Prudential Ins. Co. v. HMO Partners

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
________________
No. 04-1465
________________
*
*
The Prudential Insurance Co. of *
America; Prudential Health Care *
Plan, Inc., d/b/a Prudential Health *
Care Plan of Arkansas, *
*
Plaintiffs/Appellees, *
*
HMO Partners, Inc., *
*
Plaintiff/Appellant, * Appeals from the United States
* District Court for the
Arkansas AFL-CIO; Tyson Foods, * Eastern District of Arkansas.
Inc.; United Paperworkers *
International Union, AFL-CIO, *
CLC, *
*
Plaintiffs, *
*
v. *
*
National Park Medical Center, Inc.; *
Y.Y. King, M.D., *
*
Defendants/Appellees, *
*
*
*
*
*
Bryan W. Russell, D.C.; George A. *
Haas, O.D.; Bryant Ashley, Jr., *
O.D., *
*
Defendants, *
*
The State of Arkansas, *
*
Intervenor Below/ *
Appellee, *
*
American Association of Health *
Plans, Inc., *
*
Movant Below. *
*
________________ *
*
No. 04-1644 *
________________ *
*
The Prudential Insurance Co. of *
America; Prudential Health Care *
Plan, d/b/a Prudential Health Care *
Plan of Arkansas, Inc., *
*
Plaintiffs/Appellees, *
*
HMO Partners, Inc.; Arkansas *
AFL-CIO, *
*
Plaintiffs, *
*
Tyson Foods, Inc., *
*
Plaintiff/Appellant, *
*
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United Paperworkers International *
Union, AFL-CIO, CLC, *
*
Plaintiff, *
*
v. *
*
National Park Medical Center, Inc.; *
Y.Y. King, M.D., *
*
Defendants/Appellees, *
*
Bryan W. Russell, D.C.; George A. *
Haas, O.D.; Bryant Ashley, Jr., *
O.D., *
*
Defendants, *
*
State of Arkansas, *
*
Intervenor Below/ *
Appellee, *
*
American Association of Health *
Plans, Inc., *
*
Movant Below. *
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Submitted: November 17, 2004
Filed: June 29, 2005
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Before RILEY, JOHN R. GIBSON, and GRUENDER, Circuit Judges.
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GRUENDER, Circuit Judge.
HMO Partners, Inc. (“HMOP”) and Tyson Foods, Inc. (“Tyson”) appeal the
district court’s order dissolving the permanent injunction it imposed following this
Court’s decision in Prudential Insurance Co. of America v. National Park Medical
Center, Inc., 154 F.3d 812 (8th Cir. 1998) (“Prudential I”). For the reasons stated
below, we affirm in part, reverse in part, and remand to the district court to enter
judgment consistent with this opinion.
I. BACKGROUND
HMOP is a health maintenance organization (“HMO”) that operates under the
insurance laws of the State of Arkansas and offers insured employee health benefit
plans to employers. Tyson sponsors a self-funded, or self-insured, health benefit plan
(the “Tyson plan”) for its employees in which benefits are paid out of Tyson’s general
assets. The insured employee benefit plans offered by HMOP and Tyson’s self-
funded plan are governed by the Employee Retirement Income Security Act
(“ERISA”), 29 U.S.C. §§ 1001 – 1461.1
The Tyson plan and the plans offered by HMOP feature closed “provider
networks” to control both the cost and quality of health care services. The networks
are composed of health care providers, including doctors and hospitals, that agree to
various contractual requirements in exchange for membership within the network.
The terms and conditions for inclusion in a plan’s provider network typically include
price controls. Providers agree to those price controls because they anticipate
increased business from plan participants who are reimbursed only for services
1
Employee benefit plans can be either ERISA plans or non-ERISA plans. See
29 U.S.C. §§ 1003(a) and 1003(b). No non-ERISA plans are parties in this case.
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performed by in-network providers or who receive a greater benefit by going to in-
network providers as opposed to out-of-network providers.
HMOP creates its own provider networks. In contrast, Tyson maintains various
agreements with insurance companies under which the insurance companies may
agree not only to perform third-party administrative and claims processing services
for the Tyson plan but also to provide the plan access to various provider networks
in the geographic areas in which Tyson’s employees are located.
The Arkansas Patient Protection Act of 1995 (the “Arkansas PPA”), Ark. Code
Ann. §§ 23-99-201 – 23-99-209, was passed to ensure “that patients . . . be given the
opportunity to see the health care provider of their choice.” Ark. Code Ann. § 23-99-
202. To effectuate this goal, the Arkansas PPA, commonly referred to as an “any
willing provider” (“AWP”) law, provides that: “A health care insurer shall not,
directly or indirectly . . . [p]rohibit or limit a health care provider that is . . . willing
to accept the health benefit plan’s operating terms and conditions, schedule of fees,
covered expenses, and utilization regulations and quality standards, from the
opportunity to participate in that plan.” Ark. Code Ann. § 23-99-204. Typical of
AWP laws, the Arkansas PPA requires health care insurers to admit qualified health
care providers into the insurer’s provider networks if they are willing to meet the
terms and conditions of participation.
After Arkansas passed the Arkansas PPA, various doctors and hospitals sought
admission into otherwise exclusive provider networks by expressing a willingness to
accept the terms and conditions of participation. HMOP and Tyson sought a
declaratory judgment that the Arkansas PPA was preempted by ERISA § 514, 29
U.S.C. § 1144, and a permanent injunction against the enforcement of the Arkansas
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PPA by parties seeking admission into their exclusive provider networks.2 The
district court granted judgment in favor of both HMOP and Tyson and later amended
its order to hold that the Arkansas PPA was preempted by ERISA only insofar at it
relates to ERISA plans. Prudential Ins. Co. of Am. v. Nat’l Park Med. Ctr., 964 F.
Supp. 1285 (E.D. Ark. 1997).
