A New York statute requires hospitals to collect surcharges from patients covered by a commercial insurer but not from patients insured by a Blue Cross/Blue Shield plan, and it subjects certain health maintenance organizations (HMO's) to surcharges that vary with the number of Medicaid recipients each enrolls. N. Y. Pub. Health Law § 2807—c (McKinney 1993). These cases call for us to decide whether the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended, 29 U. S. C. § 1001 et seq. (1988 ed. and Supp. V), pre-empts the state provisions for surcharges on bills of patients whose commercial insurance coverage is purchased by employee health-care plans governed by ERISA, and for surcharges on HMO's insofar as their membership fees are paid by an ERISA plan. We hold that the provisions for surcharges do not "relate to" employee benefit plans within the meaning of ERISA's preemption provision, § 514(a), 29 U. S. C. § 1144(a), and accordingly suffer no pre-emption.
New York's Prospective Hospital Reimbursement Methodology (NYPHRM) regulates hospital rates for all in-patient care, except for services provided to Medicare beneficiaries.
Patients with Blue Cross/Blue Shield coverage, Medicaid patients, and HMO participants are billed at a hospital's DRG rate. N. Y. Pub. Health Law § 2807—c(1)(a); see also Brief for Petitioners Pataki et al. 4.
New York law also imposes a surcharge on HMO's, which varies depending on the number of eligible Medicaid recipients an HMO has enrolled, but which may run as high as 9% of the aggregate monthly charges paid by an HMO for its members' in-patient hospital care. §§ 2807—c(2—a)(a) to (2—a)(e). This assessment is not an increase in the rates to be paid by an HMO to hospitals, but a direct payment by the HMO to the State's general fund.
ERISA's comprehensive regulation of employee welfare and pension benefit plans extends to those that provide "medical, surgical, or hospital care or benefits" for plan participants
Section 514(a) provides that ERISA "shall supersede any and all State laws insofar as they . . . relate to any employee benefit plan" covered by the statute, 29 U. S. C. § 1144(a), although pre-emption stops short of "any law of any State which regulates insurance." § 514(b)(2)(A), 29 U. S. C. § 1144(b)(2)(A). (This exception for insurance regulation is itself limited, however, by the provision that an employee welfare benefit plan may not "be deemed to be an insurance company or other insurer . . . or to be engaged in the business of insurance . . . ." § 514(b)(2)(B), 29 U. S. C. § 1144(b)(2)(B).) Finally, ERISA saves from pre-emption "any generally applicable criminal law of a State." § 514(b)(4), 29 U. S. C. § 1144(b)(4).
On the claimed authority of ERISA's general pre-emption provision, several commercial insurers, acting as fiduciaries of ERISA plans they administer, joined with their trade associations to bring actions against state officials in United States District Court seeking to invalidate the 13%, 11%, and
Our past cases have recognized that the Supremacy Clause, U. S. Const., Art. VI, may entail pre-emption of state law either by express provision, by implication, or by a conflict between federal and state law. See Pacific Gas & Elec. Co. v. State Energy Resources Conservation and Development Comm'n, 461 U.S. 190, 203-204 (1983); Rice v. Santa Fe Elevator Corp. , 331 U.S. 218, 230 (1947). And yet, despite the variety of these opportunities for federal preeminence, we have never assumed lightly that Congress has derogated state regulation, but instead have addressed claims of pre-emption with the starting presumption that Congress does not intend to supplant state law. See Maryland v.
Since pre-emption claims turn on Congress's intent, Cipollone, supra, at 516; Shaw, supra, at 95, we begin as we do in any exercise of statutory construction with the text of the provision in question, and move on, as need be, to the structure and purpose of the Act in which it occurs. See, e. g., Ingersoll-Rand, supra, at 138. The governing text of ERISA is clearly expansive. Section 514(a) marks for preemption "all state laws insofar as they . . .relate to any employee benefit plan" covered by ERISA, and one might be excused for wondering, at first blush, whether the words of limitation ("insofar as they . . . relate") do much limiting. If "relate to" were taken to extend to the furthest stretch of its indeterminacy, then for all practical purposes pre-emption would never run its course, for "[r]eally, universally, relations stop nowhere," H. James, Roderick Hudson xli (New York ed., World's Classics 1980). But that, of course, would be to read Congress's words of limitation as mere sham, and to read the presumption against pre-emption out of the law whenever Congress speaks to the matter with generality. That said, we have to recognize that our prior attempt to construe the phrase "relate to" does not give us much help drawing the line here.
