Ninth Circuit Confirms ERISA Preempts State-Law Claims Against Health Plan’s Insurer

The Ninth Circuit Court of Appeals has ruled, in Meyer vs. United Healthcare, that a health plan participant’s lawsuit alleging that the plan’s insurer violated state law by improperly handling his claim for medical benefits is preempted by ERISA.   

Law. In general, ERISA’s civil enforcement scheme is intended to be the exclusive vehicle for plan participants and beneficiaries asserting improper processing of claims for benefits under ERISA-governed group health plans. ERISA covers the subject-matter area to such an extent that state-law causes of action or remedies based in this field are completely preempted. 

There are two types of ERISA preemption: express preemption and conflict preemption. Express preemption primarily preempts state laws that relate to ERISA plans, but state laws regulating insurance, among other things, are saved from this form of preemption. Conflict preemption applies “when a state law’s enforcement mechanism conflicts with ERISA’s comprehensive scheme of civil remedies.”   

Facts. In Meyer, a group health plan participant sued the plan’s insurer in federal district court alleging that the insurer violated Montana’s Unfair Trade Practices Act (“UTPA”) in processing his claim for benefits under the plan. In particular, the plaintiff alleged that the insurer had violated the UTPA by overcharged him on a medical bill for treatment following a life-threatening ski accident. 

District Court. At trial, the insurer requested that the district court dismiss the plaintiff’s UTPA claim based on ERISA preemption.  

The plaintiff responded by arguing that the plan at issue was not an ERISA-governed group health plan. As support, he pointed to an internal communication by one of the insurer’s in-house attorneys opining that the plan was a non-ERISA plan. The plaintiff also argued that, even if ERISA applied to the plan, his UTPA claim was not preempted by conflict with ERISA because it was based on misrepresentation, and that his UTPA claim fell under an exception to ERISA’s express-preemption provision because the state law regulates insurance.   

The district court agreed with the insurer and dismissed the plaintiff’s UTPA claim. In turn, the plaintiff appealed to the Ninth Circuit.

Ninth Circuit. On appeal, the Ninth Circuit upheld the district court’s dismissal of the plaintiff’s UTPA claim. In reaching this determination, the court noted that none of the facts relevant to whether the plan was an ERISA-governed plan were contested or subject to reasonable dispute. The court observed that in this case the plaintiff’s (former) employer had engaged the insurer to provide health insurance for its employees, and that an insurer’s out-of-court opinion regarding ERISA’s applicability was irrelevant. As a result, the Ninth Circuit concluded that the plan in question was ERISA-governed.

The Ninth Circuit further explained that, while state law claims alleging misrepresentations related to violations independent of ERISA’s fiduciary duties are not necessarily preempted, that was not the situation in this case. Here, the plaintiff’s suit focused on a claim-payment dispute covered by ERISA’s comprehensive regulatory scheme which meant that ERISA’s conflict preemption applied; as a result the exceptions to ERISA’s express preemption for state laws regulating insurance did not apply. Therefore, the Ninth Circuit upheld the district court’s determination that the plaintiff’s claims were preempted by ERISA.