Fuller v. Norton

PUBLISH

UNITED STATES COURT OF APPEALS
Filed 6/19/96
TENTH CIRCUIT

ROSS FULLER, Trustee of the
International Association of Entrepreneurs
of America Benefit Trust,

Plaintiff - Appellant,

and

GREAT OAKS MANAGEMENT, a
Colorado corporation,
No. 95-1163
Plaintiff,

v.

GALE NORTON, Attorney General of the
State of Colorado; JOHN EHNES,
Commissioner, Colorado Division of
Insurance, individually and in their
professional capacities,

Defendants - Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D.C. No. 94-C-1742)

Joseph A. Jordano of FITZGERALD, SCHORR, BARMETTLER & BRENNAN, P.C.,
Omaha, Nebraska (C. Scott Crabtree of ALEXANDER LAW FIRM, P.C., Denver,
Colorado, with him on the briefs), for Plaintiff - Appellant.

Robert M. Howard, Senior Assistant Attorney General (Gale A. Norton, Attorney
General, and Stephen G. Smith, Assistant Attorney General, with him on the briefs),
Denver, Colorado, for Defendants - Appellees.

Before BRORBY, McWILLIAMS and LUCERO, Circuit Judges.

LUCERO, Circuit Judge.

Appellant is the trustee of an Employee Retirement Income Security Act of 1974

(“ERISA”) plan offering benefits to the employees of its employer members through a

multiple employer welfare arrangement (“MEWA”), as defined by section 3 of ERISA.

29 U.S.C. § 1002(3),(40). He claims that because his plan is within the protection of

ERISA law, it may not be regulated as an insurance entity by the state of Colorado.

Underpinning appellant’s prosecution of this case is a belief that ERISA preemption

allows a MEWA and its members to avoid state regulation that would apply to insurance

companies and employers offering the same benefits. The district court did not find an

ERISA-created exception to state regulation and dismissed the complaint. We affirm.

I. BACKGROUND

In 1992, a group of employers established a nonprofit organization, the

International Association of Entrepreneurs of America (“IAEA”), to create an ERISA

welfare benefit plan. The plan offered employees of its members health, disability,

occupational illness or accident, and other benefits. To provide benefits, the IAEA

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established the International Association of Entrepreneurs of America Benefit Trust

(“Benefit Trust”) as an unincorporated trust. Plaintiff Ross Fuller is the trustee of the

Benefit Trust. Great Oaks Management is a member of the IAEA and was a plaintiff in

this action, but is not a party to this appeal. The Benefit Trust created an employee

welfare plan established for the purpose of providing welfare benefits to the employees of

its employer members. For purposes of this appeal we look only to allegations in the

complaint, and assume the plan constitutes a MEWA as defined in 29 U.S.C. § 1002(40).1

IAEA members may join the plan, which in turn provides employee benefits to plan

participants and their beneficiaries. All benefits from the Benefit Trust plan are

administered as one collective unit, and are funded by employer contributions to the trust.

The trustee, Mr. Fuller, administers the Benefit Trust plan subject to the oversight of a

Benefit Review Committee, elected by the employer members.

The Benefit Trust began soliciting members in Colorado and inquired of the

Colorado Division of Insurance (“Division”) how to obtain a certificate of insurance

allowing it to provide health benefits and workmen’s compensation benefits. Colorado

prohibits entities from conducting insurance activities without a certificate from the

Division, or providing workmen’s compensation benefits without complying with certain

1
Another court has found that this MEWA does not constitute an ERISA plan
because employers have a limited relationship with each other and little control over the
plan. See International Ass’n. of Entrepreneurs of America Benefit Trust v. Foster, 883
F. Supp. 1050, 1060-61 (E.D. Va. 1995).

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insurance requirements. The Commissioner of the Division notified the Benefit Trust

that it was unlawfully providing workmen’s compensation and other insurance benefits in

contravention of Colorado law. He ordered the Benefit Trust to cease and desist from

these prohibited activities and to submit documents relating to any “unauthorized

transaction of insurance.” Rather than complying with the order, the plaintiffs responded

by filing this suit. Plaintiffs requested a declaratory judgment that application of

Colorado insurance laws to MEWAs like the IAEA is preempted by federal ERISA

regulation, and alleged that Colorado’s MEWA regulation violates the Commerce and

Equal Protection clauses of the United States Constitution; they also asked the court to

enter an injunction to prohibit the Division from interfering with the plan’s activities in

Colorado.