As we have said before, § 514 indicates Congress's intent to establish the regulation of employee welfare benefit plans "as exclusively a federal concern." Alessi v. RaybestosManhattan, Inc., 451 U.S. 504, 523 (1981). We have found that in passing § 514(a), Congress intended
This objective was described in the House of Representatives by a sponsor of the Act, Representative Dent, as being to "eliminat[e] the threat of conflicting and inconsistent State and local regulation." 120 Cong. Rec. 29197 (1974). Senator Williams made the same point, that "with the narrow exceptions specified in the bill, the substantive and enforcement provisions . . . are intended to preempt the field for Federal regulations, thus eliminating the threat of conflicting or inconsistent State and local regulation of employee benefit plans." Id., at 29933. The basic thrust of the pre-emption clause, then, was to avoid a multiplicity of regulation in order to permit the nationally uniform administration of employee benefit plans.
Accordingly in Shaw, for example, we had no trouble finding that New York's "Human Rights Law, which prohibit[ed] employers from structuring their employee benefit plans in a manner that discriminate[d] on the basis of pregnancy, and [New York's] Disability Benefits Law, which require[d] employers to pay employees specific benefits, clearly `relate[d] to' benefit plans." 463 U. S., at 97. These mandates affecting coverage could have been honored only by varying the subjects of a plan's benefits whenever New York law might have applied, or by requiring every plan to provide all beneficiaries with a benefit demanded by New York law if New York law could have been said to require it for any one beneficiary. Similarly, Pennsylvania's law that prohibited "plans from . . . requiring reimbursement [from the beneficiary] in the event of recovery from a third party" related to employee benefit plans within the meaning of § 514(a). FMC Corp. v. Holliday, 498 U.S. 52, 60 (1990). The law "prohibit[ed] plans from being structured in a manner requiring reimbursement in the event of recovery from a third party" and "require[d] plan providers to calculate benefit levels in
Both the purpose and the effects of the New York surcharge statute distinguish it from the examples just given. The charge differentials have been justified on the ground that the Blues pay the hospitals promptly and efficiently and, more importantly, provide coverage for many subscribers whom the commercial insurers would reject as unacceptable risks. The Blues' practice, called open enrollment, has consistently been cited as the principal reason for charge differentials, whether the differentials resulted from voluntary negotiation between hospitals and payers as was the case prior to the NYPHRM system, or were created by the surcharges as is the case now. See, e. g., Charge Differential Analysis Committee, New York State Hospital Review and Planning Council, Report (1989), reprinted in Joint Appendix in No. 93-7132 (CA2), pp. 702, 705, 706 (J. A. CA2); J. Corcoran,
An indirect economic influence, however, does not bind plan administrators to any particular choice and thus function as a regulation of an ERISA plan itself; commercial insurers and HMO's may still offer more attractive packages
There is, indeed, nothing remarkable about surcharges on hospital bills, or their effects on overall cost to the plans and the relative attractiveness of certain insurers. Rate variations among hospital providers are accepted examples of cost variation, since hospitals have traditionally "attempted to compensate for their financial shortfalls by adjusting their price . . . schedules for patients with commercial health insurance." Thorpe, 12 J. Health Politics, Policy, & Law, at 394. Charge differentials for commercial insurers, even prior to state regulation, "varied dramatically across regions, ranging from 13 to 36 percent," presumably reflecting the geographically disparate burdens of providing for the uninsured. Id., at 400; see id., at 398-399; see also, e. g., Trussell 170 (J. A. CA2, at 664); Bobinski, Unhealthy Federalism: Barriers to Increasing Health Care Access for the Uninsured, 24 U. C. D. L. Rev. 255, 267, and n. 44 (1990).
If the common character of rate differentials even in the absence of state action renders it unlikely that ERISA preemption was meant to bar such indirect economic influences under state law, the existence of other common state action with indirect economic effects on a plan's costs leaves the intent to pre-empt even less likely. Quality standards, for example, set by the State in one subject area of hospital services but not another would affect the relative cost of providing those services over others and, so, of providing different packages of health insurance benefits. Even basic regulation of employment conditions will invariably affect the cost and price of services.
