Is Texas's 'Any Willing Pharmacy' insurance law still blocked by federal ERISA law?

Plain-English summary

Senator Charles Schwertner and Representative Todd Hunter submitted identical requests asking whether article 21.52B of the Texas Insurance Code is still good law. That statute, known as an "any willing pharmacy" or "any willing provider" (AWP) law, generally bars a health insurance policy or managed care plan from excluding a pharmacy as a contract provider if the pharmacy agrees to meet all the conditions the plan requires of providers. The Texas Department of Insurance had stopped enforcing it after a 1997 Fifth Circuit decision, Texas Pharmacy Ass'n v. Prudential, held the statute was preempted by the federal ERISA law. The legislators argued that a later U.S. Supreme Court case, Kentucky Ass'n of Health Plans, Inc. v. Miller (2003), "effectively reversed" that decision, so the statute should be enforceable again.

The AG's answer had two layers. As a prediction of how a court would rule today, the AG agreed the statute would likely survive. ERISA preempts state laws that "relate to" an employee benefit plan but saves state laws that "regulate insurance." The Fifth Circuit's 1997 decision used an older three-part test and held article 21.52B failed because it was not limited to entities within the insurance industry (it also covered HMOs, PPOs, and other organizations). In Miller, the Supreme Court made "a clean break" from that test and adopted a simpler two-part inquiry: the law must be specifically directed toward entities engaged in insurance, and it must substantially affect the risk-pooling arrangement between insurer and insured. The AG noted the Fifth Circuit has used the Miller test ever since, and in one unpublished case even said article 21.52B "would similarly be saved from preemption." So a court applying Miller today would likely conclude the statute is saved.

But as a matter of present law, the AG could not call the statute enforceable. The Fifth Circuit follows a "rule of orderliness": one panel cannot overturn a prior panel's decision unless an intervening Supreme Court case unequivocally overrules it. Miller addressed only Kentucky's law; it never mentioned Texas Pharmacy or said it was wrongly decided. Miller may undermine the reasoning, but it does not overrule the holding, and the AG has no authority to overrule a court decision. So until a court affirmatively rules that article 21.52B is saved, it remains preempted. The AG added that if a court does eventually find it saved, the statute, which was never repealed by the Legislature, would resume effect, because an un-repealed state law springs back once the preemptive mechanism is removed.

Currency note

This opinion was issued in 2016. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. This opinion turned on the status of federal ERISA preemption case law and a then-pending question the Fifth Circuit had not resolved; courts or the Legislature may have addressed article 21.52B's enforceability since 2016, so confirm the current state of the law before relying on anything here.

What the opinion meant for those who asked

The requesting legislators (as the opinion described it): The opinion told the legislators that, while a court today would likely conclude article 21.52B is saved from ERISA preemption under Miller, the AG could not declare the statute enforceable as a matter of law, because the Fifth Circuit's Texas Pharmacy holding still stands and only a court can overrule it. Until that happens, the statute remains preempted.

The Texas Department of Insurance (as the opinion described it): The opinion was consistent with the Department's position that whether article 21.52B would satisfy the Miller test today has no bearing on whether the Fifth Circuit's preemption ruling remains valid. The AG agreed the office has no authority to overrule the judicial decision and that the statute remains unenforceable until a court holds otherwise.

Pharmacies and insurers regulated by the statute (as the opinion described it): The opinion described article 21.52B as remaining preempted and unenforceable for now, even though its prospects under the current preemption test look favorable. It also explained that the statute was never repealed and would resume effect if a court later concluded it is saved from preemption.

Common questions

Is the Texas "Any Willing Pharmacy" law enforceable right now?
As the opinion read the law in 2016, no. Even though a court applying the current Miller test would likely find article 21.52B is saved from ERISA preemption, the controlling Fifth Circuit decision holding it preempted still stood, so the AG could not conclude the statute was enforceable until a court ruled otherwise.

Didn't the Supreme Court's Miller decision overrule the old ruling against the statute?
Not directly. The opinion explained that Miller changed the test and may undermine the reasoning of the 1997 Texas Pharmacy decision, but it addressed only Kentucky's law and never mentioned the Texas case. Under the Fifth Circuit's rule of orderliness, a Supreme Court decision must unequivocally overrule prior precedent to change circuit law, and Miller did not do that for article 21.52B.

Can the Attorney General just declare the statute enforceable again?
No. The opinion was explicit that the office cannot ignore or overrule a judicial decision. The AG could predict how a court would likely rule, but only a court can actually hold that the statute is saved from preemption.