Defendants filed a motion to dismiss for failure to state a claim, Fed. R. Civ. P.

12(b)(6), that was granted as to both defendants. With respect to defendant Norton, the

court found that the Colorado Attorney General has no initial responsibility for enforcing

Colorado's insurance or workmen's compensation laws. Plaintiff does not appeal that

dismissal.

The district court also dismissed the suit with respect to the Director of the

Division. The court first found that ERISA explicitly limited preemption of state

regulation of MEWAs, and created an exception for state regulation of workmen’s

compensation coverage; second, it held that Colorado's laws regulating MEWAs and

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workmen’s compensation fit within the exceptions and are not inconsistent with ERISA

regulation; and, finally, it held that Colo. Rev. Stat. § 10-3-903.5(7), which exempts from

much state insurance regulation qualified MEWAs that have been operating continuously

since 1983, is not inconsistent with ERISA provisions, primarily because this regulation

does not prohibit more recent MEWAs from operating in Colorado--it merely subjects

them to Colorado's insurance laws. Its order did not address plaintiffs’ constitutional

challenges. On appeal, Fuller renews each of the issues raised in the complaint.

II. DISCUSSION

We uphold a dismissal under Fed. R. Civ. P. 12(b)(6) only when it appears that

the plaintiff can prove no set of facts in support of the claims that would entitle him to

relief, accepting the well-pleaded allegations of the complaint as true and construing them

in the light most favorable to the plaintiff. Roman v. Cessna Aircraft Co., 55 F.3d 542,

543 (10th Cir. 1995). We review the district court’s legal rulings on ERISA preemption

de novo. Airparts Co. v. Custom Benefit Servs., Inc., 28 F.3d 1062, 1064 (10th Cir.

1994). Plaintiff’s attack on Colorado’s ability to regulate benefits offered by the Benefit

Trust plan takes three forms. First, he contends that Colorado’s workmen’s compensation

scheme is preempted from interfering with MEWA plans so long as the plans’ benefits

comply with minimum state requirements. Second, ERISA does not allow the state to

regulate MEWAs as insurance, and requirements of Colorado’s insurance regulation are

inconsistent with ERISA provisions. Third, even if Colorado’s MEWA regulatory

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scheme does not run afoul of ERISA, the MEWA regulation is unconstitutional as an

irrational classification under the Equal Protection Clause of the Fourteenth Amendment,

or a violation of reserved congressional power under the dormant Commerce Clause.

A. Are Colorado's restrictions on the provision of workmen’s compensation
benefits preempted by ERISA?

Colo. Rev. Stat. § 8-44-101 requires employers to provide workmen’s

compensation benefits through one of a number of mechanisms. Choices include

obtaining insurance through a state fund, insuring through a licensed insurance company,

or procuring a self-insurance permit from the director of insurance. Colo. Rev. Stat. § 8-

44-101(a)-(c). Plaintiff contends that the workmen’s compensation laws are inconsistent

with ERISA because they do not permit MEWAs to provide benefits that are expressly

contemplated by ERISA; for this reason, ERISA preempts application of these

requirements to the MEWA under review.

ERISA provides a complex and extensive preemption regime: “Except as provided

in subsection (b) of this section, the provisions of this subchapter and subchapter III of

this chapter shall supersede any and all State laws insofar as they may now or hereafter

relate to any employee benefit plan described in section 1003(a) of this title and not

exempt under section 1003(b) of this title.” 29 U.S.C. § 1144(a).2 A state law “relates

2
Section 1003(a), referred to in the various clauses of the preemption provision,
describes all ERISA benefit plans created or administered by private employers or labor
organizations, while § 1003(b) exempts from the operation of ERISA preemption a
narrow class of plans.

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to” an employee welfare plan if it has “a connection with or reference to such a plan.”

Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97 (1983). Preemption has been applied

very broadly, and prevents states from applying a wide body of law to employee benefit

plans, including laws that only indirectly affect ERISA plans. See Pilot Life Ins. Co. v.

Dedeaux, 481 U.S. 41, 45-46 (1987) (“[T]he express pre-emption provisions of ERISA

are deliberately expansive and designed to establish pension plan regulation as

exclusively a federal concern.” (quotation omitted)).