In Prudential I, this Court reversed the district court’s amendment of its
judgment and held that the Arkansas PPA was preempted by ERISA “in its entirety,”
not just as it relates to ERISA plans. 154 F.3d at 831-32. We held that HMOP and
Tyson were both entitled to a permanent injunction against enforcement of the
Arkansas PPA in its entirety and remanded the case to the district court to enter an
injunction (the “Prudential I injunction”) in accordance with our decision. Id. at 832.
The defendants did not seek a writ of certiorari.
The present appeal began in light of the Supreme Court’s opinion in Kentucky
Ass’n of Health Plans v. Miller, 538 U.S. 329 (2003), which held that ERISA did not
preempt two Kentucky AWP statutes. Arguing that Miller changed the applicable
law, National Park Medical Center, Inc. and Y.Y. King, M.D, which were defendants
in the original suit for injunction, and the State of Arkansas, which participated in the
original suit as an intervenor (collectively “the movants”), filed a Motion to Recall
Mandate and Lift Permanent Injunction (“Motion to Recall Mandate”) with this
Court. We summarily denied that motion, stating without further explanation that,
“The motion to recall the mandate and lift permanent injunction filed by Appellants
2
Many of the original parties in this case did not participate in this appeal. This
includes Aetna, Inc. (“Aetna”), which acquired Prudential Insurance Company of
America and Prudential Health Plan, Inc. (collectively “Prudential”) after this Court
issued its mandate in Prudential I. Aetna, the successor to Prudential’s interest in
Prudential I, takes no position on the resolution of this appeal and, upon leave from
this Court, neither filed briefs nor appeared at oral argument.
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National Park Medical Center and Y.Y. King, M.D., and Intervenor State of Arkansas
has been considered by this Court and is denied.”
The movants then filed a Joint Motion to Dissolve the Permanent Injunction
(“Joint Motion”) pursuant to Fed. R. Civ. P. 60(b)(5) with the United States District
Court for the Eastern District of Arkansas. The district court held that “the significant
shift in the law as a result of the Miller decision meets the requirement of an
extraordinary circumstance” for the purposes of Rule 60(b)(5) and dissolved the
injunction barring the enforcement of the Arkansas PPA. Prudential Ins. Co. of Am.
v. Nat’l Park Med. Ctr., No. 95-514, slip op. at 5 (E.D. Ark. Feb. 12, 2004).
HMOP and Tyson appeal, arguing on several grounds that we should reverse
the district court and direct it to reinstate the injunction against the enforcement of the
Arkansas PPA by the excluded health care providers and the State of Arkansas, the
movants in this case.
II. DISCUSSION
A. District court’s authority to rule on the movants’ Joint Motion
under Rule 60(b)(5)
The movants filed their Joint Motion under Rule 60(b)(5). This Court reviews
a district court’s ruling on a Rule 60(b)(5) motion for abuse of discretion. Parton v.
White, 203 F.3d 552, 555-56 (8th Cir. 2000). Both HMOP and Tyson argue that
because this case involves only pure issues of law, the standard of review should be
de novo. Nothing turns on this argument because a “‘district court by definition
abuses its discretion when it makes an error of law.’” Computrol, Inc. v. Newtrend,
L.P., 203 F.3d 1064, 1070 (8th Cir. 2000) (quoting Koon v. United States, 518 U.S.
81, 100 (1996)).
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Rule 60(b)(5) states that, “On motion and upon such terms as are just, the court
may relieve a party . . . from a final judgment . . . [if] it is no longer equitable that the
judgment should have prospective application.” Fed. R. Civ. P. 60(b)(5). “The
district court retains authority under Rule 60(b)(5) to modify an injunction when
changed circumstances have caused it to be unjust.” Keith v. Mullins, 162 F.3d 539,
540-41 (8th Cir. 1998). “‘Relief under Rule 60(b) is an extraordinary remedy’” and
will be justified only under “exceptional circumstances.” Watkins v. Lundell, 169
F.3d 540, 544 (8th Cir. 1999) (quoting Nucor Corp. v. Nebraska Pub. Power Dist.,
999 F.2d 372, 374 (8th Cir. 1993)). When prospective relief is at issue, a change in
decisional law provides sufficient justification for Rule 60(b)(5) relief. See Ass’n for
Retarded Citizens of N.D. v. Sinner, 942 F.2d 1235, 1240 (8th Cir. 1991).
HMOP and Tyson argue on a number of grounds that the district court was
precluded from entertaining the movants’ Joint Motion. Although HMOP and Tyson
present a number of distinct arguments, they generally contend that the district court
should not have considered the motion because this Court previously denied a motion
on the same ground seeking similar relief. We disagree.
First, HMOP’s and Tyson’s various arguments based on res judicata and the
law of the case doctrine assume that this Court’s summary denial of the movants’
Motion to Recall Mandate was a decision on the merits rather than on procedural or
prudential grounds. HMOP and Tyson, however, ignore that this Court’s summary
order refusing to recall its mandate was issued in a case with a complex procedural
history involving complex legal issues and was without any substantive analysis or
comment on the merits of the motion. Under these circumstances, the district court
could have reasonably inferred that our denial was not on the merits, but rather an
invitation for the parties to present their claims before the district court first.3 Cf.
3
Understandably, the district court questioned its own authority to decide the
matter. Prudential Ins. Co. of Am. v. Nat’l Park Med. Ctr., No. 95-514, at 9 (E.D.
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Moore v. Jackson, 70 Fed. Appx. 401, 403 (8th Cir. 2003) (unpublished per curiam)
(holding that a district court’s summary denial of a motion gave this Court no
indication of its legal conclusions and remanding the case for reconsideration). In
addition, the district court recognized that the Supreme Court’s decision in Miller
changed the governing law in this case, as we demonstrate below. For these reasons
and in these limited circumstances, we hold that the district court did not err by
reaching the merits of the Joint Motion. Therefore, we reject HMOP’s and Tyson’s
arguments that our summary denial of the movants’ Motion to Recall Mandate was
the law of the case or had res judicata effect.
