Levine v. United Healthcare Corporation: Court Holds that Perreira is Preempted by ERISA and Not Saved under ERISA’s “Savings Clause”

Thomas H. Lawrence¹

The United States Court of Appeals for the Third Circuit decided Levine v. United Healthcare Corporation, et al., Nos. 04-1224 and 04-1225, 2005 U.S. App. LEXIS 4318 (3d Cir. Mar. 16, 2005), on March 16, 2005.

The two major issues in Levine were: (1) whether Perreira v. Rediger – case law in New Jersey that outlawed subrogation with regard to fully insured plans – was saved from preemption by ERISA’s “Savings Clause” and, (2) whether the members’ claims against the health plans fell within ERISA’s civil enforcement provision to allow removal of the claims to federal court.

With regard to the preemption issue, the Third Circuit reversed the district court’s decision that Perreria was saved under the Savings Clause. The Court reasoned that the Savings Clause requires that a law be “specifically directed” toward the insurance industry in order to be saved from preemption. Perreria, the Court held, is not such a law. Rather, Perreria is a law of general application that applies far beyond the insurance industry. Id. at *23-24.

With regard to the removal issue, the Third Circuit, following the Fourth and Fifth Circuits, held that where plan participants “claim that their ERISA plan wrongfully sought reimbursement of previously paid health benefits, the claim is for ‘benefits due’ and federal jurisdiction under section 502(a) of ERISA is appropriate.” Id. at *15.

Levine is an important decision because it re-opens the door for fully insured, ERISA-covered plans to pursue subrogation or reimbursement in New Jersey. The decision is also important because it allows health plans to remove to federal court claims brought by members to challenge health plans’ recovery rights.

[1]Thomas H. Lawrence is a partner in the Memphis, Tennessee law firm of Lawrence & Russell, LLP, and represents employers, health plans, and insurers in healthcare and property and casualty subrogation and other employee benefits and employment matters and related litigation in state and federal courts throughout the United States. He was one of the attorneys who represented Great-West Life in Knudson , and has been counsel of record in many of the otherpost-Knudson decisions that have clarified the scope of relief available under ERISA. He can be reached at toml@lawrencerussell.com.