Indeed, to read the pre-emption provision as displacing all state laws affecting costs and charges on the theory that they indirectly relate to ERISA plans that purchase insurance policies or HMO memberships that would cover such services would effectively read the limiting language in § 514(a) out of the statute, a conclusion that would violate basic principles of statutory interpretation and could not be squared with our prior pronouncement that "[p]re-emption does not occur . . . if the state law has only a tenuous, remote, or peripheral connection with covered plans, as is the case with many laws of general applicability." District of Columbia v. Greater Washington Bd. of Trade, 506 U. S., at 130, n. 1 (internal quotation marks and citations omitted). While Congress's extension of pre-emption to all "state laws relating to benefit plans" was meant to sweep more broadly than "state laws dealing with the subject matters covered by ERISA[,] reporting, disclosure, fiduciary responsibility, and the like," Shaw, 463 U. S., at 98, and n. 19, nothing in the language of the Act or the context of its passage indicates that Congress chose to displace general health care regulation, which historically has been a matter of local concern, see Hillsborough County v. Automated Medical Laboratories, Inc., 471 U. S., at 719; 1 B. Furrow, T. Greaney,
In sum, cost uniformity was almost certainly not an object of pre-emption, just as laws with only an indirect economic effect on the relative costs of various health insurance packages in a given State are a far cry from those "conflicting directives" from which Congress meant to insulate ERISA plans. See 498 U. S., at 142. Such state laws leave plan administrators right where they would be in any case, with the responsibility to choose the best overall coverage for the money. We therefore conclude that such state laws do not bear the requisite "connection with" ERISA plans to trigger pre-emption.
This conclusion is confirmed by our decision in Mackey v. Lanier Collection Agency & Service, Inc., 486 U.S. 825 (1988), which held that ERISA pre-emption falls short of barring application of a general state garnishment statute to participants' benefits in the hands of an ERISA welfare benefit plan. We took no issue with the argument of the Mackey plan's trustees that garnishment would impose administrative costs and burdens upon benefit plans, id., at 831, but concluded from the text and structure of ERISA's preemption and enforcement provisions that "Congress did not intend to forbid the use of state-law mechanisms of executing judgments against ERISA welfare benefit plans, even when those mechanisms prevent plan participants from receiving their benefits." Id., at 831-832. If a law authorizing an indirect source of administrative cost is not pre-empted, it should follow that a law operating as an indirect source of merely economic influence on administrative decisions, as here, should not suffice to trigger pre-emption either.
The commercial challengers counter by invoking the earlier case of Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724 (1985), which considered whether a State could mandate coverage of specified minimum mental-health-care
The Massachusetts statute applied not only to "`[a]ny blanket or general policy of insurance . . . or any policy of accident and sickness insurance' " but also to "`any employees' health and welfare fund which provide[d] hospital expense and surgical expense benefits.' " 471 U. S., at 730, n. 11. In fact, the State did not even try to defend its law as unrelated to employee benefit plans for the purpose of § 514(a). Id., at 739. As a result, there was no reason to distinguish with any precision between the effects on insurers that are sufficiently connected with employee benefit plans to "relate to" the plans and those effects that are not. It was enough to address the distinction bluntly, saying on the one hand that laws like the one in Metropolitan Life relate to plans since they "bea[r] indirectly but substantially on all insured benefit plans, . . . requir[ing] them to purchase the mental-health benefits specified in the statute when they purchase a certain kind of common insurance policy," ibid., but saying on the other that "laws that regulate only the insurer, or the way in which it may sell insurance, do not `relate to' benefit plans," id., at 741. Even this basic distinction recognizes that not all regulations that would influence the cost of insurance would relate to employee benefit plans within the meaning of § 514(a). If, for example, a State were to regulate sales of insurance by commercial insurers more stringently
In any event, Metropolitan Life cannot carry the weight the commercial insurers would place on it. The New York surcharges do not impose the kind of substantive coverage requirement binding plan administrators that was at issue in Metropolitan Life. Although even in the absence of mandated coverage there might be a point at which an exorbitant tax leaving consumers with a Hobson's choice would be treated as imposing a substantive mandate, no showing has been made here that the surcharges are so prohibitive as to force all health insurance consumers to contract with the Blues. As they currently stand, the surcharges do not require plans to deal with only one insurer, or to insure against an entire category of illnesses they might otherwise choose to leave without coverage.