Exempted from ERISA preemption are laws regulating some arrangements that

constitute employee benefit plans, including plans “maintained solely for the purpose of

complying with applicable workmen’s compensation laws or unemployment

compensation laws or disability insurance laws.” 29 U.S.C. §§ 1003(b)(3), 1144(a). In

this case we review the relationship between the broad preemptive language in § 1144(a)

and Congress’s desire, reflected in § 1003(b), to leave to the states their traditional role in

regulating workmen’s compensation, disability, and unemployment benefits. We “must

presume that Congress does not intend to pre-empt areas of traditional state regulation”

when we determine the scope of express ERISA preemption. Metropolitan Life Ins. Co.

v. Massachusetts, 471 U.S. 724, 740 (1985) (citing Jones v. Rath Packing, Co., 430 U.S.

519, 525 (1977)). In Shaw, the Supreme Court held that New York State, through its

disability benefits law, could not regulate multibenefit plans offering disability benefits.

463 U.S. at 107-08. While the state cannot regulate the multibenefit plan itself, it may

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compel employers to choose to provide disability benefits comporting with state law

within a multibenefit plan or to create a separate plan that does comply. Id. at 108. While

specifically directed to regulation of disability benefits, Shaw applies with equal force in

the case of workmen’s compensation benefits. Employee Staffing Servs. v. Aubry, 20

F.3d 1038, 1041 (9th Cir. 1994)

Five circuits, including ours, have expressly held that ERISA does not preempt

state laws regulating workmen’s compensation, because these laws do not "relate to”

benefit plans. Contract Servs. Employee Trust v. Davis, 55 F.3d 533, 536 (10th Cir.

1995); Fuller v. Skornicka, 79 F.3d 685 (7th Cir. 1996); Employers Resource Mgmt. Co.

v. James, 62 F.3d 627 (4th Cir. 1995); Combined Mgmt. v. Superintendent of the Bureau

of Ins., 22 F.3d 1 (1st Cir.), cert. denied, 115 S. Ct. 350 (1994); Aubry, 20 F.3d at 1041.

While Contract Services did not specifically hold that a state has plenary authority to

regulate workmen’s compensation benefits offered under the MEWA umbrella, we

followed the analysis of the First and Ninth Circuits to hold that merely because state

regulation might have an economic impact on a multibenefit ERISA plan it does not

automatically “relate to” an ERISA plan. Contract Servs., 55 F.3d at 535-36. Moreover,

two of the cases from other circuits involved employers who procured workmen’s

compensation coverage through the IAEA. See Fuller, 79 F.3d at 686; Combined Mgmt.,

22 F.3d at 2. All five of these cases conclude that a multibenefit plan could not take

advantage of ERISA preemption to avoid state laws that would apply if the plan provided

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only workmen’s compensation benefits (see 29 U.S.C. § 1003(b)(3)), by placing these

benefits into a multibenefit plan. See, e.g., Contract Servs., 55 F.3d at 536. Our reasoning

in Contract Services applies with even greater force to multibenefit plans provided by

MEWAs, because Congress, in §1144(b)(6)(A), has already indicated a weaker

preemption interest, and a correspondingly stronger state regulation interest, in such

arrangements. See infra part B.1.

Plaintiff contends that these circuit cases misinterpret the exception to ERISA

application found in § 1003(b)(3) and the limited holding of Shaw. According to

plaintiff, Shaw stands for the proposition that §1003(b)(3) allows state law application

only to the portions of plans providing workmen’s compensation (or in Shaw, disability)

benefits that are inferior to state-mandated benefits. He alleges that the Benefit Trust plan

benefits meet the requirements of the Colorado scheme. Plaintiff misreads Shaw. There,

the Supreme Court expressly allowed New York to impose requirements on disability

benefits, whether or not the benefits were offered within multibenefit plans. 463 U.S. at

108. Laws insuring that benefits will be paid certainly must be considered

“requirements” of state workmen’s compensation law with which plan benefits must

comply. See id. Thus, consistent with our earlier ruling in Contract Services, we

conclude that Colorado's workmen’s compensation laws, including § 8-44-101, are not

preempted by ERISA as applied to MEWAs. The district court properly dismissed this

claim.

