Untitled Texas Attorney General Opinion ( 2016 )

KEN PAXTON
ATTORNEY GENERAL OF TEXAS
July 13, 2016
The Honorable Charles Schwertner Opinion No. KP-0103
Chair, Committee on Health and
Human Services Re: The status of Insurance Code article 2 l .52B,
Texas State Senate the Any Willing Pharmacy statute, in light of
Post Office Box 12068 federal court decisions (RQ-0092-KP)
Austin, Texas 78711-2068
The Honorable Todd Hunter
Chair, Committee on Calendars
Texas House of Representatives
Post Office Box 2910
Austin, Texas 78768-2910
Dear Senator Schwertner and Representative Hunter:
You each submitted identical requests asking whether article 21.52B of the Texas
Insurance Code, known as an "any willing pharmacy" or "any willing provider" ("A WP") statute,
is enforceable in light of a 2003 U.S. Supreme Court case, Kentucky Ass 'n ofHealth Plans, Inc. v.
Miller. 1 Article 21.52B generally prohibits a health insurance policy or managed care plan from
excluding a pharmacy as a contract provider if the pharmacy agrees to meet all the conditions
required of providers. See TEX. INS. CODE art. 21.52B, § 2(a)(2). You tell us that the Texas
Department of Insurance ("Department") currently does not enforce article 21.52B based on a
1997 decision by the U.S. Fifth Circuit Court of Appeals that article 21.52B is preempted by the
federal Employee Retirement Income Security Act of 1974 ("ERISA"). Request Letter at 1-2; see
also Tex. PharmacyAss'nv. Prudential Ir.zs. Co. ofAm., 105F.3d1035, 1042 (5th Cir. 1997). You
assert that the U.S. Supreme Court "effectively reversed Texas Pharmacy Association" with Miller
and that, as a result, article 2L52B "is and has been enforceable." Request Letter at 5.
ERIS A establishes .uniform standards for pension and health plans in private industry. See
generally 29 U.S.C. §§ 1001-1461. ERISA preempts all state laws that "relate to" an employee
benefit plan, id § 1144(a), but saves from preemption state laws which "regulat[e] insurance." Id
§ 1144(b)(2)(A). In deciding whether article 21.52B regulated insurance so as to fall within the
1
See Letter from Honorable Charles Schwertner, Chair, Senate Comm. on Health & Human Servs., to
Honorable Ken Paxton, Tex. Att'y Gen. at 1, 3 (Jan. 26, 2016); Letter from Honorable Todd Hunter, Chair, House
Comm. on Calendars, to Honorable Ken Paxton, Tex. Att'y Gen. at 1, · 3 (Jan. 26, 2016),
https://www.texasattomeygeneral.gov/opinion/requests-for-opinions-rqs (collectively, "Request Letter"); see also
Kentucky Ass 'n of Health Plans, Inc. v. Miller, 538 U.S. 329 (2003).
The Honorable Charles Schwertner (KP-0103)
The Honorable Todd Hunter
Page 2
preemption savings clause, the Fifth Circuit in Texas Pharmacy recited a three-part inquiry:
"(1) [w]hether the practice (the statute) has the effect of spreading the policyholders' risk;
(2) whether the practice is an integral part of the policy relationship between the insurer and the
insured; and (3) whether the practice is limited to entities within the insurance industry." Texas
Pharmacy, 105 F.3d at 1038 (following the then-current test as articulated by the U.S. Supreme
Court). The Fifth Circuit found that article 21.52B did not fall within the savings clause because
it was not limited to entities within the insurance industry, noting that article 21.52B also applied
to health maintenance organizations (HMOs), preferred provider organizations (PPOs), and other
health care organizations. Id. Because the statute failed the third element of the savings clause
inquiry, the Fifth Circuit concluded that article 21.52B was preempted under ERISA. Id. at 1037
(recognizing that the failure to satisfy any one element of the three-part test is dispositive).
Subsequently, in 2003, the U.S. Supreme Court decided Kentucky Ass 'n of Health Plans,
Inc. v. Miller, concerning whether Kentucky's AWP statute was saved from ERISA preemption.
538 U.S. 329 (2003). The Miller Court made "a clean break" from the three-part test it had
previously used, adopting a simpler test to determine whether a state law regulates insurance for
preemption savings purposes. Id. at 341-42. The new test provides: "First, the state law must be
specifically directed toward entities engaged in insurance. Second ... the state law must
substantially affect the risk pooling arrangement between the insurer and the insured." Id. at 342
(citations omitted).
