Federal District Court Upholds Michigan Health Insurance Claims Assessment Act

A lawsuit filed in federal court that attempted to block the Michigan Health Insurance Claims Assessment (HICA) Act on federal preemption ground has been dismissed.1 The HICA replaces a use tax that was assessed against certain insurance carriers that provided Medicaid services in Michigan.2 The primary purpose of the HICA Act is to draw down federal matching funds to help fund the Michigan Medicaid program.

Background

In December 2011, the Self-Insurance Institute of America (SIIA) filed a lawsuit in the U.S. District Court, Eastern District of Michigan, seeking to invalidate the Michigan HICA. The SIIA argued that the HICA is preempted by the Employee Retirement Income Security Act (ERISA) and violates the Supremacy Clause of the U.S. Constitution. According to the complaint filed by the SIIA, the HICA conflicts with ERISA's federal framework, interferes with the uniform national administration of ERISA plans, and contains recordkeeping and reporting provisions that conflict with ERISA. The state filed a motion to dismiss the complaint for failure to state a claim upon which relief can be granted.3

Federal Preemption Standards

ERISA is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.4 ERISA includes preemption language providing that state laws are superseded to the extent that they relate to any employee benefit plan covered by ERISA.5 The U.S. Supreme Court has held that a state law "relates to" an ERISA plan if it makes reference to or has a connection with the plan.6 The Michigan HICA defines a "group health plan" as an employee welfare benefit plan as defined in ERISA.7

HICA Not Federally Preempted

The U.S. District Court ruled that the HICA does not "relate to" ERISA plans because it does not "refer to" an ERISA plan within the meaning of the preemption doctrine or have an impermissible "connection with" an ERISA plan. In determining whether a state law improperly preempts federal law by making references to ERISA, the relevant inquiry is the nature of the effect, if any, that the law has on ERISA plans.8 Although the HICA does target ERISA plans, it is not aimed at ERISA plans per se. The state argued, and the Court agreed, that the HICA is aimed at a wide breadth of entities that process claims on behalf of Michigan residents and it does not treat ERISA plans different from other entities. In order for state...