Similarly, we reject HMOP’s argument that under Kansas Public Employees
Retirement System v. Reimer & Koger Associates, Inc., 194 F.3d 922, 925 (8th Cir.
1999), this Court should defer to a previous denial of a motion to recall the mandate
where the movants advanced the same arguments in both courts. In that case, we held
only that this Court must consider a prior denial. In this case, we have considered our
prior denial of the movants’ Motion to Recall Mandate, but we agree with the district
court that the circumstances warrant reaching the merits of the movants’ current
motion.
HMOP and Tyson also argue that the district court should have denied the
movants’ Rule 60(b)(5) motion because there was no change in this Court’s binding
precedent. See Agostini v. Felton, 521 U.S. 203, 238 (1997) (holding that a Rule
60(b)(5) motion must “be denied unless and until this Court reinterpreted the binding
precedent”); Okruhlik v. Univ. of Ark., 255 F.3d 615, 622 (8th Cir. 2001) (holding
that district courts must observe the precedents of this Court until they are overruled
by this Court sitting en banc). First, this argument fails because we believe that the
Ark. Feb. 12, 2004) (“With some reservations that the Eighth Circuit had made a final
pronouncement on this issue against the movants even without specific prohibition,
this Court will consider the merits of modifying the relief it granted earlier.”).
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Miller Court did overrule our binding precedent. Second, even ignoring the effect of
Miller, the argument also fails because the district court did not overrule our
precedent from Prudential I. Rather, the district court only modified its own prior
judgment by dissolving the injunction. See Standard Oil Co. of Calif. v. United
States, 429 U.S. 17, 18 (1976) (holding that where later review makes doing so
appropriate, a district court may grant relief from permanent injunctions without
appellate leave). Because the Joint Motion involved only prospective relief, the
district court did not alter binding precedent, and it had authority to grant the motion.
HMOP contends that the movants’ failure to seek a timely writ of certiorari is
a sufficient ground for reversing the district court’s grant of a Rule 60(b) motion
under In re SDDS, Inc., 225 F.3d 970, 972 (8th Cir. 2000) (holding that failure to file
a writ of certiorari was a sufficient ground for affirming the district court’s denial of
a Rule 60(b)(4) motion). In that case, however, there was no change of law that came
after the movants’ original decision not to seek a writ of certiorari. In this case, not
only was there a substantial subsequent change in law but also the movants’ original
decision not to file a writ of certiorari was reasonable because the Supreme Court had
recently declined to consider similar issues in two cases. See Tex. Pharm. Ass’n v.
Prudential Ins. Co. of Am., 105 F.3d 1035 (5th Cir. 1997), corrected by No. 95-50807
(5th Cir. Feb. 14, 1997), cert. denied, 522 U.S. 820 (1997); CIGNA Healthplan of La.,
Inc. v. Louisiana, 82 F.3d 642 (5th Cir. 1996), cert. denied, 519 U.S. 964 (1996).
This reasonably perceived futility of seeking a writ of certiorari does not foreclose the
district court from granting the movants’ subsequent Rule 60(b)(5) motion where, as
here, a subsequent Supreme Court decision clearly undermines the propriety of the
ongoing injunctive relief.
Lastly, Tyson argues that judicial estoppel barred the district court from
deciding this case because the movants argued in support of their Motion to Recall
Mandate that only this Court could correct its Prudential I opinion. Wyldes v.
Hundley, 69 F.3d 247, 251 (8th Cir. 1995) (“The principle of judicial estoppel ‘bars
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a party from taking inconsistent positions in the same litigation.’”) (quoting Morris
v. California, 966 F.2d 448, 452 (9th Cir. 1991)). This Court has not articulated
clearly the elements of judicial estoppel but has held that judicial estoppel applies
only when a party takes a position that is “clearly inconsistent with its earlier
position.” Hossaini v. W. Mo. Med. Ctr., 140 F.3d 1140, 1143 (8th Cir. 1998). For
Tyson’s judicial estoppel argument to succeed, we must be convinced that the
movants argued to this Court not only that this Court alone could correct its prior
opinion but also that this Court alone could dissolve an injunction imposed at its
direction. See Leonard v. Southwestern Bell Corp. Disability Income Plan, 341 F.3d
696, 702 (8th Cir. 2003). After a careful review of the record, we are not convinced
that the movants’ claim that only this Court could correct its opinion is clearly
inconsistent with asking the district court to dissolve an injunction in light of a
change of law by the Supreme Court. Thus, we reject Tyson’s judicial estoppel
argument.
For these reasons, we hold that the district court had the authority to rule on the
movants’ Joint Motion.
B. Implied Repeal
Before reaching the merits of the movants’ Joint Motion, we also must address
HMOP’s contention that Arkansas repealed the Arkansas PPA by implication when
it passed a point-of-service (“POS”) statute, the Freedom of Choice Among Health
Benefit Plans Act of 1999 (the “Freedom of Choice Act”), Ark. Code Ann. §§ 23-86-
401 – 23-86-406.
The Freedom of Choice Act requires an HMO, such as HMOP, to offer covered
persons a plan option that makes the services of any provider available to them but
allows the plan to reimburse participants at a statutorily limited lower rate for services
received from out-of-network providers. Ark. Code Ann. § 23-86-404. Like the
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Arkansas PPA, the Freedom of Choice Act attempts to expand the number of
providers that health plan participants can utilize and still receive benefits under the
plan.
Sharing the same general purpose, however, is insufficient for the implied
repeal of a statute under Arkansas law. Under Arkansas law, implied repeals are
strongly disfavored, and a court “will not find a repeal by implication if there is any
way to interpret the statutes harmoniously.” Neeve v. City of Caddo Valley, 91
S.W.3d 71, 74 (Ark. 2002). A court can find an implied repeal only if the two statutes
are in “irreconcilable conflict” or “the Legislature takes up the whole subject anew
and covers the entire ground of the subject matter of a former statute.” Uilkie v. State,
827 S.W.2d 131, 133-34 (Ark. 1992) (quotation omitted).
There is no inherent inconsistency between AWP and POS laws.4 Thus, to
demonstrate an “irreconcilable conflict” between the Arkansas PPA and the Freedom
of Choice Act, HMOP must show that these particular acts are in irreconcilable
conflict. We, however, find nothing in the plain language of the statutes to indicate
that the Arkansas PPA and the Freedom of Choice Act are in irreconcilable conflict.
