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March 4, 2026 Ms. Andria Seip, Chair National Association of Insurance Commissioners NAIC ERISA and Alternative Coverage (B) Working Group Delivered via email Re: NAIC Draft ERISA Guidance Document v.2/2/26 Dear Chair Seip; On behalf of AHIP and its members, we appreciate the opportunity to provide our input on the draft Guidance Document – ERISA Preemption and State PBM Laws (Guidance Document). We appreciate the Working Group providing a timely legal update on ERISA preemption following Rutledge v PCMA. A key feature of ERISA is that it established uniform standards for funding, benefits, and fiduciary practices that apply to all employees and their beneficiaries – including those residing in different states. These uniform standards are regulated by the U.S. Department of Labor and enable health plans, employers, and labor unions to provide affordable, consistent and equitable coverage to all of their employees and their dependents. ERISA's framework enables employers and health plans to keep administrative costs low by adhering to these consistent standards instead of attempting to provide coverage that meets the different, and sometimes conflicting, requirements of each state. ERISA coverage is the leading source of affordable, comprehensive, and high-quality health coverage in the U.S. A 2024 AHIP survey found a strong majority of consumers (75%) with employer-provided coverage are satisfied with their current coverage. The survey also found 74% prefer to get their coverage through their employer rather than through the federal or state government, with 71% stating the quality of their plan as "high." AHIP is submitting proposed revisions and clarifications to the Guidance Document (included). In addition to these comments, AHIP recommends a full comparison with the ERISA Handbook to ensure consistency and uniformity in guidance to states. In general, AHIP recommends: - Including the McKee Foods and Ommen district court rulings to provide states a complete review of courts' views on salient preemption issues. - Referencing the ERISA Handbook to promote consistency and reduce confusion between the documents, particularly where the Handbook summarizes U.S. Supreme Court decisions in Rutledge and Gobeille. - Maintaining a focus on legal precedent and the holdings of governing decisions and excluding dicta or other non-legal policy considerations related to health plans or PBMs. - Clarifying how court decisions apply to specific statutes, recognizing state laws may be amended over time. March 4, 2026 Page 2 Thank you very much for the opportunity to provide feedback on the draft Guidance Document. We welcome the opportunity to discuss our comments or address any questions. Sincerely, Kris Hathaway Vice President, State Affairs America's Health Insurance Plans khathaway@ahip.org / (202) 870-4468 America's Health Insurance (AHIP) is the national association whose members provide health care coverage, services, and solutions to hundreds of millions of Americans every day. We are committed to market-based solutions and public-private partnerships that make health care better and coverage more affordable and accessible for everyone. Visit www.ahip.org to learn how working together, we are Guiding Greater Health. Comments are requested by email to jcook@naic.org by close of business March 3, 2026 1 DRAFT 2/2/26 Disclaimer: Theinformationinthepaperiscurrentasof[insertpublicationdate.] GUIDANCE DOCUMENT – ERISAPREEMPTIONANDSTATEPBM LAWS OUTLINE I. Introduction II. ERISAPreemption III. CasesAddressing ERISAPreemptionAnalysis of State PBMLaws • Rutledge • Wehbi • Mulready IV. Lessons forStates • PrinciplestoapplytothequestionofwhetherERISAmaypreemptthe state lawatissue • Laws atissueinRutledge,Wehbi andMulready–Chart I. Introduction Pharmacy benefit managers (PBMs)1 play a significant role in the provision of health care in the U.S. PBMs negotiate and contract with pharmacies on reimbursement and pharmacy network terms. PBMs design, negotiate, implement, and manage formulary designs for prescription drugs, including negotiating rebates and drug coverage terms with pharmaceutical manufacturers. Insurance companies and employer groups contract with PBMs for the design and implementation of preferred and non-preferred pharmacy networks, metric-based payment arrangements, and formulary design elements (drug coverage,out-of-pocketresponsibilitiesfor patients and utilizationmanagement protocols). PBMs engage in the negotiation and financial transactions between pharmaceutical manufacturers,healthplans, andpharmacies.2 In connection with their regulatory authority over health care, including the practice of pharmacy and the business of insurance, states have enacted laws regulating PBMs. However, these laws interact in complex ways with a variety of federal laws (Medicare, Medicaid, Employee Retirement Income Security Act of 1974) that might also apply, depending on the type of benefit plan that the PBM is managing. This has created the opportunity for a variety of different federal preemption challenges, which complicate the abilityofstatestoaddressimportanthealthpolicyissuesaffecting their citizens. 1 The alternative form "pharmacy benefits managers" is used in many publications and statutes. 