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)
MARK ALLAN CELENTANO, )
HMA MGU, LLC, )
NEW ENGLAND CUSTOM HEALTH PLAN )
ADMINISTRATORS, LLC, AND )
JEDEDIAH L. BRETTSCHNEIDER )
Plaintiffs, )
)
v. ) CIVIL ACTION
) NO. 09-11112-DPW
COMMISSIONER OF THE )
MASSACHUSETTS DIVISION OF )
INSURANCE, )
Defendant. )
)
Younger v. Harris, 401 U.S. 37, 45-47 (1971). I will grant the
motion to dismiss.
I. FACTUAL BACKGROUND
GEN. LAWS ch. 175, § 162H, et seq. Plaintiff New England Custom
insurance producer.
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1
Self-funded employee benefit plans are those in which the
employer bears the risk of paying claims, and generally a third-
party plan administrator is hired to process and pay claims. In
fully-insured employee benefit plans, the employer purchases
commercial group health coverage from an insurance company,
which, in turn, assumes the risk of paying claims.
2
Claims 1 through 25 of the Order to Show Cause arise out
of allegations that Brettschneider failed to disclose a felony
conviction to the Division when he applied for a Massachusetts
insurance license. These claims are not the subject of the
Plaintiffs’ complaint or the motion for preliminary injunction.
Rather the Plaintiffs only dispute the Division’s investigation
and adjudication of Claims 26 though 33 regarding the Plaintiffs’
alleged HIPAA violation. Accordingly, this Memorandum only
addresses the issues presented with respect to the latter set of
claims.
3
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under state law, and order the Plaintiffs to cease and desist
ERISA. In a letter dated April 30, 2009, the DOL reported that
HMA Direct “has been selected for review by this office,” and,
3
Around the same time that the Division filed the Show-
Cause Order, a “consumer alert” was posted on the Division’s
website warning employers about “the risks in self-funded health
plans.” See Massachusetts Division of Insurance – Consumer
Alert: Beware of the Risks in Self-Funded Health Plans,
http://www.mass.gov/?pageID=ocaterminal&L=4&L0=
Home&L1=Consumer&L2=Insurance&L3=Consumer+Alerts&sid=Eoca&b=termi
nalcontent&f=advisories_selffunded&csid=Eoca (last visited Feb.
2, 2010).
4
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these ERISA and HIPAA related issues. On the same day, the
the relief they seek, Plaintiffs argue that ERISA contains “broad
that Younger and its progeny direct this court to abstain from
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II. DISCUSSION
health plans are subject neither to state insurance laws nor the
6
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principles.
the extent “any and all State laws . . . relate to any employee
construed “to exempt or relieve any person from any law of any
4
Part 7 of ERISA also contains its own preemption
provision, but the Plaintiffs do not appear to argue that this
particular preemption provision was separately or distinctively
triggered by the Division’s Order to Show Cause. See 29 U.S.C. §
1191(a) (preempting state law only to the extent that the law
“prevents the application of a requirement of this part”).
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Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 371 n.6 (2002).
supplant state law.” New York State Conference of Blue Cross &
Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 654-55
(citations omitted).
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Miller, 538 U.S. 329, 336 n.1 (2003). In order for a state law
clause, it must satisfy two requirements: (1) “the state law must
and (2) “the state law must substantially affect the risk pooling
5
The Plaintiffs argue that they are not insurance companies
but “service providers,” such that their businesses are outside
the scope of the Massachusetts insurance laws and ERISA savings
clause. This assertion is plainly contradicted by the
allegations in the Plaintiffs’ own complaint, which must, of
course, be considered true for purposes of motion to dismiss
practice. The complaint states that Celentano is “a licensed
insurance agent” in Massachusetts, NECHPA is “an insurance agency
and benefits consulting firm” licensed and registered in
Massachusetts, HMA MGU is “an insurance underwriter” registered
in Massachusetts, and Brettschneider is a “principal” in HMA
Direct, the parent company of HMA MGU and NECHPA. The Plaintiffs
therefore cannot credibly maintain that they are mere “service
providers” detached from the business of insurance in
Massachusetts. It is their ability to engage in the insurance
business through Division licenses which is at issue in the Show-
Cause proceeding. See MASS. GEN. LAWS ch. 175 § 162R (granting the
commissioner the authority to order the suspension, revocation,
or placement on probation of the insurance licenses, as well as
levy civil penalties); id. at § 174 (permitting the commissioner
to revoke or suspend insurance licenses of corporations or its
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persons and entities that can develop risk pooling agreements and
insurer and the insured.” See id. at 338-39 (finding the second
Morrison, 584 F.3d 837, 844 (9th Cir. 2009) (“The requirement
suggests in its amicus brief that the state licensing laws cited
has held saved” under the savings clause. Cf. Rush Prudential,
536 U.S. at 387 (holding savings clause spared state statute that
claims); UNUM Life Ins. Co. of Am. v. Ward, 526 U.S. 358, 368
officers or directors).
