Whether state common law claims are preempted by the Employee Retirement Income Security Act of 1974 (ERISA) is a common issue in reimbursement disputes involving health care providers and insurance companies. In cases when the right to reimbursement is at issue (as contrasted to the amount of reimbursement) courts regularly affirm ERISA’s preemptive reach and hold that providers must bring their claims challenging insurer reimbursement, or failure to reimburse, under ERISA.

The preemption issue also arises in cases involving state statutes that may affect ERISA plans either by imposing record-keeping requirements or other administrative duties, or by seeking to raise revenue. Under ERISA, such statutes are preempted if they “relate to” an employee benefit plan. Recognizing that a literal interpretation and application of this test could potentially invalidate almost every state statute, courts have adopted a “common-sense approach” under which a law “relates to” an employee benefit plan if it has a “connection with” or “reference to” such a plan.

The Supreme Court’s Decision in Gobeille

In its March 2016 opinion in Gobeille v. Liberty Mutual Insurance Company, 577 U.S. (2016), the United States Supreme Court applied this approach to a Vermont statute that required health care payors and providers to report information relating to health care services. The Supreme Court held that the Vermont statute was preempted by ERISA because it interfered with and directly affected ERISA’s extensive and detailed reporting requirements, which the Court described as fundamental components of ERISA’s regulation of plan administration. Thus, under Gobeille, only direct regulations of fundamental functions are preempted.

The Sixth Circuit’s Post-Gobeille Decision

Recently, the United States Court of Appeals for the Sixth Circuit confronted the preemption issue post-Gobeille in connection with the Michigan Health Insurance and Assessment Act, a statute aimed at generating revenue by imposing a one-percent tax on all “paid claims” by carriers or third-party administrators for services rendered in Michigan for Michigan residents. See Self-Insurance Institute of America, Inc. v. Snyder, No. 12-2264, 2016 WL 3606849 (6th Cir. July 1, 2016). The Michigan statute also imposes record-keeping and reporting requirements on carriers and third-party administrators.

The Sixth Circuit determined that the Michigan statute was not preempted because it did not directly regulate any integral aspects of ERISA. Rather, the thrust of the Michigan statute was to collect taxes and generate revenue to fund Michigan’s obligations under Medicaid, an area of traditional state concern. Unlike the statute in Gobeille, the Michigan statute’s record-keeping and reporting requirements were merely “incidental” and, therefore, did not implicate ERISA’s preemption provision.

Conclusion

The Sixth Circuit’s decision reinforces the distinction between state laws that directly regulate integral aspects of ERISA plan administration (such as the Vermont statute at issue in Gobeille) and state laws that touch on those aspects only incidentally (such as the Michigan statute discussed above), the former of which will be preempted. Determining which category a state law falls into, and the degree to which the law must affect ERISA’s functions for it to be described as having a “direct” effect such that it will fall within ERISA’s preemptive scope, may be the subject of future litigation as lower courts begin to apply the Supreme Court’s holding in Gobeille.