Fossen v. Blue Cross and Blue Shield

ERISA preempts state HIPPA laws for the purpose of subject matter jurisdiction and state law causes of action on the merits. Federal ERISA does not preempt state law claims for relief under separate state unfair insurance practice laws that prohibits charging different policy premiums to similarly situated individuals.

In 2004, the Fossens obtained health insurance from Blue Cross and Blue Shield (BCBS) for their employees. Subsequently, BCBS increased the Fossens’ premiums by 20%. BCBS imposed different increases and decreases on other plan members. The Fossens complained to the Montana Insurance Commissioner, BCBS then set the Fossens’ premium increase at 4%. In 2008, BCBS increased the Fossens’ premiums by 40%. The Fossens filed suit under state law HIPPA claims. BCBS removed to federal court, which denied the Fossens’ motion to remand, and affirmed BCBS’s motion for summary judgment as a matter of law. The Fossens appealed. The Ninth Circuit held that a state law cause of action under ERISA is preempted if the plaintiff could have brought the claim under ERISA and when there is no other legal duty implicated by defendant’s actions. The Court also held that ERISA contains a HIPPA specific preemption clause that does not supersede any requirement relating solely to health insurance. The Court held that the Fossens’ state law HIPPA suit was within the scope of ERISA, and therefore the district court properly denied the Fossens’ motion to remand. The Court further found that the Fossens’ unfair insurance practice claims were not preempted because the state law was independent of ERISA. The Court found that ERISA did not provide the same right as the state unfair insurance practices law. The Court remanded to the district court to hear the state unfair insurance claim. AFFIRMED in part, REVERSED in part, and REMANDED.