posted by Matt Eyles, AHIP President & CEO
on October 2, 2020
The Supreme Court’s Fall term begins on the first Monday in October, and the docket is full of cases that have a significant impact on the health care future of the country. While much of the focus is on Texas v. U.S. (now California v. Texas) and its potential to undo the Affordable Care Act, Rutledge v. PCMA is also a case to watch.
Why? Because this case has the potential to upend the administration of employer-provided coverage upon which more than 150 million hardworking Americans depend. If this case goes the wrong way, health care costs will be raised for millions of families at a time when everyone is desperately working to lower them.
At its core, Rutledge v. PCMA is about preserving the key principle of national uniformity enacted by Congress over four decades ago in the federal Employee Retirement Security Act (ERISA). ERISA plans are regulated at the federal level, giving employers more flexibility and more uniform benefits to their employees. This is particularly important for employers that operate in multiple states around the country. This would disappear if employers were faced with regulations from 50 individual states. ERISA was designed to incentivize employers to voluntarily offer robust coverage to employees across the country – and it has worked. More than 70% of Americans are satisfied with their employer-provided health coverage, according to an AHIP employer survey.
The case centers around an Arkansas state law (Act 900) that nullifies how employers – working together with pharmacy benefit managers (PBMs) – design, negotiate and administer the prescription drug benefits delivered under their ERISA plan. This partnership helps employers not only offer comprehensive and affordable prescription drug coverage, it assists companies with managing the benefit for their employees.
The U.S. Court of Appeals for the Eighth Circuit ruled that Arkansas does not have the legal authority to regulate these partnerships. ERISA plans are regulated at the federal level, meaning ERISA pre-empts the Arkansas law. In April, AHIP authored an amicus brief urging the U.S. Supreme Court to affirm that decision.
A ruling that reverses the Eighth Circuit’s decision would undermine the uniform administration of employer-sponsored plans under ERISA. ERISA plans are the bedrock of the American health care system, providing health benefits for nearly 153 million Americans under the age of 65. If allowed to stand, Arkansas’ statute would significantly increase the cost of providing ERISA benefits.
Arkansas’ statute would interfere with the core function of ERISA plans: determining how both employer plan sponsors and their employees pay for benefits. ERISA plans and their PBM partners would no longer have the freedom and flexibility to design and administer nationally uniform reimbursement rates for their prescription-drug benefits under Arkansas’ model. Moreover, it could cause employees that live in one state to pay even higher drug prices than their colleagues that happen to live in a different state – or worse, could result in every employee paying more. All of this at a time when the nation is already facing a prescription drug pricing crisis.
Upholding state laws like Arkansas’ Act 900 would also threaten the ability of ERISA plans to use third-party administrators beyond PBMs. For example, ERISA plans’ ability enter into arrangements with Centers of Excellence that specialize in certain types of complex care, such as cardiovascular treatment or orthopedic care, might be jeopardized by a ruling in favor of the Arkansas statute.
AHIP has encouraged the Supreme Court to uphold the Eighth Circuit’s decision, and to continue to preserve ERISA’s goal of ensuring predictable, uniform rules for ERISA plans and their administration nationwide. Anything less would significantly disrupt employers’ ability to predictably and efficiently design and administer more affordable ERISA plans. ERISA works for the tens of millions of Americans who get their coverage through work.
Let’s protect that coverage, not jeopardize it.