Court Favors Federal Law in Employee-Benefits Case

Article excerpt

THE Supreme Court Tuesday ruled that federal law pre-empts most state regulations governing self-funded group insurance plans used by millions of American workers.

The court in effect said that uninsured employee-benefit plans are not technically considered "insurance companies" for the purposes of state laws that regulate insurance, and thus are governed by the federal Employee Retirement Income Security Act (ERISA) of 1974.

The case involved an appeal by FMC Corporation, a Delaware-based company that operates a self-funded employee benefit plan. All funds used in the plan come directly from the company, which does not purchase insurance to provide the benefits.

Federal studies show the type of group health insurance plan used by FMC - self-funded rather than insured - cover more than 9.5 million Americans.

The court ruled Tuesday that the 1974 federal law permits FMC's self-funded health care plan, which paid the hospital bills of an injured claimant, to collect reimbursement from money the injured member received in a separate civil lawsuit.

A district court and the Third US Circuit Court of Appeals agreed that Pennsylvania state law makes it clear FMC was not entitled to reimbursement from money obtained in the civil suit. …