Under Arkansas law, “statutes relating to the same subject are said to be in pari
materia and should be read in a harmonious manner, if possible.” R.N. v. J.M., 61
S.W.3d 149, 154 (Ark. 2001). Nothing in the plain language of either act indicates
that they cannot stand together. Routh Wrecker Serv., Inc. v. Wins, 847 S.W.2d 707,
709 (Ark. 1993) (holding that statutes that can stand together are not in irreconcilable
conflict).5
4
At least two other states have both AWP and POS laws. See Ga. Code Ann.
§§ 33-30-25 (AWP) and 33-21-29 (POS); Va. Code Ann §§ 38.2-3407(B) (AWP) and
38.2-3407(D) (POS).
5
The movants further attempt to support their argument that the Arkansas PPA
was not repealed by implication by noting that the Arkansas General Assembly
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Moreover, HMOP provides no evidence that the Freedom of Choice Act covers
the entire subject matter of the Arkansas PPA. In fact, the Arkansas PPA applies
much more broadly than the Freedom of Choice Act. The plain language of the
Freedom of Choice Act applies strictly to HMOs, which are only one among many
types of commercially available health insurance products in Arkansas. See Ark.
Code Ann. § 23-86-404 (applying the statute only to HMOs). In contrast, the
Arkansas PPA applies to many types of health care insurance. See Ark. Code Ann.
§ 23-99-203(f) (defining “health care insurer”). The limited scope of the Freedom of
Choice Act demonstrates that it does not cover the entire subject matter covered by
the Arkansas PPA.
Consequently, we reject HMOP’s assertion that the Freedom of Choice Act
repealed the Arkansas PPA by implication.
C. ERISA Preemption
ERISA “is a comprehensive statute that sets certain uniform standards and
requirements for employee benefit plans.” Minn. Ch. of Associated Builders &
Contractors, Inc. v. Minn. Dep’t of Pub. Safety, 267 F.3d 807, 810 (8th Cir. 2001)
(quotations omitted). Congress enacted ERISA to regulate comprehensively certain
employee benefit plans and “to protect the interests of participants in these plans by
establishing standards of conduct, responsibility, and obligations for fiduciaries.”
Johnston v. Paul Revere Life Ins. Co., 241 F.3d 623, 628 (8th Cir. 2001); see 29
U.S.C. § 1001. “‘To meet the goals of a comprehensive and pervasive Federal
removed a provision explicitly repealing the Arkansas PPA from the Freedom of
Choice Act before that statute was passed. Under Arkansas law, however, a court can
employ legislative history only if the statute is not clear and unambiguous. See, e.g.,
Ark. Gas Consumers, Inc. v. Ark. Pub. Service Comm’n, 118 S.W.3d 109, 116 (Ark.
2003). Because we find the plain language of each statute to be clear, we see no need
to rely on legislative history in this case.
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interest and the interests of uniformity with respect to interstate plans, Congress
included an express preemption clause in ERISA for the displacement of State action
in the field of private employee benefit programs.’” Minn. Ch. of Associated Builders
& Contractors, 267 F.3d at 810-11 (quoting Wilson v. Zoellner, 114 F.3d 713, 715-16
(8th Cir. 1997) (internal citations and quotations omitted)).
There are two types of preemption under ERISA: “complete preemption” under
ERISA § 502, 29 U.S.C. § 1132, and “express preemption” under ERISA § 514, 29
U.S.C. § 1144. Complete preemption occurs whenever Congress “so completely
[preempts] a particular area that any civil complaint raising this select group of claims
is necessarily federal in character.” Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64
(1987). “Claims arising under the civil enforcement provision of Section 502(a) of
ERISA, 29 U.S.C. § 1132(a), including a claim to recover benefits or enforce rights
under the terms of an ERISA plan, implicate one such area of complete preemption.”
Neumann v. AT&T Communications, Inc., 376 F.3d 773, 779 (8th Cir. 2004).
Because of complete preemption, any claim filed by a plan participant for the same
relief provided under ERISA’s civil enforcement provision, even a claim purportedly
raising only a state-law cause of action, arises under federal law and is removable to
federal court. Id. at 779-80; see also Fink v. Dakotacare, 324 F.3d 685, 688-89 (8th
Cir. 2003).
In contrast, ERISA’s express preemption clause preempts any state law that
“relate[s] to any employee benefit plan.” 29 U.S.C. § 1144(a). Although express
preemption does not allow for automatic removal to federal court, it does provide an
affirmative defense against claims not completely preempted under ERISA § 502.
Ellis v. Liberty Life Assurance Co. of Boston, 394 F.3d 262, 275 n.34 (5th Cir. 2004);
cf. Magee v. Exxon Corp., 135 F.3d 599, 601 (8th Cir. 1998).
Both our decision in Prudential I and the Supreme Court’s decision in Miller
only considered whether the respective AWP laws were preempted under ERISA’s
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express preemption clause. For that reason, we begin our analysis of ERISA
preemption by determining whether the Miller decision compels us to overturn our
Prudential I holding that ERISA § 514 expressly preempts the Arkansas PPA in its
entirety. Pursuant to our analysis below, we hold that Miller mandates that we affirm
the district court’s dissolution of the Prudential I injunction with regard to insured
ERISA plans and non-ERISA plans. Miller, however, did not involve the issue of
whether the Kentucky AWP statutes were preempted with regard to self-funded
ERISA plans such as the Tyson plan. With regard to self-funded ERISA plans, we
reverse the district court’s dissolution of the Prudential I injunction and remand to
the district court to enter judgment consistent with this opinion. Finally, our holding
that the Arkansas PPA can be enforced against insured ERISA plans compels us to
consider, as a matter of first impression, whether ERISA’s civil enforcement
provision completely preempts the civil penalties provision of the Arkansas PPA,
Ark. Code Ann. § 23-99-207. Following the Supreme Court’s recent decision in
Aetna Health Inc. v. Davila, 124 S. Ct. 2488 (2004), we hold that ERISA completely
preempts the civil penalties provision of the Arkansas PPA as applied to suits that
could have been brought under ERISA § 502, and we remand to the district court to
enter judgment consistent with this opinion.