You assert that under the new Miller test, article 2 l .52B would be saved from ERISA
preemption, noting certain analysis in Texas Pharmacy as support for that conclusion, and that
Texas Pharmacy is thus "effectively overruled." Request Letter at 3-4. The Department maintains
that "[w]hether Art. 21.52B would satisfy the Miller test today has no bearing on whether the Fifth
Circuit's preemption of the statute remains valid."2 In the Department's view, article 21.52B
remains unenforceable because the Supreme
I
Court in Miller did not discuss or vacate Texas
Pharmacy or otherwise overrule prior precedent. Dep't Brief at 2.
The Fifth Circuit explains that it
abides by the rule of orderliness, under which a panel of the court
cannot overturn a prior panel decision absent an intervening change
in the law, such as by a statutory amendment, or the Supreme Court
or by our en bane court. For a Supreme Court decision to change
our circuit's law, it must be more than merely illuminating with
respect to the case before the court and must unequivocally overrule
prior precedent.
2See Brief from Ms. Norma Garcia, Gen. Counsel, Tex. Dep't of Ins. at 2 (Feb. 22, 2016) (on file with the
Op. Comm.) ("Dep't Brief').
The Honorable Charles Schwertner (KP-0103)
The Honorable Todd Hunter
Page 3
United States v. Boche-Perez, 755 F.3d 327, 334 (5th Cir. 2014) (internal quotation marks,
citations, and alterations omitted). In Provident Life & Accident Insurance Co. v. Sharpless,
decided a year after Miller, the Fifth Circuit applied the new preemption savings test from Miller
to a Louisiana statute. 364 F.3d 634, 640--41 (5th Cir. 2004). In fact, we find no Fifth Circuit or
Texas federal district court case that continues to use the old standard since Miller was decided.
Thus, it appears that the Fifth Circuit recognizes the Miller test as the appropriate standard for
analyzing whether a state statute regulates insurance for purposes ofERISA preemption savings.
In addition, the Fifth Circuit has indicated that it might overrule its prior holding in Texas
Pharmacy. In Quality Infusion Care, Inc. v. Humana Health Plan of Texas, Inc., the court, acting
on a claim under ERISA for payment of benefits that was properly analyzed under complete
preemption and not conflict preemption, as in Miller, stated that "[u]nder Miller, [the claimant] is
likely correct that [article 21.52B] at issue here would similarly be saved from preemption as
presented there." 3 290 Fed. App'x 671, 681 (5th Cir. 2008); see also id at 682, n.14 (referring
directly to the holding in Texas Pharmacy and noting that it was "at least called into doubt by
Miller"). 4 It is also possible that a lower court, applying the Miller test, could find that article
21.52B is saved from preemption. See Does 1-7v. RoundRockindep. Sch. Dist., 540 F. Supp. 2d
735, 749 (W.D. Tex. 2007) (following the "well-settled law" that a district court may recognize
when a precedent has been expressly or impliedly overruled by a subsequent Supreme Court
decision, in which case "the District Judge is free to disregard circuit precedent that is contrary to
the rule pronounced by the court possessing final authority to decide that particular question of
law" (internal quotation marks omitted)); but see id (recognizing the equally "well-settled law that
if a precedent ... has direct application in a case, yet appears to rest on reasons rejected in some
other line of decisions, the [lower court] should follow the case which directly controls, leaving to
[the binding authority] the prerogative of overruling its own decisions" (internal quotation marks
omitted)). Thus, were a court to address the issue today, it would likely conclude that article
2 l .52B is saved from preemption under ERIS A, pursuant to the. test set forth in Miller.
That said, while the Fifth Circuit applied the Miller analysis to other Texas Insurance Code
provisions, it has not determined whether its holding in Texas Pharmacy regarding article 21.52B
is still valid in light of Miller. See Ellis v. Liberty Life Assurance Co., 394 F.3d 262, 275-78 (5th
Cir. 2004) (reconsidering its previous preemption of articles 21.21and21.55 of the Insurance Code
in light of Miller but finding that they remain preempted). Miller itself addressed only the
3The claim presented in Miller was a conflict preemption issue arising from section 514 of ERISA. See
generally Miller, 538 U.S. 329. As a procedural matter, however, the claim in Quality Infusion could not be analyzed
in the same way because it depended on an interpretation of an ERISA employee welfare benefit plan, which the
court determined brought the claim under the complete preemption provisions of ERISA section 502. Quality
Infusion, 290 Fed. App'x at 673, 681. Miller was thus inapplicable. Id. at 681-82.
