ERISA

In Rutledge v. Pharmaceutical Care Management Association the Supreme Court will decide whether states’ attempts to regulate pharmacy benefit managers’ (PBMs) drug-reimbursement rates are preempted by the Employee Retirement Income Security Act (ERISA).

PBMs are an intermediary between health plans and pharmacies. Among other things, they set reimbursement rates to pharmacies dispensing generic drugs. Contracts between PBMs and pharmacies create pharmacy networks. According to the Eighth Circuit, “[b]ased upon these contracts and in order to participate in a preferred network, some pharmacies choose to accept lower reimbursements for dispensed prescriptions.” So, in some instance pharmacies lose money.

Arkansas passed a law requiring that pharmacies “be reimbursed for generic drugs at a price equal to or higher than the pharmacies’ cost for the drug based on the invoice from the wholesaler.”

The Supreme Court held 6-2 in Gobeille v. Liberty Mutual Insurance Company that the Employee Retirement Income Security Act (ERISA) preempts Vermont’s all-payers claims database (APCD) law. Seventeen other states collect health care claims data. The State and Local Legal Center (SLLC) filed an amicus brief arguing against ERISA preemption, which Justice Ginsburg cited three times in her dissenting opinion.

ERISA applies to the majority of health insurance plans. Rather than guaranteeing substantive benefits, it mandates oversight over plans. ERISA preempts all state laws that “relate” to any employee benefits plan. Vermont’s APCD law requires health insurers to report to the state information related to health care costs, prices, quality, and utilization, among other things.

Vermont and at least 16 other states collect health care claims data. In Gobeille v. Liberty Mutual Insurance Company the Supreme Court will decide whether the Employee Retirement Income Security Act (ERISA) preempts Vermont’s all-payers claims database (APCD) law. The State and Local Legal Center (SLLC) filed an amicus brief arguing against ERISA preemption.

ERISA applies to most health insurance plans and requires them to report detailed financial and actuarial information to the Department of Labor (DOL). ERISA preempts state laws if they “relate to” the core functions of an ERISA plan. Vermont’s APCD law seeks the following medical claims data: services provided, charges and payments for services, and demographic information about those covered.  

While the Employee Retirement Income Security Act (ERISA), which regulates private employer retirement plans, does not apply to state and local government retirement plans--a fiduciary duty does. A lower court determining the precise nature of the fiduciary duty state and local governments owe employees under a state law similar to ERISA regulating public retirement plans may look to the Supreme Court’s opinion in Tibble v. Edison International.  In this case the Court held unanimously that employers have a continuing duty to monitor retirement investments and remove imprudent ones.