Metropolitan Life Insurance v. Insurance Commissioner

Orth, J., delivered the opinion of the Court. We have here an employee benefit plan, substantially funded by insurance, providing certain benefits that had been reached by collective bargaining. The ultimate issue is whether Maryland may require the payment of benefits not as called for by the plan. The plan concerned is maintained by the General Electric Company for the benefit of its employees and is subject to federal regulation under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.A. § 1001 et seq.

The medical expense benefits payable under it are implemented by a group insurance policy issued by the Metropolitan Life Insurance Company. Metropolitan is a named fiduciary for the payment or denial of claims for benefits and the review of denied claims under the policy. Metropolitan denied the claims of two General Electric employees, covered by the policy, seeking benefits for services for psychotherapy rendered by social workers. It was the position of Metropolitan that services of social workers were not within the terms of the plan. 1 However, Maryland ¹²⁴ Code (1957, 1979 Repl.

Vol., 1981 Cum. Supp.) Art. 48A, § 477-0 (a) provides: "Every group or blanket health insurance policy delivered or issued- for delivery in this State or issued to a group which is incorporated or has a main office located in this State, or covering persons who reside or work within this State, which provides for reimbursement for any service which is within the lawful scope of practice of a licensed certified social worker shall provide such benefit whether the service is performed by a doctor of medicine or by a licensed certified social worker who has had at least two years or 3,000 hours of post-masters supervised clinical social work practice in a clinical program as established by the State Board of Social Work Examiners if the insured or the person covered by the policy was referred to the social worker by a physician.” It is undisputed that were the Metropolitan policy in compliance with this State statute, the benefits claimed by the two employees would be payable. The Insurance Commissioner of the State of Maryland pursued the matter. Upon hearing, he ruled that "refusal by [Metropolitan] to include coverage and pay proper claims for the benefits provided under Section 477-0 ... in out of state group health insurance contracts, whether or not part of a retirement benefit plan, would constitute a violation of Section 477-0 and 55 (2) (iv), Article 48A.” 2 It ordered that such claims be paid.

Metropolitan appealed to the Baltimore City ¹²⁵ Court. It affirmed the order of the Commissioner. Metropolitan then appealed to this Court. The validity of Art. 48A, § 477-0 (a) on its face is not in question.

The quarrel here is not the legislative mandate that group insurance policies must, under specified conditions, provide reimbursement for certain services performed by qualified social workers. It is, rather, that the requirement was impressed on a group insurance contract which is part of an employee benefit plan regulated by federal law. That law declares, as here applicable, that its provisions "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan....” 29 U.S.C.A. § 1144 (a). There follows, however, a saving clause: "[N]othing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance....” § 1144 (b) (2) (A).

And then there is a deemer clause: "Neither an employee benefit plan ... nor any trust established under such a 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....” § 1144 (b) (2) (B). The ultimate issue of whether Maryland, by statutory mandate, may require the payment of benefits not as called for by a federally regulated employee benefit plan provokes interplay between the federal act and the State statute. Vital to determination of the issue is the scope of ERISA’s savings clause insurance exception to its preemption clause. Both the Commissioner and Metropolitan indicate that it is the clear and manifest intent of ERISA to supersede any and all State laws, with specified exceptions, insofar as they relate to an employee benefit plan, including a plan such as ¹²⁶ the one here, implemented by an insurance policy.

Nor is it disputed that ERISA explicitly purports not to preempt any State law which regulates insurance, and that it preserves existing federal laws which leave the regulation of insurance to the states. 3 So it is that preemption vel non of the Maryland statute, in its application to the General Electric benefit plan and implementing insurance policy, turns on whether it "regulates insurance” within the contemplation of the federal statute. Put precisely, the question is whether the application of the provisions of Art. 48A, § 477-0 (a) of the Maryland Code to General Electric’s employee benefit plan and the implementing Metropolitan insurance policy resulted in regulating insurance within the contemplation of 29 U.S.C.A. § 1144 (b) (2) (A). In resolving the question, we are guided by the rules of statutory construction. The rules of statutory construction are fully set out in State v. Fabritz, 276 Md. 416, 421-422 , 348 A.2d 275 (1975), cert. denied, 425 U.S. 942 (1976).

