De Buono v. Nysa-Ila Medical & Clinical Serv.

• Decision Date: 02 June 1997
• Docket Number: 951594
• Parties: Barbara A. DE BUONO, New York Commissioner Of Health, et al., Petitioners, v. MEDICAL AND CLINICAL SERVICES FUND, etc., et al
• Court: U.S. Supreme Court

520 U.S. 806

117 S.Ct. 1747

138 L.Ed.2d 21

Barbara A. DE BUONO, New York Commissioner Of Health, et al., Petitioners,

v NYSA-ILA MEDICAL AND CLINICAL SERVICES FUND, etc., et al.

No. 95-1594.

Supreme Court of the United States

Argued Feb. 24, 1997.

Decided June 2, 1997.

Syllabus ^*

New York's Health Facility Assessment (HFA) imposes a tax on gross receipts for patient services at, inter alia, diagnostic and treatment centers. The NYSA-ILA Medical and Clinical Services Fund (the Fund), which administers a plan subject to the Employee Retirement Income Security Act (ERISA), owns and operates New York treatment centers for longshore workers, retirees and their dependents. Respondents, the Fund's trustees, discontinued paying the tax and filed this action to enjoin petitioner state officials from making future assessments and to obtain a refund, alleging that the HFA is a state law that "relates to'' the Fund within the meaning of §514(a) of ERISA, and is therefore pre-empted as applied to hospitals run by ERISA plans. The District Court concluded that the HFA is not pre-empted because it is a tax of general application having only an incidental impact on benefit plans. The Second Circuit reversed, reasoning that the HFA relates to the Fund by reducing the amount of Fund assets that would otherwise be available to provide plan members with benefits, and could cause the plan to limit its benefits or to charge plan members higher fees. On remand from this Court in light of New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 115 S.Ct. 1671, 131 L.Ed.2d 695-in which this Court held that ERISA did not pre-empt a New York statute requiring hospitals to collect surcharges from patients covered by a commercial insurer but not from patients insured by a Blue Cross/Blue Shield plan-the Second Circuit reinstated its judgment, distinguishing Travelers on the ground that the statute there at issue had only an indirect economic influence on the decisions of ERISA plan administrators, whereas the HFA depletes the Fund's assets directly, and thus has an immediate impact on an ERISA plan's operations.

Held: Section 514(a) does not preclude New York from imposing a gross receipts tax on ERISA funded medical centers. Pp. ____-____.

(a) When the Second Circuit initially found the HFA pre-empted, it relied substantially on an expansive and literal interpretation of the words "relate to'' in §514(a). It appears to have adhered to that approach on remand, failing to give proper weight to Travelers' rejection of such a strictly literal reading. In Travelers, the Court unequivocally concluded that the "relates to'' language was not intended to modify "the starting presumption that Congress does not intend to supplant state law.'' 514 U.S., at 654, 115 S.Ct., at 1676. In evaluating whether the normal presumption against pre-emption has been overcome in a particular case, this Court must look to the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive. Id., at 656, 115 S.Ct., at 1677. Pp. ____-____.

(b) Following that approach here, the HFA clearly operates in a field that has been traditionally occupied by the States: the regulation of health and safety matters. Hillsborough County v. Automated Medical Laboratories, Inc., 471 U.S. 707, 715, 105 S.Ct. 2371, 2376, 85 L.Ed.2d 714. Nothing in the HFA's operation convinces this Court that it is the type of state law that Congress intended ERISA to supercede. It is one of myriad state laws of general applicability that impose some burdens on the administration of ERISA plans but nevertheless do not relate to them within the statute's meaning. See, e.g., Travelers, 514 U.S., at 668, 115 S.Ct., at 1683. The supposed difference between direct and indirect impact-upon which the Second Circuit relied in distinguishing this case from Travelers-cannot withstand scrutiny. While the Fund has arranged to provide medical benefits for its beneficiaries directly, had it chosen to purchase the services at independently run hospitals, those hospitals would have passed their HFA costs onto the Fund through their rates. Although the tax would be "indirect,'' its impact on the Fund's decisions would be in all relevant respects identical to the "direct'' impact felt here. Pp. ____-____.

74 F.3d 28, reversed.

STEVENS, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and O'CONNOR, KENNEDY, SOUTER, GINSBURG, and BREYER, JJ., joined. SCALIA, J., filed a dissenting opinion, in which THOMAS, J., joined.

M. Patricia Smith, for petitioners.

Edwin S. Kneedler, Washington, DC, for the U.S. as amicus curiae, by special leave of the Court.

