The Supreme Court ruled 8-0 that state laws regulating pharmacy benefit managers (PBMs) were not pre-empted by the federal Employee Retirement Income Security Act (ERISA). The substantive outcome and the reasoning on preemption could impact workers compensation issues like opioid prescription abuse and air ambulance charges.
Many states have introduced drug formularies or lists of approved drugs to limit opioid use and abuse in workers’ compensation claims. Drug formularies are run by pharmacy benefit mangers or PBMs which make their money negotiating discounts between drug companies and drug dispensaries. Critics of PBMs argue that their business encourages higher drug prices so they can make more money on the supposed discount.
One Ohio workers’ compensation official stated that a PBM was “hosing” the state of Ohio with high costs in their drug formulary. The new Supreme Court decision could encourage states to adopt formularies in workers’ compensation without having to worry about unfair drug prices.
I emailed fellow workers compensation Jon blogger, Jon Gelman, that I was semi-pleasantly surprised about the decision on PBMs. My feeling that the federal rock of preemption will usually crush the state scissor of state workers’ compensation laws is a common feeling in the plaintiff’s bar. But Justice Sotomayor’s no-nonsense opinion in the Rutledge case, indicated that the supposedly broad pre-emptive effect of ERISA isn’t as broad as commonly believed.
Air ambulance charges
The Rutledge decision gives me some hope about another conflict between federal law and state workers’ compensation law – air ambulance billing. The issue with air ambulance billing poses the federal governments right to regulate air travel charges through the Airline Deregulation Act (ADA) against the right of a state to regulate insurance charges. The issue is important because of the high cost of air ambulances.
Federal and state courts have almost uniformly held that the federal law on air travel preempts state law on what air ambulance providers can charge. But the Supreme Court has used the preemption language in ERISA as a model for interpreting airline deregulation law.
The Supreme Court may soon take up the issue of whether state regulation of air ambulance charges is preempted by federal law. The air ambulance industry has filed an appeal with the Supreme Court asking to overturn a Texas state supreme court decision that held that state laws regulating air ambulance charges was not preempted by federal law. Since there is now a conflict between jurisdictions involving a large state like Texas, the Supreme Court may take up the issue.
One interesting fact about Texas workers’ compensation law is that they do not fee schedule air ambulance charges. The Texas Supreme Court used that fact to distinguish their decision from other decisions involving state laws that were preempted because of a fee schedule. Personally, I think if Texas won in the Supreme Court because of the fee schedule issue, that would be a hollow victory. I believe the use of fee schedules benefits workers because it keeps disputes between payors and medical providers out of court.
Workers’ compensation laws are commonly regarded as insurance laws, so there is a strong argument that they should not be preempted under the McCarran- Ferguson Act. That law holds that insurance regulation is a state concern. McCarran-Ferguson is often referred to as “reverse preemption” law . A concurring opinion in the Texas Supreme Court air ambulance discussed McCarran-Ferguson in depth. However, the dissenting opinion in the case held that workers’ compensation was not a law regarding insurance but a law that regulates the relationship between the employee and employer. If the Supreme Court takes up the Texas appeal, it may answer the question of whether workers’ compensation is a law about insurance or the workplace relations? In doing so, it may jolt some long-held assumptions about workers’ compensation.