## Facts

- Several Maryland employers sponsored self-funded employee health benefit plans governed by ERISA and used American Medical Security, Inc. as plan administrator.
- The employers purchased stop-loss insurance from United Wisconsin Life Insurance Company with an attachment point of $25,000 per employee per year.
- Maryland required insured health policies to include numerous state-mandated benefits and was concerned that low-attachment-point stop-loss coverage could be used to avoid those mandates through nominally self-funded arrangements.
- The Maryland Insurance Commissioner issued a regulation (COMAR § 9.31.02) setting a minimum attachment point for stop-loss policies issued in connection with self-funded plans.
- The employers, the administrator, and the stop-loss insurer challenged the regulation as preempted by ERISA.
- The district court granted summary judgment for plaintiffs and enjoined Maryland from enforcing the regulation to regulate or affect attachment points for stop-loss policies purchased by self-funded ERISA plans.

## Issues

1. Whether ERISA § 514(a) preempts a state insurance regulation that sets a minimum attachment point for stop-loss policies purchased by or in connection with self-funded ERISA plans.
2. Whether the regulation is saved from preemption as a law that “regulates insurance,” and, if so, whether ERISA’s deemer clause nonetheless bars its application to self-funded ERISA plans.

## Decision

- The Fourth Circuit affirmed summary judgment for plaintiffs.
- ERISA § 514(a) preempted Maryland’s attachment-point regulation as applied to stop-loss coverage purchased in connection with self-funded ERISA plans.
- The court upheld the injunction barring enforcement of the regulation to regulate or affect attachment points for stop-loss policies purchased by self-funded or self-insured ERISA plans.

## Legal Principles

- ERISA preempts state laws that “relate to” an employee benefit plan, including laws having a prohibited “reference to” or “connection with” ERISA plans.
- A state may not use regulation of insurance products as a means to dictate the benefits structure of self-funded ERISA plans.
- Even where a state law appears to regulate insurance (savings clause), the deemer clause prevents a state from treating a self-funded ERISA plan as an insurer or subjecting it to state insurance benefit mandates indirectly.
- Self-funded plans with stop-loss coverage remain obligated to pay participant benefits; stop-loss insurance reimburses the plan after payment and does not convert the plan into a fully insured arrangement subject to state benefit mandates.

## Conclusion

The Fourth Circuit held that Maryland’s minimum stop-loss attachment-point regulation was preempted by ERISA because its purpose and effect were to impose state-mandated health benefits on self-funded ERISA plans through regulation of stop-loss insurance, which ERISA’s preemption scheme and deemer clause prohibit.


Am. Med. Sec., Inc. v. Bartlett, 111 F.3d 358 (4th Cir. 1997)