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 B. Preemption of Colorado’s MEWA Regulation

Plaintiff challenges Colorado's authority to apply its insurance laws to the Benefit

Trust plan by subjecting it to the jurisdiction of the Division. The relevant statute of

which plaintiff complains, Colo. Rev. Stat. § 10-3-903.5, reads:

Jurisdiction over providers of health care benefits. (1) Notwithstanding
any other provision of law, and except as provided in this section, any
person or other entity which provides coverage in this state for medical,
surgical, chiropractic, . . . dental, hospital, or optometric expenses, whether
such coverage is by direct payment, reimbursement, or otherwise, shall be
presumed to be subject to the jurisdiction of the division of insurance . . . .
(2) . . . Nothing in this section shall be construed to in any way limit the
ability of the division of insurance to regulate insurance companies,
multiple employer trusts, multiple employer welfare arrangements,
association health plans, or preferred provider organizations.

An entity falling within § 10-3-903.5 is subject to examination by the Division, and to “all

appropriate provisions [of Colorado insurance regulation] regarding the conduct of its

business.” Colo. Rev. Stat. § 10-3-903.5(3),(4).

Colorado has chosen to exempt certain qualifying MEWAs from direct regulation

by the Division. “The provisions of this section and any other laws of this state that

regulate insurance or insurance companies shall not apply to . . . any multiple employer

welfare arrangement which meets the requirements of paragraph (c).” Colo. Rev. Stat. §

10-3-903.5(7)(a). In order to qualify for the exemption from insurance laws a MEWA

must have been in existence since January 1, 1983, must comply with disclosure,

reporting, and funding requirements, and must be sponsored by an association that fulfills

certain membership and activity requirements. Colo. Rev. Stat. § 10-3-903.5(7)(c).

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Plaintiff admits the Benefit Trust plan is ineligible for the exemption described in § 10-3-

903.5(7)(c), but asserts that ERISA preempts Colorado’s attempt to regulate the Benefit

Trust through the Division.

By directly regulating MEWAs, Colo. Rev. Stat. § 10-3-903.5 clearly “relates to”

an employee benefit plan within the meaning of the ERISA preemption clause. 29 U.S.C.

§ 1144(a). This, however, only begins our inquiry. ERISA preemption, while broad, is

not absolute. Congress specifically excepted state laws regulating insurance. This

provision, commonly referred to as the "savings clause," states: "Except as provided in

subparagraph (B), nothing in this subchapter shall be construed to exempt or relieve any

person from any law of any State which regulates insurance, banking, or securities." 29

U.S.C. § 1144(b)(2)(A). The state power allowed by the savings clause is in turn limited

by the next subparagraph, known as the “deemer clause”:

Neither an employee benefit plan described in section 1003(a) of this title,
which is not exempt under section 1003(b) of this title (other than a plan
established primarily for the purpose of providing death benefits), nor any
trust established under such a plan, shall be deemed to be an insurance
company . . . or to be engaged in the business of insurance . . . for purposes
of any law of any State purporting to regulate insurance companies,
insurance contracts, banks, trust companies, or investment companies.

29 U.S.C. § 1144(b)(2)(B) (emphasis added). The combined effect of the savings and

deemer clauses is to allow state insurance regulation of general application, while

forbidding a state from applying such regulation to ERISA plans directly. FMC Corp. v.

Holliday, 498 U.S. 52, 61 (1990).

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 Finally, and most relevant to this discussion, ERISA allows state regulation of

MEWAs in specific situations, such as the one before us, by removing federal restriction.

The pertinent provision, applicable to MEWAs (which by definition provide welfare, not

pension, benefits), states:

(6)(A) Notwithstanding any other provision of this section--
(i) in the case of an employee welfare benefit plan which is a
multiple employer welfare arrangement and is fully insured (or
which is a multiple employer welfare arrangement subject to an
exemption under subparagraph (B)), any law of any State which
regulates insurance may apply to such arrangement to the extent that
such law provides--
(I) standards, requiring the maintenance of specified levels of
reserves and specified levels of contributions, which any such plan,
or any trust established under such a plan, must meet in order to be
considered under such law able to pay benefits in full when due, and
(II) provisions to enforce such standards, and

(ii) in the case of any other employee welfare benefit plan which is a
multiple employer welfare arrangement, in addition to this
subchapter, any law of any State which regulates insurance may
apply to the extent not inconsistent with the preceding sections of
this subchapter.

29 U.S.C. § 1144(b)(6)(A) (the "MEWA clause"). Because plaintiff admits that the

Benefit Trust plan is not "fully insured" as defined by ERISA, the extent of preemption

applied to Colorado's laws is determined by § 1144(b)(6)(A)(ii).

