ERISA – State Law Versus Federal Law

Here is an opinion for lawyers handling Employee Retirement Income Security Act (ERISA) cases.  The opinion is a 2020, opinion from the Southern District of Texas, Houston Division, and is styled, Kimberly Holick v. Aetna Life Insurance Company.

Holick was an employee of Parkway Chevrolet and covered under its Aetna issued group insurance policy.  After an alleged injury, Holick’s doctor ordered an MRI and Aetna denied coverage.  Aetna later reversed its decison and Holick eventually received the MRI.

Holick claims Aetna wrongfully denied her treatment and failed to timely reverse its denial of coverage and the delay prevented timely repair and caused her pain and deformities.

Holick sued in State Court and Aetna timely removed this case to Federal Court based on diversity and federal question jurisdiction.

Aetna filed this motion to dismiss.

Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a plaintiff’s complaint to provide “a short and plain statement of the claim showing that the pleader is entitled to relief.” Rule 12(b)(6) allows the defendant to seek dismissal if the plaintiff fails “to state a claim upon which relief can be granted.”

To survive a Rule 12(b)(6) motion to dismiss, the complaint must provide the plaintiff’s grounds for entitlement to relief—including factual allegations that when assumed to be true ‘raise a right to relief above the speculative level.

Aetna attached to its motion to dismiss what it asserts to be the pertinent Plan Booklet-Certificate.  The title on the cover of this document states, “BENEFIT PLAN Prepared Exclusively For Parkway Chevrolet Inc.”  The cover also states, “This Booklet-Certificate is part of the Group Insurance Policy between Aetna Life Insurance Company and the Policyholder.”  The Plan Booklet-Certificate spans 127 pages and includes information on eligibility of employees and dependents, enrollment, covered expenses, and claim procedures and appeal processes, among other information.  Another nine pages at the end includes “Additional Information Provided by Parkway Chevrolet Inc.”

ERISA requires that employers who provide a benefits plan to employees must also provide them with a summary plan description (SPD).  An SPD is a shorter, simplified version of the plan itself and is provided to employees with the goal of allowing them to understand what would otherwise be a complex, somewhat incomprehensible document.  Aetna asserts that the foregoing materials together make up the pertinent SPD here.

With respect to the responsibilities of plan fiduciaries, ERISA 29 USC, Section 1102(a)(1) provides, “Every employee benefit plan shall be established and maintained pursuant to a written instrument.”  The Fifth Circuit holds that the regulations require only a written instrument, without requiring a formal document designated as the plan itself.  It further holds that where there is no alternative plan document in the record, the SPD is treated as a plan’s written instrument.  And it directs that even where there is a formal document designated as the plan, the SPD is binding and if there is conflict between the SPD and the terms of the plan itself, the SPD controls.

Courts have thus readily determined the existence of an ERISA plan based solely on review of the SPD.

ERISA governs claims arising out of employee benefit plans.  Its purpose is to provide a uniform regulatory regime over such plans.  There are two sections of ERISA that can operate to preempt a party’s causes of action under state law.  One, found in at 29 USC, Section 1444(a), pertains to conflict preemption.  The other, found at 29 USC, Section 1132(a), pertains to complete preemption.  Aetna proceeds under Section 1444(a), which provides that ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to an employee benefit plan . . . .”  In analyzing preemption under this provision, a court first asks whether the benefit plan at issue constitutes an ERISA plan.  If the answer is yes, then the court must determine whether the state law claims relate to the plan.

i.   Qualification as an ERISA plan

ERISA defines an “employee welfare benefit plan” as:

[A]ny plan, fund, or program . . . established or maintained by an employer or by an employee organization, or by both, to the extent that such plan . . . was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits in the event of sickness, accident, or disability, death or unemployment, or vacation benefits, apprenticeship, or other raining programs, or day care centers, scholarship, or prepaid legal services . . . .  29 USC, Section 1002(1).

To determine whether a particular plan qualifies as an employee welfare benefit plan subject to ERISA, the Fifth Circuit asks whether a plan exists, whether it falls within the safe-harbor provision established by the Department of Labor, and whether it satisfies the primary elements of an ERISA employee benefit plan—establishment or maintenance of the plan by an employer intending to benefit employees.

The plan must meet four statutory criteria under 29 CFR, Section 2510.3-1(j), if it is to fall within the Department of Labor’s safe-harbor provision and avoid ERISA preemption:

First, “the employer does not contribute to the plan”;

Second, “ participation is voluntary”;

Third, “the employer’s role is limited to collecting premiums and remitting them to the insurer”; and

Fourth, “the employer receives no profit from the plan.”

Failure to meet any one of these inquiries puts the plan outside the safe-harbor provision.

This Court then analyzed the plan documents and found that the plan qualifies as an ERISA plan.

Posted in:

Comments are closed.

Contact Information