If a court eventually finds the statute saved, does it automatically come back into force?
The opinion concluded it would. Because the Legislature never repealed article 21.52B and the Department's nonenforcement did not repeal it either, the AG reasoned that an un-repealed state law becomes effective again once the preemptive mechanism is removed, drawing on the Fifth Circuit's First Gibraltar decision.

Background and statutory framework

Article 21.52B of the Texas Insurance Code generally prohibits a health insurance policy or managed care plan from excluding a pharmacy as a contract provider if the pharmacy agrees to meet all the conditions required of providers (Tex. Ins. Code art. 21.52B, § 2(a)(2)). ERISA establishes uniform standards for private pension and health plans, preempts state laws that "relate to" an employee benefit plan, and saves from preemption state laws that "regulate insurance" (29 U.S.C. §§ 1001-1461; id. § 1144(a); id. § 1144(b)(2)(A)).

In Texas Pharmacy Ass'n v. Prudential Insurance Co. of America, the Fifth Circuit applied a three-part savings-clause inquiry and held article 21.52B preempted because it was not limited to entities within the insurance industry (105 F.3d 1035, 1037-38 (5th Cir. 1997)). In Kentucky Ass'n of Health Plans, Inc. v. Miller, the U.S. Supreme Court made a clean break from that test and adopted a two-part inquiry: the state law must be specifically directed toward entities engaged in insurance, and it must substantially affect the risk-pooling arrangement between insurer and insured (538 U.S. 329, 341-42 (2003)).

The Fifth Circuit follows a rule of orderliness under which a panel cannot overturn a prior panel decision absent an intervening change in the law, and a Supreme Court decision must unequivocally overrule prior precedent to do so (United States v. Boche-Perez, 755 F.3d 327, 334 (5th Cir. 2014)). The court has applied the Miller test since (Provident Life & Accident Insurance Co. v. Sharpless, 364 F.3d 634, 640-41 (5th Cir. 2004)) and has suggested article 21.52B "would similarly be saved from preemption" while noting Texas Pharmacy was "at least called into doubt by Miller" (Quality Infusion Care, Inc. v. Humana Health Plan of Texas, Inc., 290 Fed. App'x 671, 681-82 & n.14 (5th Cir. 2008)). A district court may recognize when a precedent has been impliedly overruled, but must otherwise follow controlling precedent (Does 1-7 v. Round Rock Indep. Sch. Dist., 540 F. Supp. 2d 735, 749 (W.D. Tex. 2007)). The Fifth Circuit has reconsidered other Insurance Code provisions under Miller but found them still preempted (Ellis v. Liberty Life Assurance Co., 394 F.3d 262, 275-78 (5th Cir. 2004)).

Courts may construe but cannot repeal a legislative enactment, and an executive branch's failure to enforce a law does not repeal it (Ward v. Chamberlain, 67 U.S. 430, 442 (1862); District of Columbia v. John R. Thompson Co., 346 U.S. 100, 113-14 (1953)). When an un-repealed state law is no longer federally preempted, it is effective again (First Gibraltar Bank, FSB v. Morales, 42 F.3d 895, 902 (5th Cir. 1995)). The Attorney General may opine on how a court would decide but cannot ignore or overrule a judicial decision (Tex. Att'y Gen. Op. No. GA-0563 (2007) at 6).

Citations

Statutes and rules:

• Tex. Ins. Code art. 21.52B, § 2(a)(2)
• 29 U.S.C. §§ 1001-1461 (ERISA)
• 29 U.S.C. § 1144(a) (preemption)
• 29 U.S.C. § 1144(b)(2)(A) (insurance savings clause)
• 5th Cir. R. 47.5.4 (unpublished opinions)

Cases:

• Kentucky Ass'n of Health Plans, Inc. v. Miller, 538 U.S. 329 (2003)
• Tex. Pharmacy Ass'n v. Prudential Ins. Co. of Am., 105 F.3d 1035 (5th Cir. 1997)
• United States v. Boche-Perez, 755 F.3d 327 (5th Cir. 2014)
• Provident Life & Accident Insurance Co. v. Sharpless, 364 F.3d 634 (5th Cir. 2004)
• Quality Infusion Care, Inc. v. Humana Health Plan of Texas, Inc., 290 Fed. App'x 671 (5th Cir. 2008)
• Does 1-7 v. Round Rock Indep. Sch. Dist., 540 F. Supp. 2d 735 (W.D. Tex. 2007)
• Ellis v. Liberty Life Assurance Co., 394 F.3d 262 (5th Cir. 2004)
• Ward v. Chamberlain, 67 U.S. 430 (1862)
• District of Columbia v. John R. Thompson Co., 346 U.S. 100 (1953)
• First Gibraltar Bank, FSB v. Morales, 42 F.3d 895 (5th Cir. 1995)
• United States v. Torres-Jaime, No. 15-40208, 2016 WL 1612762 (5th Cir. Apr. 21, 2016)