1. Express preemption under ERISA § 514
ERISA’s “express preemption” clause states that, “[e]xcept as provided [in the
act], the provisions of this subchapter and subchapter III of this chapter shall
supersede any and all State laws insofar as they may now or hereafter relate to any
employee benefit plan described in section 1003(a) of this title and not exempt under
section 1003(b) of this title.” 29 U.S.C. § 1144(a). ERISA’s broad preemption of
state law is limited by the “savings clause,” under which ERISA shall not “be
construed to exempt or relieve any person from any law of any State which regulates
insurance . . . .” 29 U.S.C. § 1144(b)(2)(A). ERISA’s exemption from preemption
for “any law . . . which regulates insurance,” however, has one express exception.
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The “deemer clause” provides that no self-funded ERISA plan “shall be deemed to
be an insurance company or other insurer . . . or to be engaged in the business of
insurance . . . for purposes of any law of any State purporting to regulate insurance
companies [or] insurance contracts . . . .” 29 U.S.C. § 1144(b)(2)(B). In other words,
even if a state law is saved from preemption because it relates to insurance, the
deemer clause prevents the application of that law to self-funded ERISA plans.
Because the savings clause is most relevant to insured ERISA plans, such as
any plan offered by HMOP, while the deemer clause applies only to self-funded
ERISA plans, such as the Tyson plan, we consider each clause in turn.
a. Savings clause
The parties do not contest that but for the savings clause, ERISA preempts the
Arkansas PPA as a statute that relates to an employee benefit plan, an issue that was
a significant part of our analysis in Prudential I. 154 F.3d at 818-26; 29 U.S.C. §
1144(a). After first establishing in Prudential I that the Arkansas PPA relates to an
employee benefit plan, we used the two-faceted analysis introduced by the Supreme
Court in Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S. 724 (1985), and
reaffirmed in Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41 (1987), to conclude
that the Arkansas PPA was not a law that regulates insurance, and, therefore, it was
not saved from preemption. 154 F.3d at 826-31.
Applying the Metropolitan Life analysis, this Court considered, first, whether
the Arkansas PPA “regulates insurance” under a “common sense view,” and, second,
whether the Arkansas PPA “regulates insurance” under the three factors used to
interpret the “business of insurance” reference in the McCarran-Ferguson Act, 15
U.S.C. §§ 1011 – 1015. See Metro. Life, 471 U.S. at 740, 743. We first concluded
that “the Arkansas PPA is not a state law that ‘regulates insurance’ under a common-
sense approach . . . because it is not a law that is ‘specifically directed toward that
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industry.’” Prudential I, 154 F.3d at 829 (quoting Pilot Life, 481 U.S. at 50; citing
United of Omaha v. Business Men’s Assurance Co. of Am., 104 F.3d 1034, 1039 (8th
Cir. 1997)). We also concluded that “[n]or does the Arkansas PPA satisfy any of the
McCarran-Ferguson factors identified in Metropolitan Life.” Prudential I, 154 F.3d
at 829. Thus, we held that under both the common-sense approach and the
McCarran-Ferguson factors, the Arkansas PPA was not a law that regulates insurance
and was not saved from preemption under ERISA. Id. at 830.
In Miller, the Supreme Court expressly repudiated the relevance of the
McCarran-Ferguson factors to the savings clause analysis and held that “for a state
law to be deemed a ‘law . . . which regulates insurance’ under § 1144(b)(2)(A), it
must satisfy two requirements.” 538 U.S. 329, 341-42. Those two requirements are
the following: “First, the state law must be specifically directed toward entities
engaged in insurance,” and second, “the state law must substantially affect the risk
pooling arrangement between the insurer and the insured.” Id. at 342 (citations
omitted).
Neither HMOP nor Tyson contest that the Arkansas PPA satisfies the second
prong of Miller, nor should they. As the Supreme Court explained in Miller: “By
expanding the number of providers from whom an insured may receive health
services, AWP laws alter the scope of permissible bargains between insurers and the
insured,” and, as a result, substantially affect “the type of risk pooling arrangements
that insurers may offer.” Id. at 338-39; see also Metro. Life, 471 U.S. at 744-47
(holding that mandated-benefit laws are laws that regulate the terms of insurance
contracts and, as such, regulate insurance); Rush Prudential HMO, Inc. v. Moran, 536
U.S. 355, 366-67 (2002) (holding that because HMOs spread risk in the manner of
insurers, independent-review provisions are saved from preemption). Thus, to
determine whether the Arkansas PPA regulates insurance for the purposes of
ERISA’s savings clause, this Court need only determine whether the Arkansas PPA
is specifically directed toward entities engaged in insurance.
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Addressing the first prong of the Miller test, HMOP and Tyson both argue that
by requiring a state law to be “specifically directed toward entities engaged in
insurance,” the Supreme Court effectively reaffirmed the common-sense test of
Metropolitan Life and Pilot Life. Because we held in Prudential I that the Arkansas
PPA did not regulate insurance under the common-sense approach, HMOP and Tyson
contend that Miller did not affect the validity of our analysis in that case. Admittedly,
the Supreme Court in Miller cited Pilot Life for the proposition that “a state law must
be ‘specifically directed toward’ the insurance industry in order to fall under ERISA’s
savings clause; laws of general application that have some bearing on insurers do not
qualify.” Miller, 538 U.S. at 334 (quoting Pilot Life, 481 U.S. at 50). While the
source of the standard may have remained the same, how that standard was applied
by this Court in Prudential I did not.