2 NAIC Health Insurance and Managed Care (B) Committee, A Guide to Understanding Pharmacy Benefit Manager and Associated Stakeholder Regulation, 2023, https://content.naic.org/sites/default/files/committee_related_documents/PBM%2520White%2520Paper%2520D raft%2520Adopted%2520B%2520Committee%252011-2-23_0.pdf Commented [KH1]: Unless otherwise noted in side comments, AHIP redlines are for clarification or to align verbiage within the document. Comments are requested by email to jcook@naic.org by close of business March 3, 2026 2 This guidance paper deals specifically with questions about preemption of state PBM laws under the Employee Retirement Income Security Act of 1974 (ERISA), which regulates employee benefit plans. It does not address potential preemption by otherfederal lawssuch asthose governing the MedicarePartDprescriptiondrugprogram. The leading SupremeCourtcaseonthissubjectisRutledgev.PCMA,decidedin2020,which heldthat anArkansasPBMlaw, Act 900wasnotpreemptedbyERISA.3 PerRutledge,ERISAdoesnot preempt state regulations that merely increase costs or alter incentives for ERISA plans without forcing plans to adopt any particular scheme of substantive coveragei impose indirect, non-acute costs on ERISA-covered plans. However, Rutledge did not conclusively resolve all questions about the permissiblescopeofstatePBM regulation,so there continue to be disputes over how the principles analyzed in Rutledge apply to PBM laws that include different types of provisions. There have been two recent ERISA preemption decisions by federal Courts of Appeals that reached opposing conclusions. The Eighth Circuit upheld North Dakota's law4 while the Tenth Circuit struck down partsofOklahoma'slaw5. This paper providessome guidance related to ERISA preemption by undertaking an analysis of the different types of statePBMlawsand consideringhowappellatecourtshaveapplied thereasoning inRutledgetothoselaws.66 Note: NAIC Health and Welfare Plans Under the Employee Retirement Income Security Act: Guidelines for State and Federal Regulation provides a comprehensive explanation of ERISA preemption and its impact on state efforts to regulate PBM contracts with ERISA plans. II. ERISAPreemption The Employee Retirement Income Security Act of 1974 is a complex and comprehensive statute that federalizes the law of employee benefits. ERISA establishes a comprehensive regulatory framework for employee pension benefit plans and also preempts most state laws relating to private-sector "employee welfare benefit plans,"77 a broad category that includes nearly all employer-sponsoredandunion-sponsoredhealthplans.However,ERISA does not preempt state insurance law. ERISA's "saving clause" for any state law that "regulates insurance"8 gives states 3 Rutledge v. Pharmaceutical Care Management Ass'n, 592 U.S. 80 (2020). The Court also held that the law was not preempted as applied to Medicare Part D plans. 4 Pharmaceutical Care Management Ass'n v. Wehbi, 18 F.4th 956 (8th Cir. 2021). 5 Pharmaceutical Care Management Ass'n v. Mulready, 78 F. 4th 1183 (10th Cir. 2023) 6 The National Conference of State Legislatures publishes policy reports on various topics. The report titled "State Policy Options and Pharmacy Benefit Managers" places state PBM laws into categories and includes a state-by-state list of laws by category. See,https://www.ncsl.org/health/state-policy-options-and-pharmacy-benefit-managers. 7 Government employee plans are exempt from ERISA. ERISA § 4(b)(1), codified at 29 U.S.C. §1003(b)(1). 8 ERISA § 514(b)(2)(A), codified at 29 U.S.C. § 1144(b)(2)(A). Commented [KH2]: Per the footnote - the case was only appealed to the United States Supreme Court on the issue of ERISA preemption. The Court did not opine on the Eight Circuit's finding that Act 900 was preempted by Medicare. Commented [KH3]: A reference to the ERISA Handbook should be included in some part of the document. Comments are requested by email to jcook@naic.org by close of business March 3, 2026 3 broad authority to regulate PBMs administering state regulated insurance policies, including fully-insured policies sold to fully insured employee health plans.9 Importantly, the "savings clause" is constrained by the "deemer clause" which prevents a state from "deeming" a self-insured, ERISA-covered plan to be an insurance company or engaged in the business of insurance for purposes of any state law that purports to regulate insurance companies or insurance contracts.10 In recognition of this prohibition, the Supreme Court has found ERISA preemption applies to laws applying to a third-party administrator (TPA) acting on behalf of the ERISA-covered plan. For example, in Gobeille, the Court held that the state reporting law at issue was preempted, even though it applied to the insurer acting as a TPA for the plan, and not the plan itself.11 Although Because of ERISA's deemer clause, the savings clause does not entirely foreclose the possibilityof preemption challenges to insurance-specific PBM laws. Accordingly, the focus of recent preemption litigation has been state laws that apply broadly to the PBM industry including with respect to PBMs acting on behalf of self-insured, ERISA-covered plans.Many states have, chosen to address PBM issues through pharmacy regulation rather than insurance regulation because the majority of consumers do not get their medications through stateregulated insurance policies. In particular, almost 2/3 of people with coverage through their employer arecovered by self-insured health plans not regulated by state insurance law.12 But, because of the deemer clause, whether