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Dear Ms. Hain:
This responds to your request for guidance regarding Title I of the
Employee Retirement Income Security Act of 1974 (ERISA). Specifically, you
request guidance on whether ERISA would preempt an action by a State
Medicaid Agency to recover Medicaid benefit payments made on behalf of
individuals who are also participants in ERISA-covered private health
insurance plans that require prior authorization for covered health care
items or services.
Your inquiry focuses on ERISA-covered plans that provide, in order for
a participant or beneficiary to receive certain items or services, that
the participant, beneficiary or health care provider must obtain specific
authorization in advance from the plan. You state that when a plan
participant or beneficiary, who is also a State Medicaid beneficiary,
fails to inform the provider at the point of service that he or she has
private health coverage, the provider may bill and Medicaid may pay for
health care items or services received by the participant or beneficiary.
When the State Medicaid Agency discovers that the participant or
beneficiary had coverage under a private employee benefit plan, and seeks
reimbursement, the plan may reject the State's claim on the ground that
the participant or beneficiary failed to obtain the required prior
authorization. The plan may assert that, without prior authorization, the
plan does not cover the items or services, and that any State law
entitling the State to obtain reimbursement in this situation is preempted
by ERISA.
ERISA section 514(a), 29 U.S.C. 1144(a), provides that, with certain
exceptions, Title I of ERISA preempts any and all State laws insofar as
they may now or hereafter relate to any employee benefit plan subject to
Title I. Section 514(b)(8) (as follows) specifically saves from preemption
State causes of action to obtain reimbursement for State Medicaid programs
from ERISA plans:
Subsection (a) of this section shall not be construed to preclude any
State cause of action—
(A) with respect to which the State exercises its acquired rights under
section 609(b)(3) with respect to a group health plan (as defined in
section 607(1)), or
(B) for recoupment of payment with respect to items or services
pursuant to a State plan for medical assistance approved under title XIX
of the Social Security Act which would not have been payable if such
acquired rights had been executed before payment with respect to such
items or services by the group health plan.
Moreover, ERISA section 609(b)(3), 29 U.S.C. 1169(b)(3), provides:
[a] group health plan shall provide that, to the extent that payment
has been made under a State plan for medical assistance approved under
title XIX of the Social Security Act in any case in which a group health
plan has a legal liability to make payment for items or services
constituting such assistance; payment for benefits under the plan will be
made in accordance with any State law which provides that the State has
acquired the rights with respect to a participant to such payment for such
items or services.
The Department previously expressed its views on the scope of these
provisions in Advisory Opinion 2005-05A (March 23, 2005). In that Advisory
Opinion, the Department stated that one of Congress’ primary purposes in
enacting these provisions (as part of OBRA '93 (Pub. L. 103-66)) was to
reflect changes to the Medicaid provisions of the Social Security Act
(Title XIX) requiring enactment of State laws to recoup Medicaid payments
from liable third parties, including self-funded ERISA plans. 42 U.S.C.
1396a(a)(25)(G) and (H).
In the Department’s view, a plan that requires participants and
beneficiaries to obtain prior authorization for health care items or
services, but that makes no provision for reimbursing a State Medicaid
Agency for payment of those items or services in cases where prior
authorization was not requested, would not be in compliance with ERISA
section 609(b)(3). If prior authorization from the private plan were
required for a State Medicaid Agency to obtain reimbursement from the plan
under section 609(b)(3), the State Medicaid Agency would never be able to
obtain such reimbursement because the very act of the State’s paying for
the item or service in the first instance (the prerequisite for the Agency
obtaining reimbursement rights under ERISA section 609(b)(3)) precludes
any possibility of obtaining prior authorization from the employee benefit
plan. It is the Department’s view that ERISA would not preempt a State
cause of action to recoup Medicaid payments made for covered expenses to
the extent that the private plan would have been liable for those expenses
if the participant had followed the appropriate prior authorization
procedures under the plan before the State made the payment for the items
or services.
We note, however, that ERISA section 609(b)(3) limits the private
employee benefit plan’s obligation to cases “in which a group health
plan has a legal liability to make payment for items or services . . . .”
In Advisory Opinion 2005-05A, the Department, relying on that provision in
ERISA section 609(b)(3), explained that the State cannot compel the plan
to reimburse it for items or services to which the participant was not
entitled for procedural reasons, citing as an example the participant
having already received a final denial of benefits for failure to follow
the plan’s claims procedures. Accordingly, if, before seeking to have
the State Medicaid Agency pay for the item or service, the participant or
provider had filed a benefit claim with the plan, and the plan (or State
external review decision maker, if applicable) had issued a final denial
based on the participant's failure to obtain prior authorization, the
Department would not view the plan as legally liable to pay for the item
or service. Nor, in the Department’s view, could a plan be required to
reimburse the full amount of the State's payment for a particular item or
service if, under the terms of the plan, the plan would have paid a lesser
amount or would have required the participant to seek an alternative
treatment.
This letter constitutes an advisory opinion under ERISA Procedure 76-1,
and is issued subject to the provisions of that procedure, including
section 10 thereof relating to the effect of advisory opinions.
Sincerely,
Lisa M. Alexander
Chief, Division of Coverage, Reporting and Disclosure
Office of Regulations and Interpretations
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