It remains only to speak further on a point already raised, that any conclusion other than the one we draw would bar any state regulation of hospital costs. The basic DRG system (even without any surcharge), like any other interference with the hospital services market, would fall on a theory that all laws with indirect economic effects on ERISA
Even more revealing is the National Health Planning and Resources Development Act of 1974 (NHPRDA), Pub. L. 93— 641, 88 Stat. 2225, §§ 1-3, repealed by Pub. L. 99-660, title VII, § 701(a), 100 Stat. 3799, which was adopted by the same Congress that passed ERISA, and only months later. The NHPRDA sought to encourage and help fund state responses to growing health care costs and the widely diverging availability of health services. § 2, 88 Stat. 2226-2227; see generally National Gerimedical Hospital and Gerontology Center v. Blue Cross of Kansas City, 452 U.S. 378, 383-388 (1981). It provided for the organization and partial funding of regional "health systems agencies" responsible for gathering data as well as for planning and developing health resources in designated health service areas. 88 Stat. 2229-2242. The scheme called for designating state health planning and
The Secretary was required to provide technical assistance to the designated agencies by promulgating "[a] uniform system for calculating rates to be charged to health insurers and other health institutions payors by health service institutions." Id., at 2254. Although the NHPRDA placed substantive restrictions on the system the Secretary could establish, the subject matter (and therefore the scope of envisioned state regulation) covers the same ground that New York's surcharges tread. The Secretary's system was supposed to:
The last-quoted subsection seems to envision a system very much like the one New York put in place, but the significant point in any event is that the statute's provision for comprehensive aid to state health care rate regulation is simply incompatible with pre-emption of the same by ERISA. To interpret ERISA's pre-emption provision as broadly as respondents suggest would have rendered the entire NHPRDA utterly nugatory, since it would have left States without the authority to do just what Congress was expressly trying to induce them to do by enacting the NHPRDA. Given that the NHPRDA was enacted after ERISA and by the same Congress, it just makes good sense to reject such an interpretation.
That said, we do not hold today that ERISA pre-empts only direct regulation of ERISA plans, nor could we do that with fidelity to the views expressed in our prior opinions on the matter. See, e. g., Ingersoll-Rand, 498 U. S., at 139; Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47-48 (1987); Shaw, 463 U. S., at 98. We acknowledge that a state law might produce such acute, albeit indirect, economic effects, by intent or otherwise, as to force an ERISA plan to adopt a certain scheme of substantive coverage or effectively restrict its choice of insurers, and that such a state law might indeed be pre-empted under § 514. But as we have shown, New York's surcharges do not fall into either category; they affect only indirectly the relative prices of insurance policies, a result no different from myriad state laws in areas traditionally subject to local regulation, which Congress could not possibly have intended to eliminate.
The judgment of the Court of Appeals is therefore reversed, and the cases are remanded for further proceedings consistent with this opinion.
It is so ordered.
Briefs of amici curiae urging affirmance were filed for the Association of Private Pension and Welfare Plans et al. by Edward R. Mackiewicz; for Group Health Association of America, Inc., by Alan J. Davis and Brian D. Pedrow; for the Federation of American Health Systems by Carl Weissburg and Robert E. Goldstein; for the National Carriers' Conference Committee by Benjamin W. Boley, David P. Lee, and William H. Dempsey; for the National Coordinating Committee for Multiemployer Plans by Gerald M. Feder and Diana L. S. Peters; for the NYSA—ILA Welfare Fund et al. by C. Peter Lambos, Donato Caruso, Thomas W. Gleason, Ernest L. Mathews, Jr., and Kevin Marrinan; and for the Trustees of and the Pension Hospitalization Benefit Plan of the Electrical Industry et al. by Edward J. Groarke.
Briefs of amici curiae were filed for the International Foundation of Employee Benefit Plans by Paul J. Ondrasik, Jr., and Sara E. Hauptfuehrer; and for the Self-Insurance Institute of America, Inc., by George J. Pantos.
Nor do we address the surcharge statute insofar as it applies to selfinsured funds. The trial court's ERISA analysis originally led it to enjoin defendants "from enforcing those surcharges against any commercial insurers or HMOs in connection with their coverage of . . . ERISA plans," without any further mention of self-insured funds. 813 F. Supp., at 1012. After staying its decision as to the 13% surcharge pending appeal, see id., at 1012-1015, it ordered all named parties, including the Travelers Insurance Company (which served as fiduciary to a self-insured plan), to pay that surcharge whenever required by state law, see Travelers Ins. Co. v. New York State Health Maintenance Conference, No. 92 Civ. 3999 (SDNY Apr. 27, 1993), reprinted in Brief for National Carriers' Conference Committee as Amicus Curiae 29a—31a. The Court of Appeals, in turn, did not expressly address this application of the surcharge and, accordingly, we leave it for consideration on remand.