ORDER DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND GRANTING DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT
Presently before this Court is Plaintiff's motion for summary judgment and Defendant's cross-motion for summary judgment. Having read and considered all matters submitted in connection with these motions, the Court hereby DENIES Plaintiff's motion for summary judgment and GRANTS Defendant's cross-motion for summary judgment.
Plaintiff seeks a declaratory judgment to establish that a state law governing reimbursement to the state Medicaid program by an ERISA-governed benefit plan overrides the claim submission time limit imposed by the benefit plan. Jurisdiction is proper under 28 U.S.C. § 1331 and 29 U.S.C. § 1132(a)(1)(B).
The action is brought by the director of the Department of Health and Human Services (hereinafter "DHS") of the State of California against the Laborers Health and Welfare Trust Fund for Northern California (hereinafter "Laborers"). DHS administers Medi-Cal, which is the state Medicaid program. Laborers is an "employee welfare benefit plan," as defined by 29 U.S.C. § 1002(1), which was organized through collective bargaining.
As a condition of federal funding, state Medicaid agencies must provide for mandatory assignment of rights of payment for medical care owed to recipients under a third party health plan. 42 U.S.C. §§ 1396a(a)(45), 1396k(a)(1)(A). State Medicaid agencies must also submit a plan for pursuing claims against such third parties. 42 U.S.C. § 1396a (25)(A)(ii). California has implemented these requirements into state law. Cal. Welf. & Inst. Code §§ 10022, 10024, 14023 and 14024.
The state law at issue in the instant matter is California Welfare and Institutions Code Section 10022, which provides that Medi-Cal shall be entitled to the subrogation rights of a Medi-Cal beneficiary under a third party health care plan. The statute further provides that an action to enforce this right may be brought within three years from the date medical service was rendered to the beneficiary.
The Laborers benefit plan requires claims to be submitted no later than one year after the date of service. For various reasons, Medi-Cal does not always ascertain within one year of service whether a Medi-Cal beneficiary has rights under a third party health care plan that Medi-Cal is entitled to by subrogation. For more than three years prior to the filing of this action, DHS has submitted claims to Laborers within three years after services were provided to Laborers beneficiaries, but after Laborers' one-year claim submission deadline had passed. Laborers has denied such demands for reimbursement as untimely.
DHS seeks a declaratory judgment that establishes that California Welfare and Institutions Code Section 10022 authorizes DHS to submit claims to Laborers for up to three years after medical service is rendered to a Laborers beneficiary. Laborers in turn seeks a judgment that Section 10022 does not literally or impliedly preclude the application of a benefit plan's claim submission time limits, and that ERISA Section 514(a)
preempts DHS's attempt to override the internal claims processing provisions of Laborers' plan.
The parties have brought their motions for summary judgment so that the Court may now resolve the disputed legal issues before it. Both parties agree that no factual issues are in dispute, and that this action may be appropriately resolved at this time by summary judgment.
A. Legal Standard
The Employee Retirement Income Security Act of 1974 ("ERISA") was designed to protect the interests of employees and their beneficiaries in employee benefit plans. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90, 103 S. Ct. 2890, 77 L. Ed. 2d 490 (1983). ERISA's comprehensive regulatory scheme was intended to establish the regulation of benefit plans as "exclusively a federal concern." Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46, 95 L. Ed. 2d 39, 107 S. Ct. 1549 (1987). In order to maintain federal control over benefit plan regulation, ERISA contains a "very broad preemption clause." Hydrostorage, Inc. v. Northern Cal. Boilermakers, 891 F.2d 719, 726 (9th Cir. 1989), cert. denied, 498 U.S. 822 (1990).
ERISA section 514(a) states that "Except as provided in subsection (b) of this section," ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title . . . ." 29 U.S.C. § 1144 (a). A law "relates to" an employee benefit plan if it "has a connection with or reference to such a plan." Shaw, 463 U.S. at 97.
ERISA's broad preemption of state laws is qualified by ERISA section 514(b)(2)(A), the so-called "saving clause" or "savings clause": "Except as provided in subparagraph (B) [section 514(b)(2)(B)], nothing in this subchapter shall be construed to except or relieve any person from any law of any State which regulates insurance, banking, or securities." 29 U.S.C. § 1144(b)(2)(A).
The Supreme Court has noted that ERISA's preemption provisions "perhaps are not a model of legislative drafting," in that the savings clause appears to return to the states much of the power taken away by § 514(a). Metropolitan Life Ins. Co. v. Mass., 471 U.S. 724, 739-40, 85 L. Ed. 2d 728, 105 S. Ct. 2380 (1985). To further complicate matters, the savings clause is in turn qualified by section 514(b)(2)(B), known as the "deemer clause," which states that no employee benefit plan "shall be deemed to be an insurance company or other insurer . . . or to be engaged in the business of insurance or banking for purposes of any law of any State purporting to regulate insurance companies, insurance contracts, banks, trust companies, or investment companies." 29 U.S.C. § 1144(b)(2)(B).
A recent Supreme Court case interpreted the deemer clause to make a distinction between self-funded ERISA plans and insured ERISA plans,
excluding self-funded plans from the reach of the saving clause because such plans may not be deemed to be insurance companies under the deemer clause. FMC Corp. v. Holliday, 498 U.S. 52, 61, 112 L. Ed. 2d 356, 111 S. Ct. 403 (1990). State laws directed toward self-funded plans are thus preempted "because they relate to an employee benefit plan but are not 'saved' because they do not regulate insurance." Id. State laws that directly regulate insurance are "saved," but do not reach self-funded plans because such plans may not be deemed to be insurance companies. Id. Applying this distinction, the Court held that a state antisubrogation law was saved from preemption by the saving clause, but that a self-funded health care plan was exempt from the regulation under the deemer clause. Id. at 60-61.
Unfortunately, the subject of ERISA preemption does not end here. Two further provisions of ERISA § 514 arguably apply to the instant motion. The first is § 514(b)(8):
Subsection (a) of this section shall not be construed to preclude any State cause of action --