Appeal from the United States District Court for the Central District of California. D.C. No. CV-89-0484-JSL. J. Spencer Letts, District Judge, Presiding.
Before: Cecil F. Poole, Alex Kozinski and Edward Leavy, Circuit Judges. Opinion by Judge Kozinski.
The next worst thing to having no insurance at all is having two insurance companies cover the same claim. In the absence of consistent coordination of coverage provisions, the two companies can dissipate months, even years, wrangling with one another, while the insured and the provider of the covered services are left holding the bag. This is such a case, involving two ERISA-covered health benefit plans.
On January 1, 1988, Maria Campos gave birth to a daughter, Elizabeth. The baby was born over three months premature and spent the first five and a half months of her life in the neo-natal intensive care unit at Loma Linda University Medical Center. The medical expenses incurred during that period total $344,000.
Maria Campos and her husband Jose were covered by the employee benefit plans of their respective employers. Maria's employer provided medical benefits under a plan administered by Western Growers Assurance Trust (Western); Jose's employer provided medical benefits under a plan administered by Pacific Mutual Life Insurance Company (PM).
Each plan, standing alone, covers virtually all of the $344,000 expended in saving little Elizabeth's life. To this much everyone agrees. Yet, as of this date, nearly four years after Elizabeth's birth, only $3,840 has been paid to Loma Linda.*fn1
The district court granted PM's motion for summary judgment, basing its decision on a California insurance regulation that adopts the "birthday rule," under which the plan of the employee whose birthday comes earlier in the calendar year is primarily responsible. See 10 Cal. Admin. Code § 2232.56(d)(2). Because Maria's birthday comes earlier in the year than Jose's, and Western covers Maria, the district court held Western primarily responsible. Western appeals.
A. PM and Western are employee benefit plans and therefore subject to the Employee Retirement Income Security Act, 29 U.S.C. §§ 1001-1461 (1988) (ERISA). As we have previously noted, "ERISA contains one of the broadest preemption clauses ever enacted by Congress." Evans v. Safeco Life Ins. Co., 916 F.2d 1437, 1439 (9th Cir. 1990). The statutory language certainly supports this Conclusion: "Except as provided in subsection (b) of this section, the provisions of this subchapter . . . shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). The "saving clause" in the following subsection contains an exception: "Nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance." Id. § 1144(b)(2)(A). The "deemer clause," which immediately follows the saving clause, makes clear, however, that employee benefit plans are not to be "deemed" insurance companies "for purposes of any law of any State purporting to regulate insurance companies, [or] insurance contracts." Id. § 1144(b)(2)(B).
In FMC v. Holliday, 112 L. Ed. 2d 356, 111 S. Ct. 403 (1990), and Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 85 L. Ed. 2d 728, 105 S. Ct. 2380 (1985), the Supreme Court recognized that ERISA - specifically the interaction of the saving and deemer clauses with the general preemption clause - treats insured plans and self-funded plans differently for preemption purposes. State insurance regulation of insured plans is permissible, but state insurance regulation of self-funded plans is preempted. Holliday, 111 S. Ct. at 407-11; Metropolitan Life, 471 U.S. at 738-47.*fn2 In Holliday the Court reasoned that this distinction between insured and self-funded plans follows directly from the language of the statute. "State laws that directly regulate insurance . . . do not reach self-funded employee benefit plans because the plans may not be deemed to be insurance companies." Holliday, 111 S. Ct. at 409.
Both PM and Western are self-funded plans. They are therefore exempt from state insurance regulation under the interpretation of ERISA proffered by the Supreme Court in Holliday and Metropolitan Life. Our only remaining question is whether California's coordination of benefits provision is a state insurance regulation. No doubt it is. The provision resolves disputes between insurance companies when two of them provide coverage for the same claim, it is part of the state's insurance regulations and it was adopted from uniform language promulgated by the National Association of Insurance Commissioners (NAIC). The California insurance ...