Travelers Ins. Co. v. Pataki
| Decision Date | 15 August 1995 |
| Docket Number | Nos. 1514-1516 and 1667,D,s. 1514-1516 and 1667 |
| Citation | 63 F.3d 89 |
| Parties | , 19 Employee Benefits Cas. 1702, Medicare & Medicaid Guide P 43,552, Pens. Plan Guide P 23911K The TRAVELERS INSURANCE COMPANY, Plaintiff-Appellee-Cross-Appellant, Health Insurance Association of America, American Council of Life Insurance, Life Insurance Council of New York, Inc., Aetna Life Insurance Co., Aetna Health Plans of New York, Inc., Mutual of Omaha Insurance Company, the Union Labor Life Insurance Company, Professional Insurance Agents of New York, Inc. Trust, Plaintiffs-Appellees, New York State Health Maintenance Organization Conference and Health Services Medical Corporation, MVP Health Plan, Wellcare of New York, Mid-Hudson Health Plan, Oxford Health Plan, Capital District Physicians Health Plan, Choicecare Long Island, Independent Health, Travelers of New York, Physicians Health Services, Preferred Care and U.S. Healthcare, Plaintiffs-Intervenors-Appellees, v. George E. PATAKI, in his official capacity as Governor of the State of New York, Barbara DeBonno, M.D., in her official capacity as Commissioner of Health for the State of New York, Edward J. Muhl, in his official capacity as Superintendent of Insurance of the State of New York, Bryan Wing, in his official capacity as Commissioner of Social Services of the State of New York, Dennis C. Vacco, in his official capacity as Attorney General of the State of New York, Defendants-Appellants-Cross-Appellees, New York State Conference of Blue Cross & Blue Shield Plans, Empire Blue Cross and Blue Shield, Hospital Association of New York State, Intervenors-Defendants- Appellants-Cross-Appellees. ockets 93-7132L, 93-7134CON, 73-7148CON and 93-7194XAP. |
| Court | U.S. Court of Appeals — Second Circuit |
M. Patricia Smith, Asst. Atty. Gen., New York City (Dennis C. Vacco, Atty. Gen. of State of New York, of counsel), for defendants-appellants-cross-appellees.
Robert A. Bicks, Whitman Breed Abbott & Morgan, New York City (James J. Sabella, Patricia Anne Kuhn, New York City, of counsel, and Bartley J. Costello, III, Eileen M. Considine, Hinman, Straub, Pigors & Manning, P.C., Albany, NY, of counsel), for intervenors-defendants-appellants-cross-appellees Empire Blue Cross & Blue Shield and the New York State Conference of Blue Cross & Blue Shield Plans.
Jeffrey J. Sherrin, Sherrin & Glasel, Albany, NY, for intervenor-defendant-appellant-cross-appellee Hosp. Ass'n of New York State.
Craig P. Murphy, Windels, Marx, Davies & Ives, New York City, for plaintiff-appellee-cross-appellant The Travelers Ins. Co., and plaintiffs-appellees Health Ins. Ass'n of America, American Council of Life Ins., Life Ins. Council of New York, Inc., Mutual of Omaha Ins. Co., The Union Labor Life Ins. Co., Aetna Life Ins. Co. and Aetna Health Plans of New York, Inc. and Professional Ins. Agents of New York, Inc. Trust.
Diana L.S. Peters, Feder & Assocs., Washington, DC, for amicus curiae The Natl. Coordinating Committee for Multiemployer Plans.
Edward J. Groarke, Colleran, O'Hara & Mills, Garden City, NY, for amicus curiae Trustees of and The Pension, Hospitalization Benefit Plan of the Elec. Industry and Trustees of and United Food and Commercial Workers Local 174 Health Care Fund, Trustees of and United Food and Commercial Workers Local 174 Retail Welfare Fund, and Trustees of and United Food and Commercial Workers Local 174 Commercial Health Care Fund.
Hugh Barber, Asst. Atty. Gen., Hartford, CT , for amicus curiae the State of Connecticut.
Before: LUMBARD and CARDAMONE, Circuit Judges. *
In Travelers Insurance Co. v. Cuomo, 14 F.3d 708 (2d Cir.1993), we held in part that the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. Sec. 1001 et seq., preempted a New York statute that imposed surcharges on hospital bills ultimately paid by private health insurers. The Supreme Court reversed and remanded this portion of our decision, New York State Conference of Blue Cross and Blue Shield Plans v. Travelers Insurance Co., --- U.S. ----, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995), holding that the surcharge statute's economic impact on ERISA plans was indirect only and not substantial enough to trigger ERISA preemption. The Court left open whether the surcharge statute was preempted with respect to self-insured ERISA plans. Finding that, on the present facts, an ERISA plan's self-insured status makes no difference, we reverse the judgment of the United States District Court for the Southern District of New York (Louis J. Freeh, then-Judge ) in part, and remand with instructions to enter partial judgment for the defendants.
