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Metropolitan Life Insurance Co. v. Massachusetts

Supreme Court of United States
471 U.S. 724 (1985)
ELI5:

Rule of Law:

A state law mandating that insurance policies provide specific minimum health benefits is a law that "regulates insurance" and is therefore saved from preemption by the Employee Retirement Income Security Act (ERISA). Such a law, when it establishes a minimum labor standard of general applicability, is also not preempted by the National Labor Relations Act (NLRA).


Facts:

  • The Commonwealth of Massachusetts enacted a statute, § 47B, requiring that any general health insurance policy providing hospital and surgical coverage to a Massachusetts resident also include specified minimum benefits for mental-health care.
  • The law was designed to protect working people from high treatment costs, encourage more effective outpatient treatment, and correct for "adverse selection" in the voluntary insurance market.
  • Metropolitan Life Insurance Company and Travelers Insurance Company are out-of-state insurers that issue group health policies to employee benefit plans, employers, and unions with employees residing in Massachusetts.
  • These insurers issued policies that covered hospital and surgical expenses for Massachusetts residents but failed to include the minimum mental-health benefits mandated by § 47B.
  • The insurers believed they were not bound by § 47B for policies issued to ERISA-regulated employee benefit plans or plans negotiated under collective bargaining agreements, arguing that the state law was preempted by federal law.

Procedural Posture:

  • The Attorney General of Massachusetts sued Metropolitan Life and Travelers Insurance in Massachusetts Superior Court (a trial court) to enforce § 47B.
  • The Superior Court issued a preliminary injunction and later a permanent injunction requiring the insurers to comply with the law.
  • The insurers applied for direct appellate review to the Supreme Judicial Court of Massachusetts (the state's highest court).
  • The Supreme Judicial Court affirmed the trial court's judgment, holding that the law was not preempted by either ERISA or the NLRA.
  • The insurers appealed to the U.S. Supreme Court, which vacated the judgment and remanded for reconsideration in light of Shaw v. Delta Air Lines, Inc.
  • On remand, the Supreme Judicial Court of Massachusetts reinstated its prior judgment, again finding no preemption.
  • The insurers (appellants) again appealed to the U.S. Supreme Court, which noted probable jurisdiction.

Locked

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Issue:

Does the Employee Retirement Income Security Act of 1974 (ERISA) or the National Labor Relations Act (NLRA) preempt a state law that requires minimum mental-health benefits to be included in general health insurance policies sold to employee benefit plans?


Opinions:

Majority - Justice Blackmun

No, neither ERISA nor the NLRA preempts the Massachusetts mandated-benefit law. The law is saved from ERISA preemption because it is a state law that 'regulates insurance' under ERISA's saving clause, § 514(b)(2)(A). Although the law relates to employee benefit plans and falls under ERISA's broad general preemption clause, the saving clause explicitly exempts state laws regulating insurance. Mandated-benefit laws are a traditional form of insurance regulation that dictates the terms of the insurance contract and spreads policyholder risk, fitting squarely within the McCarran-Ferguson Act's definition of the 'business of insurance.' The law is not preempted by the NLRA because it establishes a minimum labor standard that affects union and non-union employees equally and does not interfere with the collective bargaining process itself. The NLRA is concerned with establishing a fair process for bargaining, not with preventing states from enacting minimum health and safety protections of general applicability.



Analysis:

This decision significantly clarifies the scope of ERISA's insurance saving clause, establishing that states retain substantial authority to regulate the substantive content of insurance policies sold to ERISA plans. It creates a critical distinction between insured plans, which are subject to such state mandates, and self-funded plans, which are exempt under the 'deemer clause.' This has led to a dual regulatory system where the applicability of state health insurance law depends on how an employer chooses to fund its benefit plan, impacting national employers' ability to maintain uniform benefit packages. The NLRA analysis reinforces the principle that federal labor law does not occupy the entire field of labor standards, preserving states' police power to set minimum terms of employment for the health and welfare of all workers.

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