Plaintiff raises three arguments why Colorado’s MEWA regulation is not protected

from ERISA preemption by 29 U.S.C. § 1144(b)(6)(A)(ii): first, the deemer clause

forbids Colorado from “deeming” the Benefit Trust to be insurance for the purpose of

subjecting it to regulation by the Division, regardless of the MEWA clause; second, the

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MEWA clause does not exempt Colo. Rev. Stat. § 10-3-903.5 from preemption because it

is not a “law of any State which regulates insurance”; third, even if § 10-3-903.5 is a law

which regulates insurance, Colorado’s insurance scheme would subject the Benefit Trust

to laws “inconsistent” with ERISA.

1. Does Colorado Impermissibly “Deem” MEWAs to be Insurance?

While admitting that the MEWA clause allows states to apply insurance laws to

MEWAs, plaintiff nevertheless contends that states may not effectuate this regulation by

merely “deeming” MEWAs to be insurance arrangements. He argues that enactment of

the MEWA clause does not affect the operation of the deemer clause. At the outset, we

assume for purposes of this argument that by presumptively subjecting MEWAs to be

subject to the jurisdiction of the Division, Colo. Rev. Stat. § 10-3-903.5 “deems”

MEWAs to “be engaged in the business of insurance.” Our task, then, is to determine the

effect of the MEWA clause on the deemer clause.

In FMC Corp. v. Holliday, 498 U.S. 52 (1990), the Supreme Court held that the

deemer clause exempts self funded ERISA plans from state regulation “insofar as that

regulation ‘relates to’ the plans.” Id. at 61. On the other hand, state insurance laws

indirectly may regulate plans that are not self funded, because insured plans are bound by

state regulation insofar as the regulations apply to their insurers. Id. The Court drew this

distinction from Congress’s interest in creating national rules governing pension plans

and in avoiding “‘endless litigation over the validity of State action.’” Id. at 64-65

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(quoting 120 Cong. Rec. 29942 (1974) (remarks of Sen. Javits)).3

The MEWA provision was added in a 1983 amendment to ERISA. Pub. L. No.

97-473 (97th Cong., 2nd Sess.) (1983). The impetus behind the amendment was an

interest in curbing abuses by multiple employer trusts, which would claim ERISA

preemption when states attempted to regulate them as quasi-insurance companies. 129

Cong. Rec. 30356 (1982) (statement of Rep. Erlenborn). After thwarting state regulation,

some of these uninsured trusts declared bankruptcy, leaving employees responsible for

millions of dollars in unpaid hospital and medical bills. Id.; 129 Cong. Rec. 30355

(statement of Rep. Rostenkowski). The purpose of the amendment was to make clear the

extent to which state law is preempted with respect to employee benefit plans that are also

MEWAs. Id. at 30357. The result, as the Conference Report notes, is that “[i]n the case

of a multiple employer welfare arrangement that is not fully insured, the provision

exempts from ERISA preemption any state laws that regulate insurance. Notwithstanding

this provision, the Secretary is authorized to determine the extent to which the ERISA

preemption provision will be applied to a [MEWA] that is not fully insured.” H.R. Rep.

3
Until FMC, the scope of the deemer clause had been unclear. The provision was
interpreted by lower courts either to preempt only state regulation that, as a pretext for
regulating ERISA plans, purported to regulate the business of insurance, or, more
broadly, to any state insurance law that would apply to a self insured plan. Compare, e.g.,
Northern Group Servs., Inc. v. Auto Owners Ins. Co., 833 F.2d 85, 93 (6th Cir. 1987),
cert. denied, 486 U.S. 1017 (1988) with Mullenix v. Aetna Life and Cas. Ins. Co., 912
F.2d 1406 (11th Cir. 1990). FMC settled the question by adopting the latter
interpretation.

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97-984, at 19, reprinted in, 1982 U.S.C.C.A.N. at 4604.

The Second Circuit has held that the MEWA clause “authorizes states to regulate

MEWAs as insurance companies.” Atlantic Healthcare Benefits Trust v. Googins, 2 F.3d

1, 5 (2d Cir. 1993), cert. denied, 114 S. Ct. 689 (1994). Based on both the language and

structure of § 1144 and on the legislative history of the MEWA amendment, we agree.

