On Appeal from the United States District Court for the Middle District of Pennsylvania, D.C. Civil Action No. 85-0930.
Higginbotham and Stapleton, Circuit Judges, and Rodriguez, District Judge.*fn*
A. LEON HIGGINBOTHAM, Jr., Circuit Judge.
This is an appeal from a grant of summary judgment for appellee in a declaratory judgment action. On June 2, 1986, 635 F. Supp. 1425, the United States District Court for the Middle District of Pennsylvania denied appellants' motion to reconsider filed pursuant to Fed. R. Civ. P. 59(e) and affirmed its February 28, 1986 order that concluded that certain agreements between Pennsylvania Blue Cross and Blue Shield (collectively "the Blues") and the Insurance Board under the Social Insurance Plan of Bethlehem Steel Corporation and Subsidiaries ("Board") were subject to regulation by the Pennsylvania Department of Insurance. The district court reached this conclusion notwithstanding the fact that the agreements were entered into as part of the Social Insurance Plan of Bethlehem Steel Corporation and Subsidiary Companies ("Plan") under the Employee and Retirement and Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. (1982). Because we find that the district court's legal analysis of ERISA's effect on the agreements was flawed, we will reverse and direct the district court to grant appellants the declaratory judgment they sought.
The affidavits and pleadings filed in this action indicate the following. The Plan provides several welfare and health programs for Bethlehem Steel and its Subsidiary Corporations, including the Comprehensive Medical Program for the benefit of certain employees and pensioners, the Program of Insurance Benefits for Hourly Paid Employees, and the Program of Hospital and Medical/Surgical Benefits for Eligible Pensioners and Surviving Spouses. The Board administers the Plan, but does so in a manner which is challenged by the appellee in this suit. The Board's contracts with the Blues require each to process participants' claims under the aforementioned programs. Plan participants receive Blue Cross or Blue Shield benefits and claim forms, which are processed by the staff of Blue Cross or Blue Shield in accordance with regular office procedures. Blue Cross and Blue Shield also make initial determinations as to coverage under the Plan. Further, when participants' claims are determined to be valid, Blue Cross or Blue Shield pays participants directly. For purposes of reimbursing the Blues for such payments, the Board advances monthly payments to each equal to the anticipated amount of claims. Each advance monthly payment is based on the amount paid for claims in the second preceding month. The advance payments are to be submitted by the first of each month and if either of the Blues do not receive a payment by the fifth of the month, the unpaid entity or entities are no longer required to process or pay claims and are not obligated to pay claims fully processed at the time of the Board's non-payment. In addition to the advance payment based on previous claims, the Board advances an administrative fee based on the number and type of plan participants.*fn1 This fee is to be paid on the twentieth of the month preceding the month for which the advance is made.
At the end of each period, each of the Blues prepares a settlement. If the amount of claims paid exceeds the Board's advances to either of the Blues, the Board must pay the difference to the appropriate entity within thirty days of notification. If the advance payments exceed the claims paid by either of the Blues, the appropriate entity must remit the difference to the Board. This reconciliation of payments occurs even if the contract is terminated in the middle of a period.
The original action in the district court was prompted by a letter, dated June 6, 1985, sent by the Department of Insurance to the Board. In the letter the Department stated it believed that the Program of Insurance Benefits for Hourly Paid Employees did not comply with certain Pennsylvania mandated-benefits laws.*fn2 After the Board received the letter, appellants*fn3 brought suit in the United States District Court for the Middle District of Pennsylvania, seeking a declaratory judgment that ERISA preempted Pennsylvania insurance law. The district court granted summary judgment for appellee because it concluded that the Blues were engaged in the business of insurance and therefore subject to state regulation under ERISA. Affirming its earlier judgment, the district court later denied appellants' motion to alter or amend judgment. This appeal followed.
Appellants contend that ERISA, as a comprehensive federal regulatory scheme, preempts Pennsylvania's mandatory benefit and provider laws. Appellants argue that therefore the Department of Insurance may not attempt to enforce those laws as they apply to the Program of Insurance Benefits for Hourly Paid Employees. Appellees assert in response that ERISA does not preclude application of Pennsylvania's mandatory benefit and provider laws here because appellants have essentially purchased an insurance policy from a professional insurer which is, under Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 105 S. Ct. 2380, 85 L. Ed. 2d 728 (1985), subject to state insurance regulation laws. We now resolve these conflicting assertions. Since our consideration of the district court's grant of summary judgment involves only a question of law, our standard of review is plenary. See Fed'n of Westhinghouse Indep. Salaried Unions v. Westinghouse Elec. Corp., 736 F.2d 896 (3rd Cir. 1984).
In Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 105 S. Ct. 2380, 85 L. Ed. 2d 728 (1985), the Massachusetts Attorney General brought an action against an insurer to enforce Massachusetts Gen. Laws. Ann., ch. 175, § 47B (West Supp. 1985), which required health insurance policies, and any benefit plans that incorporated such policies, to provide a certain minimum of mental health protection if such policies or plans provided hospital and surgical coverage.*fn4 The insurer maintained that ERISA precluded the application of state mandated-benefit laws to insurance policies purchased by employee-health care plans regulated by ERISA. After rulings by the Massachusetts Superior Court and The Massachusetts Supreme Judicial Court, the United States Supreme Court on appeal rejected the insurer's assertion. The Court first noted that federal law provided that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 105 S. Ct. at 2385. The Court went on to note, however, that this broad preemption provision of ERISA was qualified by an "insurance saving clause," which provided that no ERISA provision "shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities." Id. at 2385-86. The Court further noted that the insurance saving clause, which qualified the preemption provision, was itself qualified the preemption provision, was itself qualified by a "deemer clause," which provided that no employee benefit plan of the type at issue:
shall be deemed to be an insurance company or other insurer, bank, trust company, or investment company or to be engaged in the business of insurance or banking for purposes of any law of any State purporting to regulate insurance companies, ...