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.
But the Supreme Court Tuesday, by a 7-to-1 vote, said ERISA, not state law, governs these types of cases. ERISA allows self-funded plans to collect reimbursement.
The case sparked interest from a wide range of groups, including the US Chamber of Commerce, which had urged the action taken by the court, noting that increased state regulation would be ``devastating to the employers that have chosen to self-insure their plans,'' and would ``ultimately result in diminished coverage for workers and their dependents.''
A coalition of labor unions also urged the court to overturn the Third Circuit decision, arguing that if companies were precluded from seeking such reimbursement, insurance costs for all workers would rise.
State and local government groups, however, including the National Conference of State Legislatures and the US Conference of Mayors, had warned that reversing the ruling would weaken states' authority to regulate insurance and would create unfair distinctions in state law governing employees covered by insured health plans and those with self-funded plans.