The cardinal rule is to effectuate the real and actual intention of the legislature. Statutes are to be construed reasonably with reference to the purpose to be accomplished, and in light of the evils or mischief sought to be remedied, so that every statute must be considered in its entirety, and in the context of the purpose underlying its enactment. It should be construed according to the ordinary and natural import of its language, since it is the language of the statute which constitutes the primary source for determining the legislative intent. Results that are unreasonable, illogical or inconsistent with common sense should be avoided whenever possible consistent with the statutory language, with the real legislative intention prevailing over the intention indicated by the literal meaning.

It is in the light of these principles that we consider the provision of 29 U.S.C.A. § 1144 (b) (2) ¹²⁷ (A) that "nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance. . . .” The phrase "regulates insurance” is not devoid of obscurity and free from ambiguity when applying it to a particular law. The Congressional findings and declarations of policy set out in 29 U.S.C.A. § 1001 show dramatically that the Congress recognized that there was a serious problem of national magnitude and character with respect to employee benefit plans and that it perceived a need for a uniform and manageable solution. It found that such plans, whose growth in size, scope and number had been rapid and substantial in recent years, were a concern of national interest and directly affected the continued well-being and security of millions of employees and their dependents. Such plans had become an important factor influencing the stability of employment and the successful development of employee relations.

But there was insufficient information given to employees concerning them and inadequate control established in the operation of them. It was essential that safeguards be provided as to the establishment, operation, and administration of such plans. Owing to the inadequacy of minimum standards, the soundness and stability of plans with respect to adequate funds to pay promised benefits were endangered; employees and their beneficiaries had been deprived of anticipated benefits. It was, therefore, desirable that minimum standards be provided assuring the equitable character of such plans and their financial soundness. § 1001 (a).

The Congress declared it to be the policy of the Act to protect the interests of those concerned by, among other things, establishing standards of conduct, responsibility, and obligations for fiduciaries of employee benefit plans and by providing for appropriate remedies and sanctions and by requiring such plans to meet minimum standards of funding and to obtain plan termination insurance. § 1001 (b) and (c). The legislation enacted by Congress in response to its findings and to fulfill its policy declarations was "a comprehensive regulatory scheme directed at the displacement of ¹²⁸ state regulation of employee benefit plans.” Hutchinson and Ifshin, Federal Preemption of State Law Under the Employee Retirement Income Security Act of 1974, 46 Chicago L. Rev. 23 (1978), (hereinafter referred to as Hutchinson). It cannot be seriously questioned that the express preemptive intent and "ERISA’s structure, language, and legislative history [4] support a broad interpretation of the scope of federal preemption of state law in this field... .” Hutchinson at 41. This view is supported by the deemer clause, § 1144 (b) (2) (B).

The deemer clause prevents the savings clause from digging a large loophole in the preemption clause through the characterization of benefit plans as insurance by expressly prohibiting such characterization. By it, the Congress made clear that the savings clause was not to be used as a device through which states could regulate employee benefit plans by considering a plan itself to be an insurance company or other insurer. It is apparent that the funding of a plan by the purchase of insurance does not for that reason trigger the savings clause and permit a state to regulate a plan. It is obviously in furtherance of the declared policies of the Congress to have the plan supported by insurance, and the Congress expressly recognized this in defining an employee benefit plan to include a plan maintained to provide benefits "through the purchase of insurance. . . .” 29 U.S.C.A. § 1002 (1).

In prescribing the coverage of ERISA, the Congress designated four types of plans to which its provisions do not apply. Plans funded by insurance are not among those specified exceptions. § 1003. In other words, plans implemented by an insurance contract are within the ambit of ERISA, and the mere existence of an insurance contract funding the plan does not remove it from federal regulation and permit the state to move in. The purposes to be accomplished by ERISA, the strong preemptive intent of the Congress, the approval of insurance ¹²⁹ implemented plans, and the deemer clause exception to the savings clause, leave little doubt that benefit plans are to be free of direct regulation by the State even if that regulation is part of a general body of insurance law.

Hutchinson at 65-66. Furthermore, "ERISA makes clear that even indirect state action bearing on private [benefit plans] may encroach upon the area of exclusive federal concern.... ERISA’s authors clearly meant to