Texas Attorney General opinions:

• Tex. Att'y Gen. Op. No. GA-0563 (2007)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0103
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2016/kp0103.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

KEN PAXTON
ATTORNEY GENERAL OF TEXAS

July 13, 2016

The Honorable Charles Schwertner Opinion No. KP-0103
Chair, Committee on Health and
Human Services Re: The status of Insurance Code article 21.52B,
Texas State Senate the Any Willing Pharmacy statute, in light of
Post Office Box 12068 federal court decisions (RQ-0092-KP)
Austin, Texas 78711-2068

The Honorable Todd Hunter
Chair, Committee on Calendars
Texas House of Representatives
Post Office Box 2910
Austin, Texas 78768-2910

Dear Senator Schwertner and Representative Hunter:

    You each submitted identical requests asking whether article 21.52B of the Texas Insurance Code, known as an "any willing pharmacy" or "any willing provider" ("AWP") statute, is enforceable in light of a 2003 U.S. Supreme Court case, Kentucky Ass'n of Health Plans, Inc. v. Miller. [1] Article 21.52B generally prohibits a health insurance policy or managed care plan from excluding a pharmacy as a contract provider if the pharmacy agrees to meet all the conditions required of providers. See TEX. INS. CODE art. 21.52B, § 2(a)(2). You tell us that the Texas Department of Insurance ("Department") currently does not enforce article 21.52B based on a 1997 decision by the U.S. Fifth Circuit Court of Appeals that article 21.52B is preempted by the federal Employee Retirement Income Security Act of 1974 ("ERISA"). Request Letter at 1-2; see also Tex. Pharmacy Ass'n v. Prudential Ins. Co. of Am., 105 F.3d 1035, 1042 (5th Cir. 1997). You assert that the U.S. Supreme Court "effectively reversed Texas Pharmacy Association" with Miller and that, as a result, article 21.52B "is and has been enforceable." Request Letter at 5.

    ERISA establishes uniform standards for pension and health plans in private industry. See generally 29 U.S.C. §§ 1001-1461. ERISA preempts all state laws that "relate to" an employee benefit plan, id. § 1144(a), but saves from preemption state laws which "regulat[e] insurance." Id. § 1144(b)(2)(A). In deciding whether article 21.52B regulated insurance so as to fall within the preemption savings clause, the Fifth Circuit in Texas Pharmacy recited a three-part inquiry: "(1) [w]hether the practice (the statute) has the effect of spreading the policyholders' risk; (2) whether the practice is an integral part of the policy relationship between the insurer and the insured; and (3) whether the practice is limited to entities within the insurance industry." Texas Pharmacy, 105 F.3d at 1038 (following the then-current test as articulated by the U.S. Supreme Court). The Fifth Circuit found that article 21.52B did not fall within the savings clause because it was not limited to entities within the insurance industry, noting that article 21.52B also applied to health maintenance organizations (HMOs), preferred provider organizations (PPOs), and other health care organizations. Id. Because the statute failed the third element of the savings clause inquiry, the Fifth Circuit concluded that article 21.52B was preempted under ERISA. Id. at 1037 (recognizing that the failure to satisfy any one element of the three-part test is dispositive).

    Subsequently, in 2003, the U.S. Supreme Court decided Kentucky Ass'n of Health Plans, Inc. v. Miller, concerning whether Kentucky's AWP statute was saved from ERISA preemption. 538 U.S. 329 (2003). The Miller Court made "a clean break" from the three-part test it had previously used, adopting a simpler test to determine whether a state law regulates insurance for preemption savings purposes. Id. at 341-42. The new test provides: "First, the state law must be specifically directed toward entities engaged in insurance. Second ... the state law must substantially affect the risk pooling arrangement between the insurer and the insured." Id. at 342 (citations omitted).

    You assert that under the new Miller test, article 21.52B would be saved from ERISA preemption, noting certain analysis in Texas Pharmacy as support for that conclusion, and that Texas Pharmacy is thus "effectively overruled." Request Letter at 3-4. The Department maintains that "[w]hether Art. 21.52B would satisfy the Miller test today has no bearing on whether the Fifth Circuit's preemption of the statute remains valid." [2] In the Department's view, article 21.52B remains unenforceable because the Supreme Court in Miller did not discuss or vacate Texas Pharmacy or otherwise overrule prior precedent. Dep't Brief at 2.