The Miller Court rejected the reasons that this Court advanced in Prudential
I to support our holding that the Arkansas PPA was not specifically directed toward
insurance or the insurance industry under the “common sense” test. First, the
Prudential I Court stated that the Arkansas PPA was not directed toward insurance
because it created an opportunity for providers to participate in health plans.
Prudential I, 154 F.3d at 829. In contrast, the Miller Court held that the Kentucky
AWP laws are specifically directed toward entities engaged in insurance even though
“as a consequence of Kentucky’s AWP laws, entities outside the insurance industry
(such as health-care providers) will be unable to enter into certain agreements with
Kentucky insurers.” Miller, 538 U.S. at 335.6
6
As this court recognized in Prudential I, whether the Arkansas PPA expressly
regulated “health care insurers” rather than “health benefit plans” is not
determinative. See, e.g., Prudential I, 154 F.3d at 829. In Miller, the Supreme Court
liberally interchanged discussion of “health benefit plans” and “health care insurers”
because the two Kentucky statutes differed as to what they expressly regulated.
Miller, 538 U.S. at 331-32 & passim. Thus, under Miller, an AWP statute can be
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Second, the Prudential I Court stated that the Arkansas PPA’s definitions of
“health benefit plans” and “health care insurers” go too far “beyond the scope of the
insurance industry” to be specifically directed toward entities engaged in insurance.
Prudential I, 154 F.3d at 829 (citing Pilot Life, 481 U.S. at 50). The Prudential I
Court stated both that “[a]n act that purports to regulate ‘health benefit plans’ defined
so broadly as to include employers and administrators of self-insured plans, as well
as traditional insurance, simply does not fit within a common-sense view of a law
directed specifically toward the insurance industry,” and that “the statutory term
‘health care insurers’ also goes well beyond the scope of the insurance industry,”
because its statutory definition includes not only insurance companies but also
HMOs, preferred provider organizations, physician hospital organizations, third-party
administrators, and other entities not regularly thought to be in the insurance industry.
Id.
In Miller, however, the Supreme Court expressly rejected the argument that a
law does not regulate insurance for purposes of the savings clause if it regulates more
than traditional insurance companies. In rejecting this argument, the Supreme Court
returned to the plain language of the savings clause by noting that “ERISA’s savings
clause does not require that a state law regulate ‘insurance companies’ or even ‘the
business of insurance’ to be saved from pre-emption; it need only be a ‘law . . . which
regulates insurance’ . . . and self-insured plans engage in the same sort of risk pooling
arrangements as separate entities that provide insurance to an employee benefit plan.”
Miller, 538 U.S. at 336 n.1. In addition, the Miller Court stated that the Kentucky
AWP laws were saved from preemption even though both laws “apply to . . . HMOs
that do not act as insurers but instead provide only administrative services to self-
insured plans” because “administering self-insured plans . . . suffices to bring them
within the activity of insurance” under the savings clause. Id.; see also Rush
saved from preemption whether it regulates health benefit plans or insurers that
provide health benefit plans.
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Prudential, 536 U.S. at 372 (stating that “some overbreadth” in the application of
Illinois’s independent-review laws provides “no reason to think Congress would have
meant such minimal application to noninsurers to remove a state law entirely from the
category of insurance regulation saved from preemption”). As Miller makes plain,
it is not the case that a statute must regulate only traditional insurance companies to
be a statute specifically directed toward entities engaged in insurance. Rather, that
statute need only regulate entities engaged in the activity of insuring.7
For the above reasons, we hold that the Supreme Court’s decision in Miller
undermined our prior reasoning in Prudential I. While the Miller Court’s rejection
of our prior reasoning to support the conclusion that the Arkansas PPA was not saved
from express preemption under ERISA does not necessarily compel a holding that the
Arkansas PPA is saved from preemption, we see no reason why the Miller Court’s
reasoning would not require such a result in this case. In particular, the Miller
Court’s holding that a law that regulates non-insuring entities can be saved from
preemption eliminates any concern about whether the Arkansas PPA is specifically
directed toward entities engaged in insurance. See Miller, 538 U.S. at 336 n.1. Thus,
under the first prong of Miller’s two-step test, we hold that the Arkansas PPA is a
“state law . . . specifically directed toward entities engaged in insurance,” as that
standard was applied in Miller. Id. at 342.
7
In addition, we note that in Rush Prudential the Supreme Court emphasized
that with regard to the savings clause “‘there is no ERISA preemption without clear
manifestation of congressional purpose.’” Rush Prudential, 536 U.S. at 387 (quoting
Pegram v. Herdrich, 530 U.S. 211, 236 (2000). Although the Prudential I Court
acknowledged this “presumption” against preemption when interpreting the general
applicability of ERISA’s express preemption clause, after Rush Prudential, we must
recognize the same presumption in our application of the savings clause as well.
Prudential I, 154 F.3d at 822.
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HMOP attempts to distinguish Miller on the ground that the Arkansas PPA, by
its terms, applies to more non-insurance entities than the Kentucky AWP laws
considered in Miller. For that reason, HMOP argues that the Arkansas PPA is not
specifically directed toward entities engaged in insurance. Contrary to HMOP’s
contentions, we conclude that the relevant statutory provisions in the Kentucky AWP
laws are so similar to the Arkansas PPA as to require our conclusion that the
Arkansas PPA is saved from preemption. For example, all three statutes contain
similar prohibition clauses.8 In addition, the Arkansas PPA’s definitions of “health
care insurer” and “health benefit plan,” which HMOP claims to be much broader than
the Kentucky AWP laws considered in Miller, possess meaningful cognates in the
Kentucky laws.9 The Arkansas PPA, like the Kentucky AWP laws, aims to compel
8
Compare, e.g., Ark. Code Ann. § 23-99-204(a)(3) (“A health care insurer shall
not, directly or indirectly . . . (3) Prohibit or limit a health care provider . . . willing
to accept the health benefit plan’s operating terms and conditions, schedule of fees,
covered expenses, and utilization regulations and quality standards, from the
opportunity to participate in that plan.”), with Ky. Rev. Stat. Ann. § 304.17A-270 (“A
health insurer shall not discriminate against any provider. . . who is willing to meet
the terms and conditions for participation established by the health insurer. . . .”).
