In Central States, Southeast and Southwest Areas Health and Welfare Fund et al. v. McClain, the Northern District of Illinois dismissed a challenge brought by a multiemployer employee welfare benefit plan against the Arkansas Insurance Commissioner over Arkansas Insurance Dept. Rule 128, which was issued in December 2024. Rule 128 includes a reporting obligation that requires plans to submit pharmacy compensation information, and the information is used to confirm if payments to pharmacies are “fair and reasonable.”
The plaintiffs argued the rule was pre-empted by ERISA as both a direct regulation of ERISA plans and an intrusion into core plan administration. The court disagreed, holding that Rule 128 applies broadly to all health benefit plans and was enacted to help ensure sustainable network adequacy. Additionally, citing Rutledge v. PCMA, the court held that Rule 128 was not preempted, as ERISA does not preempt state regulations that may potentially increase costs or alter incentives, provided the regulation does not force a plan to adopt any particular scheme of substantive coverage. Accordingly, the court granted the defendants’ motion to dismiss and terminated the case.
You can read the court order here.