Donato Caruso, New York City, for Respondents.

Justice STEVENS delivered the opinion of the Court.

This is another Employee Retirement Income Security Act (ERISA) pre-emption case. ¹ Broadly stated, the question presented is whether hospitals operated by ERISA plans are subject to the same laws as other hospitals. More precisely, the question is whether the opaque language in ERISA's §514(a) ² precludes New York from imposing a gross receipts tax on the income of medical centers operated by ERISA funds. We hold that New York may collect its tax.

I

In 1990, faced with the choice of either curtailing its Medicaid program or generating additional revenue to reduce the program deficit, the New York General Assembly enacted the Health Facility Assessment (HFA). ³ The HFA imposes a tax on gross receipts for patient services at hospitals, residential health care facilities, and diagnostic and treatment centers. ⁴ The assessments become a part of the State's general revenues.

Respondents are the trustees of the NYSA-ILA Medical and Clinical Services Fund (the Fund), which administers a self-insured, multiemployer welfare benefit plan. The Fund owns and operates three medical centers-two in New York and one in New Jersey-that provide medical, dental and other health care benefits primarily to longshore workers, retirees, and their dependents. The New York centers are licensed by the State as "diagnostic and treatment centers,'' App. 80, and are thus subject to a 0.6 percent tax on gross receipts under the HFA. N.Y. Pub. Health Law §2807-d(2)(c) (McKinney 1993).

During the period from January through November of 1991, respondents paid HFA assessments totaling $7,066 based on the two New York hospitals' patient care income of $1,177,670. At that time, they discontinued the payments and brought this action against appropriate state officials (petitioners) to enjoin future assessments and to obtain a refund of the tax paid in 1991. The complaint alleged that the HFA is a state law that "relates to'' the Fund within the meaning of §514(a) of ERISA, and is therefore pre-empted as applied to hospitals run by ERISA plans.

The District Court denied relief. It concluded that HFA was not pre-empted because it was a "tax of general application'' that did not "interfere with the calculation of benefits or the determination of an employee's eligibility for benefits'' and thus had only an incidental impact on benefit plans. App. to Pet. for Cert. 21a. ⁵

The Court of Appeals for the Second Circuit reversed. It distinguished cases in which we had found that certain "laws of general application'' were not pre-empted by ERISA, ⁶ explaining that the HFA "targets only the health care industry,'' which is, "by definition, the realm where ERISA welfare plans must operate,'' NYSA-ILA Medical and Clinical Services Fund v. Axelrod, M. D., 27 F.3d 823, 827 (1994). The court reasoned that because the HFA "operates as an immediate tax on payments and contributions which were intended to pay for participants' medical benefits,'' it directly affects "the very operations and functions that make the Fund what it is, a provider of medical, surgical, and hospital care to its participants and their beneficiaries.'' Ibid. The HFA, concluded the court, thus "related to'' the Fund because it reduced the amount of Fund assets that would otherwise be available to provide plan members with benefits, and could cause the plan to limit its benefits, or to charge plan members higher fees.

The first petition for certiorari in this case was filed before we handed down our opinion in New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995). In that case we held that ERISA did not pre-empt a New York statute that required hospitals to collect surcharges from patients covered by a commercial insurer but not from patients insured by a Blue Cross/Blue Shield plan. Id., at 649-651, 115 S.Ct., at 1679-1682. After deciding Travelers, we vacated the judgment of the Court of Appeals in this case and remanded for further consideration in light of that opinion. 514 U.S. 1094, 115 S.Ct. 1819, 131 L.Ed.2d 742 (1995).

On remand the Court of Appeals reinstated its original judgment. The court distinguished the statute involved in Travelers on the ground that-by imposing a tax on the health insurance carriers who provided coverage to plans and their beneficiaries-it had only an indirect economic influence on the decisions of ERISA plan administrators, whereas the HFA "depletes the Fund's assets directly, and thus has an immediate impact on the operations of an ERISA plan,'' NYSA-ILA Medical and Clinical Services Fund v. Axelrod, M. D., 74 F.3d 28, 30 (1996). We granted the New York officials' second petition for certiorari, 519 U.S. ----, 117 S.Ct. 292, 136 L.Ed.2d 212 (1996), and now reverse.

II

When the Second Circuit initially found the HFA pre-empted as applied to Fund-operated hospitals, that court relied substantially on an expansive and literal interpretation of the words "relate to'' in §514(a) of ERISA. 27 F.3d, at 826. In reconsidering the case on remand, the court appears to have adhered to that approach, failing to give proper weight...