Insurance Commissioner of the State v. Metropolitan Life Insurance

Eldridge, J., delivered the opinion of the Court. This State’s Insurance Code, Maryland Code (1957, 1979 Repl. Vol.), Art. 48A, § 477-0 (a), requires all group and blanket health insurance policies to provide reimbursement, under certain circumstances, for services performed by duly licensed social workers. 1 An Act of Congress, designated as ³³⁶ the "Employees Retirement Income Security Act of 1974,” and ordinarily referred to as "ERISA,” 29 U.S.C. § 1001 et seq., regulates employee pension and welfare benefit plans. Section 514 (a) of ERISA, 29 U.S.C. § 1144 (a), provides generally for the preemption of state laws relating to employee benefit plans covered by ERISA.

But in one of the exceptions to the preemption provision, Congress stated that the provision shall not "be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities.” § 514 (b) (2) (A) of ERISA, 29 U.S.C. § 1144 (b) (2) (A). 2 Consequently, as the Supreme Court has noted, "ERISA itself... explicitly preserves state regulation of 'insurance..Alessi v. ³³⁷ Raybestos-Manhattan, Inc., 451 U.S. 504 , 523 n. 19, 101 S.Ct. 1895 , 68 L.Ed.2d 402 (1981). See Shaw v. Delta Air Lines, U.S. , 103, S.Ct. 2890, 77 L.Ed.2d 490, 4968, 4969 (1983) ("State laws regulating insurance. . . are exempt from this pre-emption provision. . .”). 3 The sole question before us in this case is whether § 477-0 (a) of the Maryland Insurance Code, mandating certain coverage in health insurance policies, is a "law . . . which regulates insurance” within the meaning of § 514 (b) (2) (A) of ERISA, and thus is not preempted by the federal statute. The facts of the case are as follows. As a part of its system of employee benefits, arrived at through the process of collective bargaining, the General Electric Co. (G.E.) has purchased from the Metropolitan Life Insurance Company (Metropolitan) a group health insurance policy which provides benefits for medical expenses incurred by G.E. employees and certain dependents. 4 One provision of the policy generally reimburses group members for mental disorders treated by physicians and psychologists.

Reimbursement for services rendered by a qualified social worker is provided for under the policy provision but only in limited circumstances. 5 ³³⁸ Based on the above-described provision of the policy, Metropolitan denied liability for the payment of claims filed by two covered G.E. employees. The claims were for psychotherapy services rendered by qualified social workers to whom the employees had been referred by their physicians. It is undisputed that the claims for the psychotherapy are not covered by the insurance policy. On the other hand, "Metropolitan concedes that the services in question would be covered if Section 477-0 [of the Maryland Insurance Code] were applicable to the policy,” (Metropolitan’s brief, p. 2).

Displeased with Metropolitan’s refusal to pay, the two' employees complained to the Insurance Commissioner of the State of Maryland, claiming that the refusal to pay for the services violated § 477-0 (a) of the Insurance Code. Subsequently a hearing was held on two different dates before the Chief Hearing Officer of the Insurance Division. Thereafter, the hearing officer rendered findings and conclusions, in which he rejected Metropolitan’s argument that § 477-0 (a) was preempted by ERISA and held that Metropolitan had violated the Insurance Code. The Insurance Commissioner ordered Metropolitan to pay the claims of the two employees.

Metropolitan sought judicial review of the Commissioner’s order in the Baltimore City Court (now the Circuit Court for Baltimore City), again arguing that § 477-0 (a) of the Maryland Insurance Code was not a law regulating insurance and thus was preempted by ERISA. The trial court, however, affirmed, agreeing with the Insurance Commissioner that § 477-0 (a) constituted a law regulating insurance and therefore was saved from preemption by § 514 (b) (2) (A) of ERISA. Metropolitan then appealed to the Court of Special Appeals, which reversed and held that ERISA preempted the application of § 477-0 (a). Metropolitan Life v. Ins.

Comm’r, 51 Md.App. 122 , 441 A.2d 1098 (1982). The Court of Special Appeals stated that § 477-0 (a) "does not, in the frame of reference of ERISA, regulate insurance,” and that, therefore, the Maryland statute was not exempt from ³³⁹ ERISA’s preemption provision. 51 Md.App. at 130 . Thereafter this Court granted the Insurance Commissioner’s petition for a writ of certiorari. Although the parties in this case have engaged in a broad discussion of ERISA, including the reasons and policies underlying the statute and its general preemption provision, the issue before us is quite narrow.

The Insurance Commissioner concedes that if § 477-0 (a) of the Maryland Insurance Code is not a law regulating insurance, then its application in this case is preempted by § 514 (a) of ERISA as a law which "relatéi s] to any employee benefit plan.” On the other hand, it is undisputed that if § 477-0 (a) is a law regulating insurance, then it is saved from preemption and requires the payment of the two claims in this case. Therefore, as previously pointed out, the only issue is whether § 477-0 (a) is "any law of any State which regulates insurance,” as Congress used that phrase in § 514 (b) (2) (A) of ERISA. Metropolitan asserts that the "sort of State regulation which ERISA intended to preserve” in § 514 (b) (2) (A) is limited to that which is "designed to regulate the solvency or conduct of insurance companies” (Metroplitan’s brief, p. 2). In our view, there is no support in the statutory language, the legislative history, or case law, for such a restrictive interpretation of the words "which regulates insurance.” Neither ERISA itself nor the underlying legislative history define the phrase "regulates insurance.” Consequently, we must proceed upon the assumption that Congress intended the phrase to have its plain, ordinary meaning.

