Brief at 48 n.40). The United States has filed an amicus brief in support of OPM's position. (Amicus Brief at 6).
Federal employees are eligible for health benefits through the FEHBA program, and can select coverage from any one of the participating insurance carriers in their region. 5 U.S.C. § 8905. "Contributions" or premiums under the program are assessed against the government and the individual employee, and are then deposited into the Employees Health Benefits Fund (the "Fund"). The FEHBA program is structured so that carriers pay care providers directly for covered treatment, and then are reimbursed by the Fund. 5 U.S.C. § 8909.
FEHBA's preemption provision states that:
(c) EXEMPTION FROM STATE PREMIUM TAXES, -- Section 8909 of title 5, United States Code, is amended by adding at the end the following:
(f)(1) No tax, fee, or other monetary payment may be imposed, directly or indirectly, on a carrier or an underwriting or plan administration subcontractor of an approved health benefits plan by any State, the District of Columbia, or the Commonwealth of Puerto Rico, or by any political subdivision or other governmental authority thereof, with respect to any payment made from the Fund.
(2) Paragraph (1) shall not be construed to exempt any carrier or underwriting or plan administration subcontractor of an approved health benefits plan from the imposition, payment, or collection of a tax, fee, or other monetary payment on the net income or profit accruing to or realized by such carrier or underwriting or plan administration subcontractor from business conducted under this chapter, if that tax, fee, or payment is applicable to a broad range of business activity.
[Pub. L. No. 101-508].
Defendants argue that the language of the statute as well as its legislative history are unambiguous, and reflect Congress' clear intent that FEHBA preemption apply only to state premium taxes. (Defendants' Brief at 44-45; Blues' Reply Brief at 11). It is well-established that if Congress' intent with regard to a particular issue is clear, "that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress." Chevron, 104 S. Ct. at 2781. If, however, Congress' intent is not clear, district courts should defer to an implementing agency's interpretation of a federal statute, as long as that interpretation is reasonable. Id. at 2782. See also Presley v. Etowah County Commission, 117 L. Ed. 2d 51, 112 S. Ct. 820, 831 (1992) (same).
Contrary to defendants' arguments, the FEHBA statute itself does not clearly refer to state premium taxes. In fact, other than the heading to the amendment, the provision does not use the term "premium tax," but refers only to a "tax, fee, or other monetary payment" imposed "directly or indirectly" on "any payment made from the Fund." This conflict between the amendment heading and the statutory language alone suggests that Congress' intent is less than clear.
The statute's legislative history is similarly ambiguous. (See Amicus Brief at 14) (referring to "sparse" legislative history for preemption provision). Even assuming that Congress intended FEHBA preemption to apply only to premium taxes, the legislative history does not resolve the question whether the 11% and 13% Surcharges qualify as premium taxes within the meaning of the statute.
Because the Court finds that FEHBA's preemption provision and the statute's legislative history are both ambiguous, it will defer to OPM's reasonable interpretation of that clause. In order to be deemed reasonable, the agency's finding need not be "the only possible construction, or . . . the same finding the court would have made." Lipscomb v. United States, 906 F.2d 545, 548 (11th Cir. 1990). Rather, an agency's interpretation may be upheld if it is a "permissible construction of the statute." Chevron, 104 S. Ct. at 2782.
It is undisputed that the 11% and 13% Surcharges substantially increase the amount that FEHBA carriers must pay for hospital care rendered to their insureds. Because those carriers are then reimbursed for the payments by the Fund, the Surcharges also serve to increase, at least indirectly, "payments from the Fund." Given these circumstances -- and absent any evidence to the contrary -- the Court finds that OPM's determination that the Surcharges are preempted under § 8909(f) is a reasonable interpretation of the statute. Accordingly, the Court will defer to that interpretation and finds that the two Surcharges are both preempted under FEHBA as well as ERISA.
5. The Actuarial Letter
Finally, plaintiff Travelers challenges Actuarial Information Letter No. 6 (the "Actuarial Letter") issued by the New York State Department of Insurance. (Joseph Aff. Ex. 1). The Actuarial Letter imposes certain requirements on "stop-loss type policies," that is, insurance policies purchased by employee benefit plans to protect themselves against excess or catastrophic losses. Travelers claims that because the Actuarial Letter relates to employee benefit plans within the meaning of ERISA, that letter is also preempted. Defendants disagree, and argue that to the extent that the Actuarial Letter does relate to ERISA plans, it constitutes a regulation of insurance within the meaning of the savings clause.