The background of this case may be found in three opinions, familiarity with which we assume. See New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., --- U.S. ----, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995), rev'g Travelers Ins. Co. v. Cuomo, 14 F.3d 708 (2d Cir.1993), aff'g in part, rev'g in part 813 F.Supp. 996 (S.D.N.Y.1993). At issue is a New York statute that imposed greater or lesser surcharges on patients, depending on who provided health care benefits to the patients. See N.Y.Pub.Health Law Sec. 2807-c (McKinney 1993). For example, a patient who belonged to a self-insured plan had to pay a 13% surcharge, Sec. 2807-c(1)(b), while one who belonged to a Blue Cross/Blue Shield plan (the "Blues") paid no surcharge at all, Sec. 2807-c(1)(a). Some patients with commercial insurance had to pay as much as a 24% surcharge. Sec. 2807-c(2-a)(a)-(2-a)(e). (Of course, the bills ultimately were paid by the patient's health insurer.) The surcharges were intentionally enacted to give the Blues a leg up by raising costs to private insurers, HMOs, and ERISA plans that self-insure.
A number of commercial insurers, acting as fiduciaries for the ERISA plans they administer, challenged, inter alia, the surcharge statute, arguing that it "relate[d] to" an ERISA plan, 29 U.S.C. Sec. 1144(a), and was thus preempted by ERISA. (Several HMOs intervened as plaintiffs, too.) The plaintiffs moved, and the defendants cross-moved, for summary judgment on the ERISA preemption issue. The district court granted the plaintiffs' motion, ruling that ERISA preempted the surcharge statute, and denied the defendants' motion. Travelers Ins. Co. v. Cuomo, 813 F.Supp. 996 (S.D.N.Y.), aff'd in part, rev'd in part, 14 F.3d 708 (2d Cir.1993), rev'd sub nom. New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., --- U.S. ----, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995).
The defendants appealed, and we affirmed the district court's ruling that ERISA preempted the surcharge statute. We concluded that the economic impact on ERISA plans, though indirect, was substantial enough to trigger preemption. Travelers Ins. Co., 14 F.3d at 717-23. We reasoned that ERISA preempted any state law imposing surcharges that "purposely interfere[d] with the choices that ERISA plans make for health care coverage." Id. at 719. Furthermore, we concluded that ERISA preempted any state law that "impose[d] a significant economic burden on commercial insurers and HMOs," id. at 721, especially when the law "substantially increase[d] the cost to ERISA plans of providing beneficiaries with a given level of health care benefits," id. at 720 (emphasis added). Finally, we suggested that ERISA preempted any state law that imposed surcharges which forced ERISA plans either to increase "plan costs or reduce plan benefits." Id.
The Supreme Court reversed, holding that an "indirect" economic effect does not trigger ERISA preemption, unless it produces "such acute, albeit indirect, economic effects, by intent or otherwise, as to force an ERISA plan to adopt a certain scheme of substantive coverage or effectively restrict its choice of insurers." Travelers, --- U.S. ----, 115 S.Ct. at 1683. The Court concluded that the surcharge statute, which inflated private insurers' hospital bills by as much as 24%, neither forced ERISA plans to adopt certain coverage nor restricted their choice of insurers. Rather, the statute "affect[ed] only indirectly the relative prices of insurance policies, a result no different from myriad state laws in areas traditionally subject to local regulation, which Congress could not possibly have intended to eliminate." Id.
The Court further explained:
An indirect economic influence ... does not bind plan administrators to any particular choice and thus function as a regulation of an ERISA plan itself; commercial insurers and HMOs may still offer more attractive packages then the Blues. Nor does the indirect influence of the surcharges preclude uniform administrative practice or the provision of a uniform interstate benefit package if a plan wishes to provide one. It simply bears on the costs of benefits and the relative costs of competing insurance to provide them. It is an influence that can affect a plan's shopping decisions, but it does not affect the fact that any plan will shop for the best deal it can get, surcharges or no surcharges.
Id. at ----, 115 S.Ct. at 1679. The Court footnoted, however, that it did not "address the [13%] surcharge statute insofar as it applies to self-insured funds," because we had never "expressly address[ed]" it in our opinion, and because the district court had referred to it only in staying its decision pending appeal. Id. at ----, 115 S.Ct. at 1675 at n. 4. The Court therefore left for us this issue on remand. Id.
Plaintiffs who are fiduciaries for self-insured ERISA plans have seized upon the foregoing footnote to suggest that we let the district court first consider whether ERISA preempts the surcharge statute with respect to self-insured plans. On the merits, they argue that the economic impact of the New York statut...
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