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When Does ERISA Preempt State Law Claims Related to Health Plans?

Most employees in Chicago have health insurance coverage through their employers. Most of these health plans are governed by the Employee Retirement Income Security Act of 1974, a federal law known as ERISA. ERISA has a broad preemption provision, stating ERISA “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.” ERISA § 514(a); 29 U.S.C. § 1144(a). But how broad is the “relate to” language in the preemption statute? A recent case demonstrated the limitations of this broad preemption clause.

In Russell v. Southern California Permanente Medical Group, No. 22-cv-1930, 2023 WL 2436005 (S.D. Cal. Mar. 9, 2023), Russell sued in state court for forced patronage under California’s labor code because the employer forced employees to buy into its health insurance plan, which was regulated by ERISA. The employer then removed the action to federal court under 28 U.S.C. § 1441, contending the action arose under ERISA because it “relates to” an employee benefit plan. Russell then moved to remand, arguing ERISA’s preemption clause does not apply.

The United States District Court for the Southern District of California held ERISA did not preempt the state law cause of action, remanding the case back to state court. The court reasoned that resolving Russell’s claim would not require interpreting the ERISA governed health insurance plan or a collective bargaining agreement. It also explained the California Labor code did not act immediately and exclusively upon ERISA plans, and the law could operate even if ERISA plans did not exist. Whether the employees were forced to buy insurance did not relate to “a fundamental ERISA function,” and so would not impact plan administration. The Court thus held there was no federal subject matter jurisdiction over the matter, and remanded to state court.

If you have a question about whether ERISA applies to your dispute with a health insurance plan, contact an experienced ERISA health insurance attorney today.

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