9
Compare Ark Code Ann. § 23-99-203(f) (“‘Health care insurer’ means any
entity, including but not limited to: (1) insurance companies; (2) hospital and medical
services corporations; (3) health maintenance organizations; (4) preferred provider
organizations; (5) physician hospital organizations; (6) third party administrators; and
(7) prescription benefit management companies, authorized to administer, offer, or
provide health benefit plans.”), with Ky. Rev. Stat. Ann. § 304.17A-170(7) (“‘Health
care insurer’ means any entity, including but not limited to insurance companies,
hospital and medical services corporations, health maintenance organizations,
preferred provider organizations, and physician hospital organizations, that is
authorized by the state of Kentucky to offer or provide health benefit plans, policies,
subscriber contracts, or any other contracts of similar nature which indemnify or
compensate health care providers for the provision of health care services.”); see also
Ark. Code Ann. § 23-99-203(c) (defining “health benefit plan”), and Ky. Rev. Stat.
Ann. § 304.17A-005(18) (defining “health benefit plan”).
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every health benefit plan to allow any willing and otherwise eligible provider into its
provider network. In Miller, the Supreme Court held that this aim constituted
regulating insurance under ERISA’s savings clause, and we see no reason why that
conclusion should not be applied to the Arkansas PPA.
Therefore, applying the Miller Court’s two-pronged savings-clause test, the
Arkansas PPA is a “law . . . which regulates insurance,” and is saved from preemption
under ERISA § 514. As such, we affirm the district court’s dissolution of the
Prudential I injunction against the application of the Arkansas PPA to non-ERISA
plans and insured ERISA plans, including those offered by HMOP.
b. Deemer clause
With regard to self-funded ERISA plans, our ERISA preemption analysis does
not end with the savings clause. Instead, under the deemer clause a self-funded
ERISA plan, such as Tyson’s, cannot be deemed to be an insurance company or other
insurer subject to state regulation because of the savings clause. The Miller decision
only interpreted ERISA’s savings clause. The Miller Court did not consider the
effects of the deemer clause because no self-funded ERISA plan was a party to that
case. See Miller, 538 U.S. at 336 n.1 (“The deemer clause presents no obstacle to
Kentucky’s law, which reaches only those employee benefit plans ‘not exempt from
state regulation by ERISA.’”). Thus, we must consider whether, in light of the
deemer clause, Tyson’s self-funded ERISA plan is subject to regulation by the
Arkansas PPA. Following recent Supreme Court decisions applying the deemer
clause, we hold that it is not.
Similar to the Kentucky statutes considered in Miller, the Arkansas PPA
provides that it “shall not apply to self-funded or other health benefit plans that are
exempt from state regulation by virtue of [ERISA].” Ark. Code Ann. § 23-99-209.
Under this exemption, self-funded ERISA plans, such as Tyson’s, are not directly
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regulated by the Arkansas PPA. Recognizing this exemption, the movants argue that
because Tyson contracts with insurance companies for access to their provider
networks, the Arkansas PPA can indirectly regulate the Tyson plan through those
third-party insurance companies.
As support for this argument, the movants reference the Supreme Court’s
statement in Miller that non-insuring entities administering self-insured plans are
engaged in the activity of insurance for the purpose of the savings clause. Miller, 538
U.S. at 336 n.1 (“[N]oninsuring HMOs would be administering self-insured plans,
which we think suffices to bring them within the activity of insurance for purposes
of [the savings clause].”). The movants, however, take this statement out of context.
The Miller Court’s discussion of third-party administrators came as a response to an
argument against the application of the savings clause to the Kentucky AWP laws –
namely that the application of those laws to non-insuring HMOs prevents the laws
from being specifically directed toward entities engaged in insurance. Id. In Miller,
the Supreme Court focused solely on the application of the savings clause. The
movants’ argument here fails because it ignores the application of the deemer clause
to self-funded ERISA plans, a non-issue in Miller, but the controlling issue in this
case with regard to the Tyson plan.
The Supreme Court has noted repeatedly that because of the deemer clause,
statutes that indirectly regulate self-funded ERISA plans are not saved from
preemption to the extent such statutes apply to self-funded plans. See Rush
Prudential, 536 U.S. at 371 n.6 (noting that because of the deemer clause, an Illinois
independent review statute “would not be ‘saved’ as an insurance law” to the extent
it indirectly applied to self-funded plans); FMC Corp. v. Holliday, 498 U.S. 52, 64
(1990) (“Our interpretation of the deemer clause makes clear that if a plan is insured,
a State may regulate it indirectly through regulation of its insurer and its insurer’s
insurance contracts; if the plan is uninsured, the State may not regulate it.”); Metro.
Life, 471 U.S. at 747 (“We are aware that our decision results in a distinction between
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insured and uninsured plans, leaving the former open to indirect regulation while the
latter are not. By so doing we merely give life to a distinction created by Congress
in the ‘deemer clause,’ a distinction Congress is aware of and one it has chosen not
to alter.”). Nothing in Miller indicates a change in the Court’s deemer-clause
analysis. Thus, we hold that not only does the Arkansas PPA exempt the Tyson plan
and other self-funded ERISA plans from direct regulation but also that ERISA
preempts any indirect state regulation of those plans because of the deemer clause.