Items 4 and 7 of the Actuarial Letter mandate the level of runoff reserves and the rate filings to be submitted for stop-loss policies. Because those provisions apply only to the insurance policy and/or insurer, and have no direct or indirect connection with employee benefit plans, they are not preempted by ERISA.
Item 6 provides that "only appropriate groups will be written, which excludes multiple-employer trusts and associations." Because that provision similarly regulates the insurer, not an ERISA plan, it is also not preempted under the statute.
The remaining items of the Actuarial Letter provide that:
1. The insurer must undertake to ensure that statutorily mandated benefits be covered under the employer's plan;
2. The insurer must agree to ensure that statutory conversion policies be provided, either by them or by another insurer;
3. Notice must be given to employees if and when the insurer becomes liable for runoff claims. We will accept a policy provision which requires the employer to pass along material provided by the insurer for such purposes;
* * *
5. The insurer must take full primary responsibility for the payment of all employer plan claims incurred but not yet paid at date of termination of the policy, unless one of two conditions occurs:
a) The stop-loss plan is replaced by another stop-loss plan, issued by another carrier, which takes liability on a "paid" (as opposed to "incurred") basis; or
b) If there is no replacement stop-loss plan, the insurer agrees to determine that the employer's plan has not been eliminated or materially reduced within 90 days (or three months) following termination of the stop-loss contract.
The Court finds that these items do have a connection with ERISA plans given that they attempt to mandate, through the stop-loss insurer, the benefits offered by and the administrative functioning of the ERISA plan purchasing the stop-loss coverage. Thus, those provisions will be preempted unless they fall within the savings clause.
As already noted, ERISA's savings clause exempts from preemption any state law which "regulates insurance." However, ERISA's deemer clause limits the scope of the savings clause, stating that "neither an employee benefit plan . . . nor any trust established under such a plan, shall be deemed to be an insurance company or other insurer . . . to be engaged in the business of insurance . . . for purposes of any law of any State purporting to regulate insurance companies [or] insurance contracts . . ." 29 U.S.C. § 1144(b)(2)(B).
In interpreting the deemer clause, the Supreme Court has held that self-funded ERISA plans are not subject to state laws which otherwise "regulate insurance" within the meaning of the savings clause. See FMC Corp., 111 S. Ct. at 409 ("the deemer clause . . . exempts self-funded ERISA plans from state laws" regulating insurance). While an insured plan may be indirectly regulated through regulation of its insurer, "if the plan is uninsured, the State may not regulate it" at all. Id. at 411. See also Metropolitan Life, 105 S. Ct. at 2393 (noting that Court's interpretation of ERISA savings clause leaves insured plans open to indirect regulation through state insurance laws).
It is undisputed that the plan on whose behalf Travelers challenges the Actuarial Letter is self-funded, other than its purchase of stop-loss coverage from Travelers. The question then becomes whether that purchase transforms an otherwise uninsured plan into an insured plan for purposes of ERISA preemption.
Defendants correctly argue that nothing in ERISA "compels the conclusion that a plan that purchases excess risk coverage should not be treated as an insured plan." (Defendants' Brief at 42) (emphasis added). It does not appear that the Second Circuit has ruled on this issue. A number of other courts have, however, and have found that, for ERISA purposes, a plan "remains self-funded even with the stop-loss insurance." Thompson v. Talquin Building Products Co., 928 F.2d 649, 653 (4th Cir. 1991). Accord United Food & Commercial Workers & Employers Arizona Health & Welfare Trust v. Pacyga, 801 F.2d 1157, 1161-62 (9th Cir. 1986) (because no insurance is provided directly to plan participants, plan should not be considered "insured").
The Court agrees. Accordingly, Items 1, 2, 3, and 5 of the Actuarial Letter are preempted by ERISA.
For the foregoing reasons, plaintiffs' motions for summary judgment are granted in part and denied in part, and defendants' cross-motions are denied. Because the Court finds that the three Surcharges are all preempted by ERISA, defendants are enjoined from enforcing those surcharges against any commercial insurers or HMOs in connection with their coverage of any ERISA plans. Because the Court also finds that both the 11% and 13% Surcharges are preempted by FEHBA, defendants are enjoined from enforcing those surcharges against any insurers participating in the FEHBA program. Finally, because the Court finds that Items 1, 2, 3 and 5 of the Actuarial Letter are also preempted under ERISA, defendants are enjoined from enforcing those provisions of the Letter against any commercial insurers providing stop-loss coverage to self-funded ERISA plans.
New York, New York
February 3, 1993
LOUIS J. FREEH, U.S.D.J.