As the Supreme Court recently observed in construing other language in § 514 of ERISA, "fw]e must give effect to this plain language unless there is good reason to believe Congress intended the language to have some more restrictive meaning.” Shaw v. Delta Air Lines, supra, U.S. at , 103 S. Ct. at 2900 . Under the plain and ordinary meaning of the language, a statute mandating a particular type of coverage in a category of insurance policies, is a law "which regulates insur ³⁴⁰ anee.” A great many of the regulations contained in the Maryland Insurance Code, as well as the insurance laws of other states, are provisions mandating specified coverages in various types of insurance policies. Much of the litigation concerning state regulation of insurance involves statutory provisions requiring specified coverages in different classes of insurance policies. See generally, e.g., Guardian Life Ins. v. Ins.

Comm’r, 293 Md. 629 , 446 A.2d 1140 (1982); Nationwide Mutual Ins. v. Webb, 291 Md. 721 , 436 A.2d 465 (1981); Insurance Co. of N. Amer. v. Aufenkamp, 291 Md. 495 , 435 A.2d 774 (1981); Pennsylvania Nat’l Mut. v. Gartelman, 288 Md. 151 , 416 A.2d 734 (1980); Yarmuth v. Gov’t Employees Ins. Co., 286 Md. 256 , 407 A.2d 315 (1979); Reese v. State Farm Mut. Auto. Ins., 285 Md. 548 , 403 A.2d 1229 (1979); State Farm Mut. v. Ins.

Comm’r, 283 Md. 663, 670-674 , 392 A.2d 1114 (1978); Government Employees Ins. v. Harvey, 278 Md. 548 , 366 A.2d 13 (1976); Travelers Ins. Co. v. Benton, 278 Md. 542 , 365 A.2d 1000 (1976); State Farm v. Md. Auto Ins. Fund, 277 Md. 602 , 356 A.2d 560 (1976); Maryland Auto Ins. Fund v. Stith, 277 Md. 595 , 356 A.2d 272 (1976). 6 A similar line of recent cases could be cited from the reports of any other state.

When ERISA was enacted, the members of Congress certainly knew that much of the body of state law regulating insurance concerned required coverages in various categories of insurance. Nevertheless, Congress did not use language distinguishing between this type of regulation and other types. Instead it broadly exempted from the preemption provision state laws regulating insurance. 7 ³⁴¹ Moreover, other language in § 514 of ERISA suggests that Congress contemplated a broad exception for state regulation of insurance, banking or securities. Section 514 (b) (2) (A) refers to "any law of any State which regulates insurance,” and § 514 (c) (1) provides that "[t]he term 'State law’ includes all laws, decisions, rules, regulations, or other State action having the effect of law, of any State.” 29 U.S.C. §§ 1144 (b) (2) (A) and 1144 (c), emphasis added.

In addition, giving effect to the plain language of § 514 (b) (2) (A), which indicates that Congress intended generally that state laws regulating insurance be excepted from the preemption provision, is consistent with the federal policy, reflected in the McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015 , that the regulation of insurance is primarily a state function. This interpretation is also consistent with the often-repeated principle that" '[preemption of state law by federal statute or regulation is not favored,’ ” Alessi v. Raybestos-Manhattan, Inc., supra, 451 U.S. at 522 , quoting Chicago & North Western Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 317 , 101 S.Ct. 1124 , 67 L.Ed.2d 258 (1981). And "[w]here ... the field which Congress is said to have pre-empted has been traditionally occupied by the States,. .. 'we start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress,’ ” Jones v. Rath Packing Co., 430 U.S. 519, 525 , 97 S.Ct. 1305 , 51 L.Ed.2d 604 (1977), quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 , 67 S.Ct. 1146 , 91 L.Ed. 1447 (1947).

See de Canas v. Bica, 424 U.S. 351, 356-357 , 96 S.Ct. 933 , 47 L.Ed.2d 43 (1976); Florida Lime & Avocado Growers v. Paul, 373 U.S. 132, 142 , 83 S.Ct. 1210 , 10 L.Ed.2d 248 (1963); Barnett v. Md. St. Bd. Of Dental Ex., 293 Md. 361, 377-378 , 444 A.2d 1013 (1982). Other courts which have considered the issue have also concluded that § 514 (b) (2) (A) of ERISA preserves state ³⁴² laws mandating certain benefits in insurance policies purchased by employee benefit plans. In Wadsworth v. Whaland, 562 F.2d 70 (1st Cir. 1977), cert. denied, 435 U.S. 980 , 98 S.Ct. 1630 , 56 L.Ed.2d 72 (1978), while observing that a state may not under §§ 514 (a) and 514 (b) (2) (B) of ERISA directly regulate an employee benefit plan on the theory that the plan serves as a self-insurer of its benefits ( 562 F.2d at 77 ), the United States Court of Appeals for the First Circuit went on to hold that under the savings clause for state regulation of insurance, § 514 (b) (2) (A), a state could indirectly affect