For the above reasons, we reverse the district court’s dissolution of the
Prudential I injunction against the enforcement of the Arkansas PPA with respect to
self-funded ERISA plans. We remand to the district court with directions to enter an
injunction prohibiting both direct and indirect enforcement of the Arkansas PPA
against self-funded ERISA plans, such as the Tyson plan.10
2. Complete preemption under ERISA § 502
Because we hold that ERISA saves the Arkansas PPA from preemption with
respect to insured ERISA health benefit plans, we must now consider an issue that
was not presented to the Prudential I Court: whether the doctrine of complete
preemption under ERISA applies to the Arkansas PPA’s civil penalties provision,
Ark. Code Ann. § 23-99-207. We hold that ERISA’s civil enforcement provision
10
Our holding concerning express preemption, that the Arkansas PPA is
preempted as applied to self-funded ERISA plans but not preempted as to all other
health benefit plans, acknowledges the distinction between ERISA and non-ERISA
health benefit plans made in the original district court opinion in this matter. See
Prudential Ins. Co. of Am. v. Nat’l Park Med. Ctr., 964 F. Supp. at 1299-1300
(holding the Arkansas PPA was preempted, but only as applied to ERISA plans).
Because ERISA does not apply to non-ERISA plans, ERISA could not preempt a
statute as applied to those plans. To the extent that the Prudential I injunction
covered non-ERISA plans, that injunction should be dissolved.
-24-
completely preempts the Arkansas PPA’s civil penalties provision, but only with
respect to suits that could have been brought under ERISA.
Unlike the Kentucky statutes the Supreme Court considered in Miller, the
Arkansas PPA contains a civil penalties provision. That provision states that, “Any
person adversely affected by a violation of this subchapter may sue in a court of
competent jurisdiction for injunctive relief against the health care insurer and, upon
prevailing, shall, in addition to such relief, recover damages of not less than one
thousand dollars ($1,000), attorney’s fees, and costs.” Ark. Code Ann. § 23-99-207.
Invoking the doctrine of complete preemption discussed above, HMOP contends that
ERISA’s civil enforcement provision completely preempts the enforcement of the
civil penalties provision of the Arkansas PPA, and, as a consequence, this Court
should enjoin enforcement of that section.
In Aetna Health Inc. v. Davila, the Supreme Court held that “any state-law
cause of action that duplicates, supplements, or supplants the ERISA civil
enforcement remedy conflicts with the clear congressional intent to make the ERISA
remedy exclusive and is therefore pre-empted.” Davila, 124 S. Ct. at 2495 (citing
Pilot Life, 481 U.S. at 54-56). A state cause of action is completely preempted under
ERISA “if an individual, at some point in time, could have brought his claim under
[ERISA § 502], and where there is no other independent legal duty that is implicated
by a defendant’s actions.” Id. at 2496. In addition, even a state law that is saved
from express preemption under ERISA § 514 “will be pre-empted if it provides a
separate vehicle to assert a claim for benefits outside of, or in addition to, ERISA’s
remedial scheme.” Id. at 2500. The Supreme Court emphasized that a state-law
cause of action need not duplicate an ERISA provision to be preempted. Id. at 2499.
Rather, a state-law cause of action is preempted if it arises from a duty created by
ERISA or the terms of the relevant health benefit plan. Id. at 2497-99 (holding that
the alleged “tort” duty “to exercise ordinary care” under the Texas Health Care
-25-
Liability Act did not arise independently of the “contract” duties actionable under
ERISA or the plan’s terms).
The “comprehensive legislative scheme” of ERISA § 502 creates “six carefully
integrated civil enforcement provisions.” Mass. Mut. Life Ins. Co. v. Russell, 473
U.S. 134, 146 (1985); see also Davila, 124 S. Ct. at 2495. Most relevant to the
Arkansas PPA’s civil penalties provision, ERISA § 502(a)(1)(B) provides that “[a]
civil action may be brought . . . by a participant or beneficiary . . . to recover benefits
due to him under the terms of his plan, to enforce his rights under the terms of the
plan, or to clarify his rights to future benefits under the terms of the plan . . . .” 29
U.S.C. § 1132(a)(1)(B). Under ERISA § 502, any suit by a plan participant to enforce
benefits wrongly denied that participant would be completely preempted. Thus, any
suits by plan participants brought under the civil penalty provision of the Arkansas
PPA because the plan denied reimbursement to the participant for services from an
otherwise qualified and willing provider are completely preempted.
We, however, offer no opinion as to the exact scope of this preemption
because the Arkansas PPA’s civil penalties provision extends to “[a]ny person
adversely affected by a violation” of the Arkansas PPA and invites a number of
possible suits that would require speculation beyond the scope of this appeal. Rather,
we hold generally that with respect to any cause of action brought under Ark. Code
Ann. § 23-99-207 that could have been brought under ERISA, the Arkansas PPA is
preempted and the resulting cause of action is recharacterized as an action brought
under ERISA. Such a cause of action is removable to federal court. See, e.g., Hull
v. Fallon, 188 F.3d 939, 942 (8th Cir. 1999).
Accordingly, we reverse the district court’s dissolution of the Prudential I
injunction against the enforcement of the civil penalties provision of the Arkansas
PPA as applied to any cause that could have been brought under ERISA § 502 and
remand to the district court to enter judgment consistent with this opinion.
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III. CONCLUSION
Based on the foregoing, we hold that the Arkansas PPA is saved from
preemption under ERISA § 514 except with regard to self-funded ERISA plans. We
also hold that ERISA § 502 completely preempts the civil penalties provision of the
Arkansas PPA, Ark. Code Ann. § 99-23-207, with respect to any cause of action that
could have been brought under ERISA.
Therefore, we affirm the district court’s dissolution of the Prudential I
injunction except for the following: (1) we reverse the district court’s dissolution of
the Prudential I injunction with regard to self-funded ERISA plans, and (2) we
reverse the district court’s dissolution of the Prudential I injunction with regard to
any cause of action brought under the Arkansas PPA’s civil penalties provision that
could have been brought under ERISA § 502.
Consequently, we affirm in part, reverse in part, and remand to the district court
to enter judgment consistent with this opinion.
______________________________
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