a state law regulates insurance or has no bearing on whether ERISA preempts the state law due to an impermissible connection with or reference to the ERISA plan. At a high level, when a state contemplates applying a particular regulatory measure to PBMs contracted with self-insured employers, the question policymakers must consider is whether thatmeasure is a permissible exercise of the state's general powers to regulate the pharmaceutical industry, or whetherit encroaches on the exclusive federal powerto regulate the employer's health benefit plan. Under ERISA, if a state PBM law "may now or hereafter relate to any employee benefit plan" and is not a law "which regulates insurance," that law is preempted.13 9 The terms "fully-insured employee health plan" and "employer group health insurance policy" are often used interchangeably, and as a practical matter they are functionally identical. However, strictly speaking, the policy is issued by an insurance company, while the fully-insured plan is established by the employer when it buys the policy. This is what the Supreme Court was referring to in Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S. 724, 747 (1985), when it explained that the structure of ERISA "results in a distinction between insured and uninsured plans, leaving the former open to indirect regulation while the latter are not." In other words, by directly regulating the insurer and the insurance policy, the state indirectly regulates the employer that buys theinsurance. 10 ERISA § 514(b)(2)(B), codified at 29 U.S.C. § 1144(b)(2)(B). 11 Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312, 319-320 (2016). 12 https://www.kff.org/health-costs/2024-employer-health-benefits-survey/#e3efa8b3-48d2-458b-a2f7- c4d5add1983b--hsection-10-plan-funding. 13 ERISA §§ 514(a) & (b)(2)(A), codified at 29 U.S.C. §§ 1144(a) & (b)(2)(A). Comments are requested by email to jcook@naic.org by close of business March 3, 2026 4 As the case law discussed below illustrates, it is not a simple task to decide whether a particular provision ofstate law"relates",within themeaning of ERISA,to a state-regulated PBM orto itsselfinsured,federally-protectedclient. III. CASESADDRESSINGERISA PREEMPTION ANALYSIS OF STATE PBM LAWS Rutledge To consider the potential impact of ERISA on state PBM laws, it is logical to begin with an analysis of the Supreme Court's Rutledge opinion. In Rutledge, the Court upheld an Arkansaslaw,Act 900, whichrequiresPBMstoreimbursepharmacies atapriceequaltoor higherthanwhatthepharmacy paid to buy the drug. To accomplish this, Act 900mandates that PBMs: 1) keep their Minimum Acquisition Cost (MAC) pricing lists current with wholesale drug price increases; 14 2) establish an appeal process for pharmacies to challenge PBM MAC pricing lists;15 3) increase pharmacy reimbursement rates to cover pharmacy acquisition costs;16 and 4) allow the pharmacy to adjust any claims17 affected by the pharmacy's inability to get the drug at a lower price from its usual wholesaler. Act 900 also includes a fifth provision allowing the pharmacy to refuse to fill a prescription ifthe PBM reimbursementtothepharmacyislessthanthepharmacypaidforthedrug. The CourtreviewedeachoftheseprovisionsintheArkansaslawandconcludedthatthey didnot "relate to" ERISA plans and were not preempted. The Court explained that in order to impermissibly "relate to" an ERISA plan, the state law must have a "connection with" or make a"reference to" ERISA plans.18 To analyze whether Act 900 had an impermissible "connection with" ERISA plans, after providing some general background on the objectives of ERISA,19 the Court contrasted three prior cases in which it held laws to be preempted on that ground, stating that ERISA is "primarily concerned with preempting laws that require providers to structure benefit plans in particular ways,such as by requiring payment of specific benefits" as in Shaw v. Delta Air Lines,20 or "by binding plan administrators to specific rules for determining beneficiary status," as in Egelhoff.21 In addition, there can be an impermissible connection if "acute, albeit indirect, economic effects of the state 14 Ark. Code Ann. §17-92-507(c)(2) (Supp. 2019). 15 Ark. Code Ann. §17-92-507(c)(4)(A)(i)(b) (Supp. 2019) 16 Ark. Code Ann. §17-92-507(c)(4)(C)(i)(b) 17 Ark. Code Ann. §17-92-507(c)(4)(C)(iii). 18Rutledge, 592 U.S 80 at 86. 19 Id. The Court progressed through its prior jurisprudence by: 1) considering "ERISA's objectives as a guide as to what state laws would survive" (California Div of Labor Standards Enforcement v. Dillingham Constr. , N.A., Inc, 519 US 316, 325 (1997)); 2) identifying the objective of ERISA as ensuring the security of employer sponsored benefits "by mandating certain oversight systems and other standard procedures." (Gobeille, 577 U.S. 312, 320-321 (2016)); and 3) explaining that Congress, in pursuit of the security of employer sponsored plans, "sought to ensure that plan and plan sponsors would be subject to a uniform body of benefits laws," thereby minimizing the administrative and financial burden of complying with different benefit requirements in multiple jurisdictions. (Ingersoll-Rand Co. v. McClendon, 498 US 133, 142 (1990)) 20 Id. at 86-87 21 Id. at 87 --_----------=bollin67H0rcl4RcGurwWlDU.GdaZIJnK5t8w-- --_-------L2WTOPQTaRa11NKI6gF9.rbFXoKcX7up6VhY-798785990758395L2WTOPQTaRa11NKI6gF9.rbFXoKcX7up6VhY=:
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