ERISA preemption debate heats up in 2025 

ERISA preemption debate heats up in 2025
July 1, 2025

ERISA preemption of state laws is a legal doctrine that has existed for over a half century, but it’s heating up like the summer weather this year, playing out in court houses, state houses and elsewhere. Taking an inventory of recent developments helps us understand patterns and prepare for the upcoming forecast, whether it be fair, partly cloudy or severe thunderstorms.  

At its core, ERISA preemption allows states to regulate fully insured plans but not self-funded plans if the state laws “relate to” those plans. In 2020, a key US Supreme Court decision, Rutledge v. PCMA, held that an Arkansas Pharmacy Benefit Manager law was not preempted by ERISA (and thus applies to self-funded plans) because it merely increased plan costs. As discussed below, Rutledge opened the door for states to try to push the limits of that standard. Those in favor of ERISA preemption often point to the need for uniformity and flexibility, particularly for multi-state plan sponsors. Those in favor of limiting ERISA preemption often point to states’ sovereignty and their need to address specific issues of their residents. While the current ERISA preemption fight is primarily on the PBM battleground, it also arises in other contexts, like claims reporting and processing and third-party licensure. 

So, let’s start the highlight reel: 

The court house. On June 30, the US Supreme Court denied review of Mulready v. PCMA, a 10th Circuit Court of Appeals decision that previously held that ERISA preempted several parts of an Oklahoma PBM law that set network standards, impacting self-funded ERISA plans. In May, the US Solicitor General in the Trump administration filed an amicus curiae brief in support of the lower court decision, urging the US Supreme Court to decline review. As a result of the high court’s denial, the 10th Circuit decision stands and the applicable provisions of the Oklahoma PBM law are preempted for self-funded ERISA plans. For employers, the denial and the recent brief are an encouraging shift from the US Solicitor General’s 2023 brief

In March, a federal district court concluded that ERISA preempted a Tennessee PBM law. The McKee Foods v. BFP ruling invalidated parts of a 2021 law (later amended in 2022) with an “any-willing-provider” requirement for pharmacy networks and a ban on financial incentives to steer participants to certain pharmacies. These provisions “prevent an ERISA plan from designing and providing benefits in a way that the plan determines best serves participants,” according to the judge. The case is currently on appeal to 6th Circuit. 

Last December saw an ERISA preemption challenge to a 2019 Minnesota PBM law that restricts mail-order and specialty pharmacy networks. The ERISA Industry Committee v. Minnesota Department of Commerce case is ongoing. 

The state house. Arkansas HB 1150 characterized PBM-owned pharmacies as a “fox guarding the henhouse” and prohibited certain anticompetitive business tactics, including prohibiting most PBM-owned retail pharmacies from operating in the state. After its April enactment, three PBMs (CVS Health, Express Scripts and Navitus, along with PCMA) filed lawsuits in federal court contesting the new law. While the complaints primarily allege US Constitutional violations, the CVS lawsuit asserts ERISA preemption, arguing that “the law imposes significant restrictions on pharmacy networks and the type of coverage that plan sponsors can incorporate into their benefit plan design.”  

Recently, Iowa’s SF 383 waded into the ERISA preemption pool, requiring PBMs to reimburse pharmacies at the National Average Drug Acquisition Cost, plus a $10.68 dispensing fee. Other restrictions focused on participant steerage, mail-order pharmacies, network standards and third-party financial assistance applied to cost sharing. The law is being challenged in court. 

Earlier in the year, North Dakota passed HB 1584, removing from its PBM statutes an exemption for PBMs acting on behalf of self-funded ERISA plans. As a result, self-funded ERISA plans are subject to limitations previously applicable only to fully insured plans. The law is now in effect. 

Other states like Alabama, Indiana, Mississippi and Oklahoma have enacted laws this year that arguably trigger ERISA preemption concerns. 

Elsewhere. Arkansas’ Insurance Department issued Final Rule 128 and Bulletin 18-2024, which require annual reporting of PBM data on pharmacy reimbursements for the prior calendar year. The obligation falls on insurers and self-funded plan sponsors, although third-party administrators and/or PBMs may file on their behalf. The bulletin provides special instructions for self-funded health plans, including a limited obligation for plans with fewer than 5,000 Arkansas residents. 

Florida’s Office of Insurance Regulation requested PBMs to provide detailed claims data for individuals residing or employed in Florida, applicable to fully insured and self-funded ERISA plans. The request — referred to as a market conduct exam — was based on FLOIR’s authority under a 2023 law. The request raises ERISA and HIPAA concerns. Some PBMs allowed self-funded plan sponsors to opt out of the data request, but this exam appears to be ongoing. 

Texas Attorney General Ken Paxton issued Opinion KP-0480, confirming his office’s view that two 2021 PBM laws include self-funded ERISA plans and fully insured plans issued in another state. While the opinion was not binding on the Texas Department of Insurance, it did influence some legislation during the 2025 session. 

Weather forecast. We can reasonably expect to see increasing turbulence between the states and multi-state plan sponsors (and the vendors who work for them). Here are three steps employers can take to prepare for the storm: 

  • Keep senior management aware of the forecast. Let them know about ongoing developments and the potential impact on health benefits. 
  • Stay ready for bad weather. Keep up to date on legislative and regulatory developments in the states where you operate. Major insurers and vendors often have personnel who track bills. 
  • Try to minimize storm damage. Assess the impact of enacted legislation on plan design. 

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About the author(s)
Rich Glass

Principal, Mercer's Law & Policy Group

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