The savings clause limits preemption of state insurance law to the extent it could be read

to “exempt or relieve any person from [state insurance law].” 29 U.S.C. § 1144(b)(2)(A)

(emphasis added). The deemer clause, in turn, qualifies the savings clause and insures

that states will not treat ERISA plans as “persons” subject to state laws enumerated in the

savings clause. Finally, the MEWA clause is a limited exception to the deemer clause,

and allows states to regulate MEWA-sponsored plans as if they were engaged in the

business of insurance.

In this fashion Congress satisfied its goal of reserving to the states regulation of

the business of insurance and protecting ERISA plans themselves from being subjected to

state and local regulation. See FMC Corp.. 498 U.S. at 61-65. This interest in protecting

plans from preemption is notably absent in the MEWA clause, which specifically

authorizes state regulation of MEWAs as insurance providers, even if the MEWA is an

employee benefit plan. 29 U.S.C. § 1144(b)(6)(A). Congress obviously viewed self

funded arrangements by multiple employers to be different, and less deserving of federal

preemption from state insurance regulators, than self funded plans by single employers.

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See Googins, 2 F.3d at 5. Finally, if MEWAs that are not fully insured cannot be deemed

to be insurance companies for the purpose of state insurance regulations, it is difficult to

understand exactly what the MEWA clause adds to the existing ERISA preemption

arrangement. We avoid interpreting statutes in a manner that makes any part superfluous.

See United States v. Nordic Village, Inc., 503 U.S. 30, 36 (1992).

2. Does Colo. Rev. Stat. § 10-3-903.5 Regulate Insurance?

For MEWAs that are not fully insured, as defined in ERISA, the state may apply

any "law of any State which regulates insurance . . . not inconsistent [with ERISA]." 29

U.S.C. § 1144(b)(6)(ii) (emphasis added). Plaintiff asserts that Colo. Rev. Stat. § 10-3-

903.5, which subjects MEWAs to the jurisdiction of the Division, is not a law which

“regulates insurance.” The term "law of any state which regulates insurance" has been

read in the context of the ERISA savings clause to be coextensive with the term as

defined by the McCarron-Ferguson Act, which cedes to the states extensive authority to

regulate the “business of insurance." Pilot Life, 481 U.S. 48. We see no reason to

believe Congress intended the term to be used differently in the context of the MEWA

clause. See Gustafson v. Alloyd Co., 115 S. Ct. 1061, 1067 (1995) (the normal rule of

statutory construction is that identical terms used in different parts of the same act are

intended to have the same meaning).

In Pilot Life, the Supreme Court developed a test, derived from Metropolitan Life

Insurance Co. v. Massachusetts, 471 U.S. 724 (1985), to determine whether a challenged

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state law regulates insurance for the purpose of ERISA preemption. Pilot Life, 481 U.S.

at 48. The court must first look to the "common-sense view" of whether the law is meant

to regulate insurance for the purposes of the ERISA preemption regime. Id. It then tests

this determination by reference to three criteria: "First, whether the practice has the effect

of transferring or spreading a policyholder's risk; second, whether the practice is an

integral part of the policy relationship between the insurer and the insured; and third,

whether the practice is limited to entities within the insurance industry." Id. at 48-49

(quotation omitted).

Colorado enacted Colo. Rev. Stat. § 10-3-903.5 to address what it perceived as an

insurance problem; specifically, the state believed that MEWA-type vehicles were

attempting to provide insurance services, and wanted to regulate these entities through its

insurance laws. Colorado’s approach is consistent with the intent of the MEWA clause.

The MEWA amendment’s sponsor in the House of Representatives viewed uninsured

MEWAs as thinly disguised insurance arrangements that properly should be regulated at

the state level. 129 Cong. Rec. 30356 (statement of Rep. Erlenborn). By subjecting

MEWAs to the jurisdiction of the Division, Colo. Rev. Stat. § 10-3-903.5 establishes the

equivalent of a licensing requirement. As another court has noted, licensing is integral to

regulating the insurance relationship; the licensure process precedes effective insurance

regulation. Foster, 883 F. Supp. at 1064. The Department of Labor, in an advisory

opinion to a state insurance regulator, agrees. See Dep’t of Lab. Advisory Op. 90-18A

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(July 2, 1990). Plaintiff does not point to any specific part of Colorado's insurance code--

to which the Benefit Trust plan would be subjected by § 10-3-903.5--that does not

regulate the business of insurance as contemplated by the McCarron-Ferguson Act. As

we have decided that a state may deem a MEWA to be subject to regulation as insurance,

the entire regulatory regime falls well within the Pilot Life test. We decline plaintiff’s

invitation to engage in a semantic absurdity by deciding that a law bringing an entity

under the umbrella of state insurance regulation is not itself a law regulating the “business

of insurance.”