4Quality Infusion Care, Inc. v. Humana Health Plan of Texas, Inc. is an unpublished opinion, which is
generally not precedent except to show res judicata, collateral estoppel, or the law of the case. See 5th Cir. R. 47.5.4.
However, "[u]npublished opinions, although not precedential, may be considered persuasive authority."
United States v. Torres-Jaime, No. 15--40208, 2016 WL 1612762, at *4 (5th Cir. April 21, 2016).
The Honorable Charles Schwertner (KP-0103)
The Honorable Todd Hunter
Page4
Kentucky AWP statute. Nowhere in the opinion did the Miller Court broadly conclude that all
states' A WP statutes were saved from preemption, nor did it reference Texas Pharmacy or suggest
that it was wrongly decided. Miller may undermine the reasoning in Texas Pharmacy, but it does
not overrule it. Nor can Texas Pharmacy be overruled simply through speculation as to how the
Fifth Circuit would analyze article 21.52B today in light of Miller. And while the Attorney General
may opine on how a court would decide the issue, this office has no authority to overrule Texas
Pharmacy. Tex. Att'y Gen. Op. No. GA-0563 (2007) at 6 (recognizing that this office "cannot
ignore or overrule a judicial decision" (internal quotation marks omitted)). Thus, we cannot
conclude as a matter oflaw that the holding in Texas Pharmacy is automatically overruled by sole
virtue of the new test set forth by the U.S. Supreme Court in Miller. Unless and until a court
affirmatively concludes that the statute is saved from preemption, article 21.52B remains
preempted.
If the Fifth Circuit or other court determines that article 21.52B is saved from preemption
under ERISA, we consider what effect such a ruling would have on the statute. The Fifth Circuit's
ruling did not repeal the statute, nor has the Texas Legislature taken that action. See Ward v.
Chamberlain, 67 U.S. 430, 442 (1862) ("Courts ... may construe a legislative provision but they
cannot repeal what is expressly enacted."); Request Letter at 2. That the Department has not
enforced the statute likewise does not mean that the law is repealed. See District of Columbia v.
John R. Thompson Co., 346 U.S. 100, 113-14 (1953) ("The failure of the executive branch to
enforce a law does not result in its ... repeal."). In fact, there is support for the proposition that if
a state law remains on the books and has not been repealed when a preemptive mechanism is
removed, the law is effective again. In First Gibraltar Bank, FSB v. Morales, the Fifth Circuit
considered whether portions of a Texas homestead law previously preempted by federal law were
effective again when the federal law was amended so as to no longer result in preemption. 42 F .3d
895 (5th Cir. 1995). The court vacated its earlier ruling that the federal law preempted Texas
homestead law and proclaimed that
[b ]ecause the Texas homestead laws had not been repealed, they
were in effect on the date of the [a]mendment, although they were
arguably impotent in the context of federal bank regulation. Once
the preemptive mechanism was removed, however, the state
homestead provisions-already effective in all other areas-were
also effective in the area of federal bank regulation.
Id. at 902. Although the preemptive mechanism that changed in First Gibraltar was the text of
the federal law itself, whereas in this case it is judicial analysis of a federal law, the principle is
the same: when an un-repealed state law is no longer federally preempted, it is once again effective.
See id. (stating that "we cannot agree with [an] apparent assumption that once a law is preempted,
it forever remains preempted and ineffective"). Thus, a court would likely conclude that article
21.52B resumes its effectiveness upon a judicial decision that article 21.52B is saved from
preemption under ERISA.
The Honorable Charles Schwertner (KP-0103)
The Honorable Todd Hunter
Page 5
SUMMARY
Were a court to address the issue today, it would likely
conclude that article 21.52B of the Texas Insurance Code ("Any
Willing Pharmacy" statute) is saved from preemption under the
federal Employee Retirement Income Security Act of 1974
("ERISA"), pursuant to the test set forth by the U.S. Supreme Court
in Kentucky Ass 'n of Health Plans, Inc. v. Miller. However, the
current Fifth Circuit Court of Appeals decision in Texas Pharmacy
Ass 'n v. Prudential Insurance Co. of America, holding that article
21.52B is preempted under ERISA, still stands. .Until a court
affirmatively concludes that the statute is saved from preemption,
we cannot conclude as a matter of law that article 21.52B is
enforceable.
Very truly yours,
~EN PAXTON
Attorney General of Texas
·JEFFREY C. MATEER
First Assistant Attorney General
BRANTLEY STARR
Deputy First Assistant Attorney General
VIRGINIA K. HOELSCHER
Chair, Opinion Committee
BECKY P. CASARES
Assistant Attorney General, Opinion Committee