Michigan health care claims tax not pre-empted by ERISA: Judge

A 2011 Michigan law that imposes a 1% tax on paid health care claims is not pre-empted by the Employee Retirement Income Security Act, a federal judge has ruled.

Revenue generated by the tax, which is used to help fund the state's Medicaid program, is paid by health insurers offering fully insured plans, and by third-party claims administrators and stop-loss insurers, in the case of self-funded plans.

The Self-Insurance Institute of America Inc. challenged the law, arguing that it is barred by a provision in ERISA that pre-empts state and local laws and rules that relate to employee benefit plans.

But U.S. District Court Judge Julian Abele Cook of the Eastern District of Michigan disagreed. The Michigan law “does not mandate any particular benefit structure or bind administrators to certain benefit structures,” he wrote in his ruling, which was issued last week.

In addition, the law “does not act exclusively on ERISA plans or single them out for different treatment but rather treats them the same as other entities” that make payments to health care providers, Judge Cook wrote.

The SIIA intends to appeal the ruling. “At this point, it is our intent to appeal to the 6th U.S. Circuit Court of Appeals. We believe our legal arguments are strong,” said SIIA Chief Operating Officer Michael Ferguson.

“States need to understand that they cannot disregard ERISA pre-emption without being challenged,” Mr. Ferguson added.