AMERICAN MEDICAL SECURITY, INCORPORATED; Client First Brokerage Services, Incorporated; Maran, Incorporated; Trio Metal Products Company, Incorporated; United Wisconsin Life Insurance Company, Plaintiffs-Appellees, v. Dwight K. BARTLETT, III, in his capacity as Insurance Commissioner of the State of Maryland, Defendant-Appellant. National Association of Insurance Commissioners; National Employee Benefits Institute; Self-Insurance Institute of America, Incorporated, Amici Curiae. AMERICAN MEDICAL SECURITY, INCORPORATED; Client First Brokerage Services, Incorporated; Maran, Incоrporated; Trio Metal Products Company, Incorporated; United Wisconsin Life Insurance Company, Plaintiffs-Appellants, v. Dwight K. BARTLETT, III, in his capacity as Insurance Commissioner of the State of Maryland, Defendant-Appellee.
Nos. 96-1446, 96-1376
United States Court of Appeals, Fourth Circuit
Argued Oct. 23, 1996. Decided April 11, 1997.
111 F.3d 358
Alternatively, appellant argues that even if Elwyn Industries was negligent, the United States remains liable under Pennsylvania law as thе owner and possessor of the building. There is a split in the circuits on this question. Compare Dickerson, Inc. v. United States, 875 F.2d 1577 (11th Cir. 1989) (interpreting Florida law and holding the government liable), with Berkman v. United States, 957 F.2d 108 (4th Cir. 1992) (interpreting Virginia law and holding that independent-contractor exception precluded governmental liability even though similar property owners might be liable under state law for injuries resulting from unsafe conditions). We believe the Fourth Circuit offers the better reasoned analysis and we accept it as our own. The Berkman court stated:
Thus, while Berkman is correct in his assertion that, under Virginia law, the United States when acting as a landowner must maintain its property in a reasonably safe condition, Berkman must also show that federal law permits the application of this law to the United States. This he fails to do. The fundamental error in Berkman‘s reasoning flows from the fact that the government of the United States can act only through people. Furthermore, it is well understood that the government‘s activities are not performed exclusively by the government‘s employees and that independent contractors and subcontractors conduct a broad array of functions on the government‘s behalf. Thus, the FTCA divides the universe of persons through which the United States may act into two general classes, “employee[s] of the government” and “contractor[s].” See
28 U.S.C. §§ 1346(b) ,2671 .* * * * * *
[W]e find nothing in the language of the act or in the legislative history of the FTCA to indicate that Congress considered the existence of a generalized liability, attributable to the United States based on any breach of a state defined duty. By expressly waiving immunity for the tortious conduct of its employees and only its employees, the FTCA requires a more focused approach that requires the courts to determine the relationship to the United States of the actor whose negligence might be imputed to the government under state law.
Berkman, 957 F.2d at 112-113. See Gibson v. United States, 567 F.2d 1237 (3d Cir. 1977).
We have considered all arguments advanced by the parties and have concluded that no further discussion is necessary.
The judgment of the district court will be affirmed.
Before NIEMEYER and MOTZ, Circuit Judges, and DOUMAR, Senior United States District Judge for the Eastern District of Virginia, sitting by designation.
Affirmed by published opinion. Judge NIEMEYER wrote the opinion, in which Judge MOTZ and Senior Judge DOUMAR joined.
OPINION
NIEMEYER, Circuit Judge:
We must decide whether the Employee Retirement Income Security Act of 1974
The district court entered summary judgment declaring that ERISA preempts the state regulation and that the regulation is, therefore, “void to the extent that it mandates or affects attachment points for stop-loss insurance policies purchased by self-funded or self-insurеd employee benefit plans covered by ERISA.” The Court also enjoined Maryland from enforcing the regulation or taking any other step “to regulate or affect the attachment points for stop-loss insurance policies purchased by self-funded or self-insured employee benefit plans.”
Because the purpose and effect of Maryland‘s regulation is to force state-mandated health benefits on self-funded ERISA plans when they purchase certain types of stop-loss insurance, wе hold that
I
Client First Brokerage Services, Incorporated; Maran, Incorporated; and Trio Metal Products Company, Incorporated, are Maryland employers sponsoring self-funded employee health benefit plans subject to ERISA. Each has purchased stop-loss insurance from United Wisconsin Life Insurance Company (“United Wisconsin Life“) and has engaged American Medical Security, Incorporated, (“AMS“) as administrator of their plans. These Maryland employers purchased stop-loss insurаnce to cover their plans’ benefit payments above an annual $25,000-per-employee level, known as the “attachment point.” United Wisconsin Life was also agreeable to a lower attachment point, insuring a greater portion of the plans’ payments, if requested to do so by the plans’ sponsors. The stop-loss insurance afforded by United Wisconsin Life protected the plans themselves and not their participants or beneficiaries.
