Late last week TCJL filed a brief in response to a request for the opinion of the attorney general regarding the enforceability of certain provisions of Chapter 1369, Insurance Code, against self-funded employer-sponsored employee benefit plans governed by the Employer Retirement Income Security Act of 1974 (ERISA) (29 U.S.C. § 1001 et seq.).
As we noted in our comments, during the 88th Regular Session the Legislature considered proposals (HB 2021/SB 1137) that would have subjected ERISA plans to Chapter 1369, in our view, in violation of ERISA pre-emption. The effect of these bills would have been to follow other states, most recently Oklahoma, in an effort to mandate network restrictions on pharmacy services provided by ERISA plans. To date, those efforts have been met with a strong litigation response from the business community, which has successfully argued in federal courts that “any willing provider” and other mandates that restrict employer choice, plan administration, and plan design run afoul of ERISA pre-emption.
In the face of united opposition from the Texas business community, neither of these proposals advanced from committee. We think it is therefore fair to say, at least for the time being, that the Legislature came to the conclusion that the bills raised very significant pre-emption concerns and that, since other states trying to do the same thing were bogged down in pre-emption litigation, it might be the better part of valor to see how the dust settled before ginning up another lawsuit. It should be noted that the opinion request is narrower than the proposed legislation, but it asks whether TDI can enforce the most objectionable provisions of Chapter 1369 from the business community perspective: network restrictions on pharmacy services. Consequently, to the extent that any of the dust stirred up by Oklahoma (who got poured out by the 10th Circuit) has yet to settle, the opinion request kicks it up again.
In any event, our comments make the a detailed review of the pertinent provisions of Chapter 1369 and how we believe that, under current law, ERISA pre-empts them. In a broader sense, we try to make clear in the comments that last session’s legislation and this opinion request represent threats to the Texas business climate as a whole. Enforcing Chapter 1369 against pharmacy benefit managers (PBMs), health plans, or third-party administrators doesn’t hurt them in the least, but it does harm Texas businesses who offer ERISA plans to their employees because ERISA pre-emption protects those plans from patchwork state-by-state regulation, such as Chapter 1369. However people feel about health insurers or PBMs, we can all agree that employer-sponsored health insurance for employees is a good thing (if we can’t agree on that, everything really is in the ditch). ERISA pre-emption is a very small price to pay for the access to affordable, cost-effective employee retirement and health benefits that ERISA enables employers to offer to their Texas employees.
If we decide that we are not willing to pay that price but would rather regulate ERISA plans in our own way, we are also likely to find out that employers who locate their businesses in Texas in part because their ERISA plans can operate without state interference will no longer find it worthwhile to locate their employees here. It will simply become too expensive and administratively burdensome to have to comply with a unique set of Texas regulations that don’t exist anywhere else. And if it’s acceptable to do that where pharmacy benefits are concerned, there will be nothing stopping regulation of anything and everything else. That, in our view, is a recipe for disincentivizing employers from providing health insurance benefits at all, much less mandated benefits that have become too expensive and too difficult to manage. We realize that policymakers may roll their eyes whenever the Texas business community complains about the impact of a proposed policy on economic growth and job creation. We would simply respond that the policy choices that have been made since the Texas miracle took off in the mid-1990s—choices that include preserving ERISA pre-emption—have been taken with improving the economic climate at the forefront. And they have worked. It simply stands to reason that reversing those policies now might likewise reverse the progress we have made because of them.