    The Fifth Circuit explains that it

             abides by the rule of orderliness, under which a panel of the court
             cannot overturn a prior panel decision absent an intervening change
             in the law, such as by a statutory amendment, or the Supreme Court
             or by our en banc court. For a Supreme Court decision to change
             our circuit's law, it must be more than merely illuminating with
             respect to the case before the court and must unequivocally overrule
             prior precedent.

United States v. Boche-Perez, 755 F.3d 327, 334 (5th Cir. 2014) (internal quotation marks, citations, and alterations omitted). In Provident Life & Accident Insurance Co. v. Sharpless, decided a year after Miller, the Fifth Circuit applied the new preemption savings test from Miller to a Louisiana statute. 364 F.3d 634, 640-41 (5th Cir. 2004). In fact, we find no Fifth Circuit or Texas federal district court case that continues to use the old standard since Miller was decided. Thus, it appears that the Fifth Circuit recognizes the Miller test as the appropriate standard for analyzing whether a state statute regulates insurance for purposes of ERISA preemption savings.

    In addition, the Fifth Circuit has indicated that it might overrule its prior holding in Texas Pharmacy. In Quality Infusion Care, Inc. v. Humana Health Plan of Texas, Inc., the court, acting on a claim under ERISA for payment of benefits that was properly analyzed under complete preemption and not conflict preemption, as in Miller, stated that "[u]nder Miller, [the claimant] is likely correct that [article 21.52B] at issue here would similarly be saved from preemption as presented there." [3] 290 Fed. App'x 671, 681 (5th Cir. 2008); see also id. at 682, n.14 (referring directly to the holding in Texas Pharmacy and noting that it was "at least called into doubt by Miller"). [4] It is also possible that a lower court, applying the Miller test, could find that article 21.52B is saved from preemption. See Does 1-7 v. Round Rock Indep. Sch. Dist., 540 F. Supp. 2d 735, 749 (W.D. Tex. 2007) (following the "well-settled law" that a district court may recognize when a precedent has been expressly or impliedly overruled by a subsequent Supreme Court decision, in which case "the District Judge is free to disregard circuit precedent that is contrary to the rule pronounced by the court possessing final authority to decide that particular question of law" (internal quotation marks omitted)); but see id. (recognizing the equally "well-settled law that if a precedent ... has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the [lower court] should follow the case which directly controls, leaving to [the binding authority] the prerogative of overruling its own decisions" (internal quotation marks omitted)). Thus, were a court to address the issue today, it would likely conclude that article 21.52B is saved from preemption under ERISA, pursuant to the test set forth in Miller.

     That said, while the Fifth Circuit applied the Miller analysis to other Texas Insurance Code provisions, it has not determined whether its holding in Texas Pharmacy regarding article 21.52B is still valid in light of Miller. See Ellis v. Liberty Life Assurance Co., 394 F.3d 262, 275-78 (5th Cir. 2004) (reconsidering its previous preemption of articles 21.21 and 21.55 of the Insurance Code in light of Miller but finding that they remain preempted). Miller itself addressed only the Kentucky AWP statute. Nowhere in the opinion did the Miller Court broadly conclude that all states' AWP statutes were saved from preemption, nor did it reference Texas Pharmacy or suggest that it was wrongly decided. Miller may undermine the reasoning in Texas Pharmacy, but it does not overrule it. Nor can Texas Pharmacy be overruled simply through speculation as to how the Fifth Circuit would analyze article 21.52B today in light of Miller. And while the Attorney General may opine on how a court would decide the issue, this office has no authority to overrule Texas Pharmacy. Tex. Att'y Gen. Op. No. GA-0563 (2007) at 6 (recognizing that this office "cannot ignore or overrule a judicial decision" (internal quotation marks omitted)). Thus, we cannot conclude as a matter of law that the holding in Texas Pharmacy is automatically overruled by sole virtue of the new test set forth by the U.S. Supreme Court in Miller. Unless and until a court affirmatively concludes that the statute is saved from preemption, article 21.52B remains preempted.

