Wednesday, January 23, 2013

Supreme Court Declines To Review Montana Preemption Case

The United State Supreme Court will not review a ruling from the United States Court of Appeals for the Ninth Circuit that the Employee Retirement Income Security Act (“ERISA”) does not preempt a Montana state unfair insurance practices statute that bars insurers from engaging in “unfair discrimination” when charging policy premiums to similarly situated individuals. See Blue Cross and Blue Shield of Montana Inc. v. Fossen, U.S., No. 11-1144, cert. denied 1/22/13.
By way of background, the lawsuit at issue was originally filed in a Montana state court by Dale Fossen and his company. Fossen claimed that his health insurer, Blue Cross and Blue Shield of Montana Inc. (“BCBSM”), violated Montana Code Ann. §33-22-526(2)(a) by increasing the premiums for Fossen's business by 21 percent, allegedly due at least in part to the health status of one of Fossen's employees. After BCBSM removed the case to federal court, the district court agreed with Fossen that Montana's “little HIPAA” law would fall under ERISA's insurance savings clause. However, the court eventually determined that, even if the law were saved from ERISA preemption, ERISA would still bar application of the Montana law because it was duplicative of ERISA Section 702. The district court subsequently found that BCBSM did not violate ERISA Section 702. Fossen then appealed to the Ninth Circuit. In support of Fossen's appeal, the Department of Labor filed an amicus brief asking the Ninth Circuit to reverse the lower court's ruling on ERISA preemption.
The Ninth Circuit ruled in 2011 that the Montana unfair insurance practices statute was “saved” from ERISA preemption because it applied without regard to the existence of an ERISA plan and therefore fell within ERISA Section 514(a)’s savings clause for state laws regulating insurance. The Ninth Circuit also held that Montana’s “little HIPAA” statute was completely preempted by the federal Health Insurance Portability and Accountability Act (the “HIPPA statute”).  The Ninth Circuit determined that ERISA completely preempted Fossen's claim challenging BCBSM’s conduct under Montana's “little HIPAA” statute. The court found that Fossen could have brought the action under ERISA Section 502(a) and that the state law claim was identical to the federal HIPAA claim he could have filed. However, the Ninth Circuit reversed the district court's ruling on the unfair insurance practices claim against BCBSM, remanding that claim to the district court. According to the Ninth Circuit, the statute was exempt from preemption under ERISA's insurance savings clause because it applied without regard to the existence of an ERISA plan and because it “creates a right that is separate from and could not possibly be remedied under ERISA.”
Following the Ninth Circuit's decision, the Supreme Court declined to review the Ninth Circuit's preemption ruling on Montana's “little HIPAA” statute in June 2012. However, the high court invited the U.S. solicitor general to weigh in on the unfair insurance practices law, expressing the federal government's opinion on whether a substantive state insurance law that is saved from ERISA preemption can be enforced through state law remedies or whether ERISA's enforcement scheme necessarily would apply. Ultimately, the Court declined to grant certiorari.