10
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fall directly within the scope of the ERISA savings clause and
1144(b)(2)(A).
nothing unique about ERISA that would put an agent who induces
laws.” The DOL observes that the end result, should the Division
11
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Accident Ins. Co. v. Medley, 572 F.3d 22, 26 (1st Cir. 2009)
12
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MASS. GEN. LAWS ch. 176D § 6. The Plaintiffs are also entitled to
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will file a decision with the Division, see 801 CODE MASS. REGS. §
14. The court may affirm, remand, set aside, or modify the
14
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Direct only on April 30, 2009 stating that HMA Direct “has been
15
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adjudicatory in nature.
Mut. Life Ins. Co. v. Harris Trust & Sav. Bank, 510 U.S. 86, 98
6
The instant case is also distinguishable from Chaulk
because the basis for preemption there was not ERISA but the
Garmon preemption doctrine, relating to the National Labor
Relations Act. See Chaulk Servs., Inc. v. Massachusetts Comm’n
Against Discrimination, 70 F.3d 1361, 1370-71 (1st Cir. 1995);
see generally San Diego Building Trades v. Garmon, 359 U.S. 236,
245 (1959) (“When an activity is arguably subject to § 7 or § 8
of the [National Labor Relations] Act, the States as well as the
federal courts must defer to the exclusive competence of the
National Labor Relations Board if the danger of state
interference with national policy is to be averted.”).
7
I recognize that the DOL’s generally sympathetic approach
to the state initiative here reflects a policy judgment by the
current Presidential administration regarding preemption. This
policy recognizes “a strong role for both the national Government
and the States,” and cautions that “preemption of State law by
executive departments and agencies should be undertaken only with
full consideration of the legitimate prerogatives of the States
and with a sufficient legal basis for preemption.” Pres.
Memorandum on Preemption for the Heads of Executive Departments
and Agencies, 74 Fed. Reg. 24,693 (May 20, 2009). While the
policy preferences of the federal agency charged with
administering a statute containing preemptive language are not
necessarily determinative, they are entitled to careful and
respectful consideration by the Courts.
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provisions of ERISA.
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not have a basis for the allegations in Claims 26-33. But the
v. Garden State Bar Ass’n, 457 U.S. 423, 434-35 (1982) (holding
Harper, 282 F.3d 204, 209 (3d Cir. 2002) (recognizing “the
18
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Allstate Ins. Co., 517 U.S. 706, 733 (1996) (Kennedy, J.,
insurance industry. See, e.g., MASS. GEN. LAWS ch. 175 § 3A (“The
19
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U.S. at 447.
Jou v. Schmidt, 203 Fed. Appx. 9, 11 (9th Cir. 2006) (“As to the
second prong [of Younger], we have held that the state has an
Cross & Blue Shield of Michigan v. Baerwaldt, 726 F.2d 296, 299
that the Plaintiffs can advance any ERISA and HIPAA preemption
20
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state law claims.” NGS Am., Inc. v. Jefferson, 218 F.3d 519, 530
Shannon, 65 F.3d 1126, 1136 (4th Cir. 1995) (citing NOPSI, 491
proceedings.
21
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8
If, in fact, the Division’s “proposed agreement” and the
consumer alert, see Note 3 supra, together evidence a general
hostility toward – or an effort to regulate, i.e. shut down –
self-funded health plans, the deemer clause would be implicated.
See 29 U.S.C. § 1144(b)(2)(B) (providing that an employee benefit
plan covered by ERISA may not “be deemed to be an insurance
company or other insurer . . . for purposes of any law of any
State purporting to regulate insurance companies [or] insurance
contracts”). Operating as an exception to the savings clause,
the deemer clause “has effect only on state laws saved from pre-
emption by [the savings clause] that would, in the absence of
[the deemer clause], be allowed to regulate self-insured employee
benefit plans.” Kentucky Ass’n of Health Plans, Inc. v. Miller,
538 U.S. 329, 336 n.1 (2003). The Division’s proposed agreement
and consumer alert, if part of a larger program to regulate self
funded plans, arguably “would not be ‘saved’ as an insurance law
to the extent [they] applied to self-funded plans” and sought to
regulate them. See Rush Prudential HMO, Inc. v. Moran, 536 U.S.
355, 371 n.6 (2002). Nevertheless, I decline to assess whether
the deemer clause constrains the Division because I hold
abstention is required here and the matter must be resolved
initially in a state forum.
22
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Malachowski v. City of Keene, 787 F.2d 704, 709 (1st Cir. 1986)
(citing United Books, Inc. v. Conte, 739 F.2d 30, 34 (1st Cir.
1984)) (per curiam); see also Huffman v. Pursue, Ltd., 420 U.S.
23
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Equip. Corp., 162 F.3d 28, 36 (1st Cir. 1998). The First Circuit
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upon that look the claim appears substantial, the court should
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contention that the DOL has sole authority over the issues in the
III. CONCLUSION
Water Conservation Dist. v. United States, 424 U.S. 800, 817 n.22
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(1976)). For the reasons set forth more fully above, I GRANT the
of dismissal.
27