The employee benefit plans spоnsored by these three Maryland employers contained substantially fewer benefits than the 28 mandated by Maryland for health insurance policies regulated by the Maryland Insurance Commissioner. See
In the course of its review of United Wisconsin Life stop-loss policies in the fall of 1994—insurance companies issuing policies to Maryland residents are required to obtain prior approval for their policies, see
The Maryland emplоyers, United Wisconsin Life, and AMS filed suit seeking a declaratory judgment that the regulations are not enforceable and an injunction against their enforcement. They alleged that Maryland‘s insurance regulations which (1) establish a minimum attachment point for stop-loss insurance, and (2) deem stop-loss insurance
II
This case presents the tension between Maryland‘s effort to guarantee through its regulation of insurance that employee benefit plans offer at least 28 state-mandated health benefits, see
ERISA is a comprehensive federal statute regulating private employee benefit plans, including plans maintained for the purpose of providing medical or other health benefits for employees. To assure national uniformity of federal law, ERISA broadly preempts state law and assures that federal regulation will be exclusive. Section 514(a) provides that ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” as defined by ERISA. The courts have interpreted this clause broadly to carry out Congress’ purpose of displacing any state effort to regulate ERISA plans. See, e.g., FMC Corp. v. Holliday, 498 U.S. 52, 58 (1990) (“The pre-emption clause is conspicuous for its breadth“); Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 98 (1983) (“The section‘s pre-emptive scope [is] as broad as its language“). Thus, any law that “relates to” a plan is preempted by
Although ERISA‘s preemptive scope is broad, the “savings clause” explicitly saves from ERISA‘s preemption those state laws that rеgulate insurance. See
Stop-loss insurance provides coverage to self-funded plans above a certain level of risk absorbed by the plan. It provides protection to the plan, not to the plan‘s participants or beneficiaries, against benefit payments over the specified level, called the “attachment point.” Attachment points may be “specific” or “aggregate.” Specific attachment points define the level of benefits paid to individual beneficiaries beyond which the insurance company will indemnify the plan. Aggregate attachment рoints define the total amount of benefits paid to all participants or beneficiaries beyond which the insurance company will indemnify the plan. Stop-loss insurance is thus akin to “reinsurance” in that it provides reimbursement to a plan after the plan makes benefit payments. See
The State of Maryland regulates health insurance, requiring that health insurance policies afford at least 28 specified benefits. See
Recognizing that such arrangements bypass Maryland‘s regulations for health insurance and intending to prevent such arrangements, the Maryland Insurance Commissioner adopted regulations that require plans to absorb the risk of at least the first $10,000 of benefits paid to each beneficiary. As the regulations’ statement of purpose notes, the Commissioner seeks to protect Maryland residents “against acts by persons and insurers which deprive them of mandated health benefits.” 22 Md.Reg. 913 (1995). Justifying the regulation and explaining how low attachment points permit self-funded ERISA plans to bypass state mandates, the Insurance Commissioner stated in his order:
At very low attachment points, however, a “stop loss” policy is merely a substitution for health insurance. It does not insure only against catastrophic loss. The self-funded health benefit рlan is not regulated by the Insurance Commissioner and is not required to provide any of the state-mandated benefits. The goal is obvious: As policies become available with attachment points lower than many deductibles, it became an increasingly attractive option to “self-insure” a health plan, but to continue to shift the majority of the risk to the insurance carrier by purchasing “stop loss” coverage.
In re: Maryland Stop Loss Insurance Litigation, No. MIA-370-12/95 at 4 (Dec. 8, 1995). The regulations accordingly provide that any stop-loss insurance policy with a specific attachment point below $10,000 is deemed to be a health insurance policy for purposes of Maryland‘s health insurance regulations and must therefore contain mandated benefits. See
In summary, on one side of the issue before us, the Maryland Insurance Commissioner seeks to take advantage of his right under ERISA‘s savings clause to regulate the business of insurance. And on the other side, the insurance companies seek to take advantage of ERISA‘s preemption and deemer clauses to remove self-funded plans from the reach of state insurance regulation.
III
We begin the analysis with the question of whether Maryland‘s regulations “relate to” ERISA employee benefit plans and thus whether they fаll within ERISA‘s preemptive scope. See
Even though Maryland‘s regulations relate to ERISA plans, they nevertheless may be saved from preemption if they constitute a law that “regulates insurance,” see
In this case, the Maryland Insurance Commissioner can well argue with respect to the first Metropolitan Life factor that the setting of attachment points allocates risk. Higher attachment points burden plans with more risk while lower attachment points increase insurance company risk. The Commissioner might also be able to argue successfully on the second Metropolitan Life factor that the regulations address a practice integral to the insured-insurer relationship, at least if our analysis is limited to the explicit terms of the regulations. The regulations, by their own terms, seek to impose requirements only on insurance companies and their stop-loss insurance policies. This factor is, however, complicated by the fact that the intended, stated, and actual effect of the regulations is to reach the relationship between ERISA plans and their participants who are not parties to the insurance contract. The third Metropolitan Life factor is complicated in the same way. Although the state‘s regulation of attachment points is limited to entities in the insurance industry, the stated purpose of the regulations is also to reach the plan-participant relationship, a relationship which is outside the insurance industry.