    If the Fifth Circuit or other court determines that article 21.52B is saved from preemption under ERISA, we consider what effect such a ruling would have on the statute. The Fifth Circuit's ruling did not repeal the statute, nor has the Texas Legislature taken that action. See Ward v. Chamberlain, 67 U.S. 430, 442 (1862) ("Courts ... may construe a legislative provision but they cannot repeal what is expressly enacted."); Request Letter at 2. That the Department has not enforced the statute likewise does not mean that the law is repealed. See District of Columbia v. John R. Thompson Co., 346 U.S. 100, 113-14 (1953) ("The failure of the executive branch to enforce a law does not result in its ... repeal."). In fact, there is support for the proposition that if a state law remains on the books and has not been repealed when a preemptive mechanism is removed, the law is effective again. In First Gibraltar Bank, FSB v. Morales, the Fifth Circuit considered whether portions of a Texas homestead law previously preempted by federal law were effective again when the federal law was amended so as to no longer result in preemption. 42 F.3d 895 (5th Cir. 1995). The court vacated its earlier ruling that the federal law preempted Texas homestead law and proclaimed that

            [b]ecause the Texas homestead laws had not been repealed, they
            were in effect on the date of the [a]mendment, although they were
            arguably impotent in the context of federal bank regulation. Once
            the preemptive mechanism was removed, however, the state
            homestead provisions-already effective in all other areas-were
            also effective in the area of federal bank regulation.

Id. at 902. Although the preemptive mechanism that changed in First Gibraltar was the text of the federal law itself, whereas in this case it is judicial analysis of a federal law, the principle is the same: when an un-repealed state law is no longer federally preempted, it is once again effective. See id. (stating that "we cannot agree with [an] apparent assumption that once a law is preempted, it forever remains preempted and ineffective"). Thus, a court would likely conclude that article 21.52B resumes its effectiveness upon a judicial decision that article 21.52B is saved from preemption under ERISA.

[1] See Letter from Honorable Charles Schwertner, Chair, Senate Comm. on Health & Human Servs., to Honorable Ken Paxton, Tex. Att'y Gen. at 1, 3 (Jan. 26, 2016); Letter from Honorable Todd Hunter, Chair, House Comm. on Calendars, to Honorable Ken Paxton, Tex. Att'y Gen. at 1, 3 (Jan. 26, 2016), https://www.texasattorneygeneral.gov/opinion/requests-for-opinions-rqs (collectively, "Request Letter"); see also Kentucky Ass'n of Health Plans, Inc. v. Miller, 538 U.S. 329 (2003).

[2] See Brief from Ms. Norma Garcia, Gen. Counsel, Tex. Dep't of Ins. at 2 (Feb. 22, 2016) (on file with the Op. Comm.) ("Dep't Brief").

[3] The claim presented in Miller was a conflict preemption issue arising from section 514 of ERISA. See generally Miller, 538 U.S. 329. As a procedural matter, however, the claim in Quality Infusion could not be analyzed in the same way because it depended on an interpretation of an ERISA employee welfare benefit plan, which the court determined brought the claim under the complete preemption provisions of ERISA section 502. Quality Infusion, 290 Fed. App'x at 673, 681. Miller was thus inapplicable. Id. at 681-82.

[4] Quality Infusion Care, Inc. v. Humana Health Plan of Texas, Inc. is an unpublished opinion, which is generally not precedent except to show res judicata, collateral estoppel, or the law of the case. See 5th Cir. R. 47.5.4. However, "[u]npublished opinions, although not precedential, may be considered persuasive authority." United States v. Torres-Jaime, No. 15-40208, 2016 WL 1612762, at *4 (5th Cir. Apr. 21, 2016).

                                  SUMMARY

                    Were a court to address the issue today, it would likely
           conclude that article 21.52B of the Texas Insurance Code ("Any
           Willing Pharmacy" statute) is saved from preemption under the
           federal Employee Retirement Income Security Act of 1974
           ("ERISA"), pursuant to the test set forth by the U.S. Supreme Court
           in Kentucky Ass'n of Health Plans, Inc. v. Miller. However, the
           current Fifth Circuit Court of Appeals decision in Texas Pharmacy
           Ass'n v. Prudential Insurance Co. of America, holding that article
           21.52B is preempted under ERISA, still stands. Until a court
           affirmatively concludes that the statute is saved from preemption,
           we cannot conclude as a matter of law that article 21.52B is
           enforceable.

                                        Very truly yours,

                                        KEN PAXTON
                                        Attorney General of Texas

JEFFREY C. MATEER
First Assistant Attorney General

BRANTLEY STARR
Deputy First Assistant Attorney General

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

BECKY P. CASARES
Assistant Attorney General, Opinion Committee