor is § 47B, as applied to a plan negotiated pursuant to a collective-bargaining agreement subject to the NLRA, pre-empted by the NLRA. Pp. 747-758.

(a) The NLRA pre-emption involved here is the one that protects against state interference with policies implicated by the structure of the NLRA itself, by pre-empting state law and state causes of action concerning conduct that Congress intended to be unregulated. Pp. 747-751.

(b) Such pre-emption rests on a sound understanding of the NLRA's purpose and operation that is incompatible with the view that the NLRA pre-empts any state attempt to impose minimum-benefit terms on the parties to a collective-bargaining agreement. Pp. 751-753.

(c) Minimum state labor standards affect union and nonunion employees equally and neither encourage nor discourage the collective-bargaining processes that are the subject of the NLRA. Nor do they have any but the most indirect effect on the right of self-organization established in the NLRA. Unlike the NLRA, mandated-benefit laws, such as § 47B, are not designed to encourage or discourage employees in the promotion of their interests collectively; rather, they are in part designed to give minimum protections to individual employees and to ensure that each employee covered by the NLRA receives mandated health insurance coverage. These laws are minimum standards independent of the collective-bargaining process. Pp. 753-756.

(d) There is no suggestion in the NLRA's legislative history that Congress intended to disturb the state laws that set minimum labor standards but were unrelated to the collective-bargaining or self-organization processes. To the contrary, Congress in the NLRA developed the framework for self-organization and collective bargaining within the larger body of state law promoting public health and safety. When a state law establishes a minimal employment standard not inconsistent with the NLRA's general goals, it conflicts with none of the NLRA's purposes. Section 47B is an insurance regulation designed to implement the Commonwealth's policy on mental-health care, and as such is a valid and unexceptional exercise of the Commonwealth's police power. Though § 47B potentially limits any employee's right to choose one thing by requiring that he be provided with something else, it does not limit the right of self-organization or collective bargaining protected by the NLRA. Pp. 756-758.

391 Mass. 730, 463 N.E.2d 548 (1984), affirmed.

Jay Greenfield, New York City, for appellant in No. 84-325.

Addison Lane McGovern, Boston, Mass., for appellant in No. 84-356.

Sally A. Kelly, Boston, Mass., for appellee.

Justice BLACKMUN delivered the opinion of the Court.

A Massachusetts statute requires that specified minimum mental-health-care benefits be provided a Massachusetts resident who is insured under a general insurance policy, an accident or sickness insurance policy, or an employee health-care plan that covers hospital and surgical expenses. The first question before us in these cases is whether the state statute, as applied to insurance policies purchased by employee health-care plans regulated by the federal Employee Retirement Income Security Act of 1974, is pre-empted by that Act. The second question is whether the state statute, as applied to insurance policies purchased pursuant to negotiated collective-bargaining agreements regulated by the National Labor Relations Act, is pre-empted by the Labor Act.

I

A.

General health insurance typically is sold as group insurance to an employer or other group.¹ Group insurance presently is subject to extensive state regulation, including regulation of the carrier, regulation of the sale and advertising of the insurance, and regulation of the content of the contracts.² Mandated-benefit laws, that require an insurer to provide a certain kind of benefit to cover a specified illness or procedure whenever someone purchases a certain kind of insurance, are a subclass of such content regulation.

While mandated-benefit statutes are a relatively recent phenomenon,³ statutes regulating the substantive terms of insurance contracts have become commonplace in all 50 States over the last 30 years.⁴ Perhaps the most familiar are those regulating the content of automobile insurance policies.⁵

The substantive terms of group-health insurance contracts, in particular, also have been extensively regulated by the States. For example, the majority of States currently require that coverage for dependents continue beyond any contractually imposed age limitation when the dependent is incapable of self-sustaining employment because of mental or physical handicap; such statutes date back to the early 1960's.⁶ And over the last 15 years all 50 States have required that coverage of infants begin at birth, rather than at some time shortly after birth, as had been the prior practice in the unregulated market.⁷ Many state statutes require that insurers offer on an optional basis particular kinds of coverage to purchasers.⁸ Others require insurers either to offer or mandate that insurance policies include coverage for services rendered by a particular type of health-care provider.⁹

Mandated-benefit statutes, then, are only one variety of a matrix of state laws that regulate the substantive content of health-insurance policies to further state health policy. Massachusetts Gen.Laws Ann., ch. 175, § 47B (West Supp.1985), is typical of mandated-benefit laws currently in place in the majority of States.¹⁰ With respect to a Massachusetts resident, it requires any general health-insurance policy that provides hospital and surgical coverage, or any benefit plan that has such coverage, to provide as well a certain minimum of mental-health protection. In particular, § 47B requires that a health-insurance policy provide 60 days of coverage for confinement in a mental hospital, coverage for confinement in a general hospital equal to that provided by the policy for nonmental illness, and certain minimum outpatient benefits.¹¹

Section 47B was designed to address problems encountered in treating mental illness in Massachusetts. The Commonwealth determined that its working people needed to be protected against the high cost of treatment for such illness. It also believed that, without insurance, mentally ill workers were often institutionalized in large state mental hospitals, and that mandatory insurance would lead to a higher incidence of more effective treatment in private community mental-health centers. See Massachusetts General Court, Joint Committee on Insurance, Advances in Health Insurance in Massachusetts (1974), reprinted in App. 426, 430-432.

In addition, the Commonwealth concluded that the voluntary insurance market was not adequately providing mental-health coverage, because of "adverse selection" in mental-health insurance: good insurance risks were not purchasing coverage, and this drove up the price of coverage for those who otherwise might purchase mental-health insurance. The legislature believed that the public interest required that it correct the insurance market in the Commonwealth by mandating minimum-coverage levels, effectively forcing the good-risk individuals to become part of the risk pool, and enabling insurers to price the...