While the Maryland Insurance Commissioner can thus make a superficial case that the regulations address the business of insurance, the complications of the second and third Metropolitan Life factors together with the “deemer clause” provide the core difficulty with the state‘s regulation of stop-loss insurance policies issued to ERISA plans.
We recognize that the regulations are carefully drafted to focus directly on insurance companies issuing stop-loss insurance and not on the employee benefit plans themselves. Thus, the regulations purport to define stop-loss insurance as health insurance subject to state regulation if the stop-loss insurance meets specific criteria. Notwithstanding the regulations’ wording, however, their purpose and effect are directed at self-funded employee benefit plans that attempt to provide fewer health benefits to Maryland residents than state law mandates for health insurance policies. The state asserts a need for this regulation because, in its absence, the loophole would allow every self-funded plan to provide coverage for fewer health benefits than state law mandates for health insurance policies. It argues that absorbing a minimal risk is simply a sham to circumvent state insurance regulation, the area carved out by ERISA in which states mаy act. But in seeking to address this perceived loophole, the state in fact ends up regulating self-funded employee benefit plans that are exclusively subject to ERISA.
In seeking to require self-funded plans to offer coverage consistent with state insur
The state‘s fear that plаns will circumvent state regulation and offer citizens too few health benefits is understandable. But to state that fear reveals that Maryland is really concerned, not with the business of insurance and its coverage of risks, but with the benefits that ERISA plans can choose to provide their participants and beneficiaries. No matter how understandable this concern may be, only Congress may address it, not the State of Maryland through its insurance regulations. In attempting to address this concern through the regulation of stop-loss insurance, the state blurs the real distinction between self-funded plans, with or without stop-loss insurance, and fully insured plans.
Maryland‘s regulations distinguish self-funded plans from insured plans solely based on the level of the attachment point of stop-loss insurance. Thus, when the attachment point becomes low, Maryland deems self-funded plans with stop-loss insurance to be insured plans. See
Under a self-funded plan, the employer who promises the benefit incurs the liability defined by the plan‘s terms. That liability remains the employer‘s even if it has purchased stop-loss insurance and even if the stop-loss insurer becomes insolvent. Conversely, if the employer becomes insolvent, the solvency of the stop-loss insurer may not benefit plan participants and beneficiaries. This is because their claims against the insurer would be derivative of the plan‘s claim against the insurer, which arises only after the plan actually makes benefit payments beyond the agreed attachment point. In contrast, when a plan buys health insurance for participants and beneficiaries, the plan participants and beneficiaries have a legal claim directly against the insurance company, thereby securing the benefits even in the event of the plan‘s insolvency. Participants and beneficiaries in self-funded plans may not have the security of the insurance company‘s assets because stop-loss insurance insures the plan and not the participants.
The state‘s regulations fail to recognize that in a self-funded plan, with or without stop-loss insurance and regardless of the attachment point, the provision of benefits depends on the plan‘s solvency, whereas the provision of benefits in an insured plan depends entirely on the insurer‘s solvency. It is this fundamental difference that precludes the Maryland Insurance Agency from regulating self-funded plans but permits them to regulate insurance companies that provide health benefits to plans for their participants. While ERISA‘s savings clause explicitly empowers states to аdjust the obligations and incentives which bear on insurance companies’ solvency, see
Maryland‘s stop-loss insurance regulations also directly and impermissibly affect ERISA plans’ costs and choices in designing their own array of benefits. If a self-funded plan insured by stop-loss insurance having an attachment point of $5,000 provided no benefit for organ transplants, the regulations would either raise plan costs by including unwanted, state-mandated insurancе coverage for organ transplants or convert the self-funded plan into a fully insured plan contrary to its preference. These effects impermissibly in
While we recognize that self-funded plans may not be providing Maryland residents with the range of benefits mandated by state law and that such plans’ benefits may not always be as secure as those offered by regulated insurance companies, the remedy for any such deficiency must be requested of Congress. When ERISA preempted state law relating to ERISA-covered employee benefit plans, it may have created a regulatory gap, but Maryland is without authority to fill that gap. See Greater Washington Bd. of Trade, 506 U.S. at 130-31 (D.C. workers’ compensation provision requiring the provision of benefits in proportion to covered benefits of ERISA plan “relates to” and is therefore preempted by ERISA); Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 525 (1981) (“even indirect state action bearing on [ERISA plans] may encroach upon the area of exclusive federal concern“). This is not to say that Maryland may not regulate stop-loss insurance policies. Such regulation is clearly reserved to the states. See
AFFIRMED.