The Supreme Court Tuesday ruled that federal law pre-empts most state regulations governing self-funded group insurance plans used by millions of American workers and gave federal energy regulators more power to set electricity rates for 49 million homes nationwide.
The court in effect said that uninsured employee benefit plans are not technically considered "insurance companies" for the purposes of state laws that regulate insurance, and thus are governed by the federal Employee Retirement Income Security Act of 1974 (ERISA).The case involved an appeal by FMC Corp., a Delaware-based company that operates a self-funded employee benefit plan, the FMC Salaried Health Care Plan. All funds used in the plan come directly from the company, which does not purchase insurance to provide the benefits.
Federal studies show the type of group health insurance plan used by FMC - self-funded rather than insured - covers more than 9.5 million Americans. In fact, a 1986 federal study showed more than half of all U.S. workers with health insurance belong to self-funded health funds.
In the case decided Tuesday, the court ruled that the 1974 federal law permits a company's self-funded health-care plan, which has been obliged to pay hospital bills after an accident, to collect reimbursement from money the injured member received in a separate civil lawsuit.
The case involved 15-year-old Cynthia Holliday, seriously injured in a traffic accident on Jan. 16, 1987, in White Township, Pa.
In the electricity case, by an 8-0 vote, the justices overturned a ruling that barred the Federal Energy Regulatory Commission from slashing rate hikes to customers in 15 Ohio communities.
The court, agreeing to do what FERC requested, sent the case back to a lower court for further study to determine whether the FERC orders are "just and reasonable."
At issue in today's ruling is the authority shared by FERC and the Security and Exchange Commission over public utilities and their subsidiaries.
The court said a provision of the Federal Power Act governing overlapping authority between FERC and other agencies does not bar the energy regulators from seeking to control rates in the Ohio case.
FERC said it is trying to prevent public utilities from passing on to consumers allegedly inflated costs of buying coal and possibly other goods and services from the companies' subsidiaries.
The Bush administration supported an appeal by the Ohio communities.