3. Are Colorado's MEWA regulations "inconsistent" with ERISA
requirements because they require MEWA plans to comply with laws
designed for insurance companies?

The MEWA clause does not allow all state insurance regulations to apply to

MEWAs that are not fully insured. It permits only regulation that is "not inconsistent

with [ERISA provisions]." Plaintiff argues that Colorado laws intended for regulation of

insurance companies are inconsistent with ERISA. He contends that by forcing MEWAs

to adopt the structure of insurance entities, the Colorado regulations do not allow

MEWAs to provide benefits as MEWAs, as expressly permitted by ERISA. More

specifically, by being forced to become an insurance-type entity, the IAEA would be

forced to engage in a prohibited transaction as defined by § 406(a) of ERISA, 29 U.S.C. §

1106(a).4 Thus, plaintiff argues, the MEWA clause does not shield Colo. Rev. Stat. § 10-

4
Section 406(a) provides: "Except as provided in section 1108 of this title: (1) A
(continued...)

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3-903.5 from ERISA preemption.

Where state regulation is not entirely excluded by a federal framework, state

regulation is not "inconsistent” unless there is an actual conflict between federal and state

requirements. See Fidelity Federal Sav. v. De La Cuesta, 458 U.S. 141, 153 (1982)

(applying "inconsistency" test to different federal preemption issue). An "actual conflict"

is said to arise only when "compliance with both federal and state regulations is a physical

impossibility" or when state law "stands as an obstacle to the accomplishment and

execution of the full purposes and objectives of Congress." Id. A Department of Labor

advisory opinion is insightful; it concludes that a state insurance scheme effectively

prohibiting a MEWA from obtaining a certificate of authority to operate in the state

would be "inconsistent with" ERISA. Dep't of Lab. Advisory Op. 90-18A (July 2, 1990).

On the other hand, “it is the view of the Department that it would be contrary to

congressional intent to conclude that states, while having the authority to apply insurance

laws to such plans, do not have the authority to require and enforce registration, licensing,

reporting and similar requirements necessary to establish and monitor compliance with

4
(...continued)
fiduciary with respect to a plan shall not cause the plan to engage in a transaction, if he
knows or should know that such transaction constitutes a direct or indirect-- (D) transfer
to, or use by or for the benefit of, a party in interest, of any assets of the plan." 29 U.S.C.
§ 1106(a)(1)(D). A "party in interest" includes "an employer any of whose employees are
covered under the plan." 29 U.S.C. § 1002(14)(c).

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those laws.” Id.5

Plaintiff appears to argue that through merely subjecting MEWAs to regulation by

the Division, § 10-3-903.5 is inconsistent with ERISA because Colorado might require it

to engage in practices prohibited by ERISA or, conversely, prohibit practices specifically

allowed by ERISA.6 He does not present facts, however, that suggest the Benefit Trust

will be required to become an insurance entity in contravention of ERISA, that it is being

subjected to laws with which it cannot comply, or that it will be unable to get a certificate

of compliance from the Division.7 Under Fed. R.Civ. P. 12(b)(6), we evaluate all well

5
Although a Department of Labor advisory opinion is binding only on the parties
to whom it is addressed and has no precedential effect, see ERISA Proc. 76-1, § 10, the
opinion of an agency charged with administering a statute can, in appropriate
circumstances, provide guidance to a court. Federal Elec. Comm’n v. Colorado
Republican Party Fed. Campaign Comm’n., 59 F.3d 1015, 1021 (10th Cir. 1995), cert.
granted, 116 S. Ct. 689 (Jan. 6, 1996); see also Wisconsin Educ. Assn. Ins. Trust v. Iowa
State Board of Public Instruction, 804 F.2d 1059, 1065 (8th Cir. 1986) (“situations exist
where it is prudent to consult the expert opinion of the Department of Labor in construing
the statutory meaning of an [ERISA term]”). In this case, the Department’s advisory
opinion is valuable both because the circumstances in this case almost mirror those
described in the advisory opinion, and because of the important role the Department of
Labor has in granting exemptions from state regulation to MEWAs that are not fully
insured. See 29 U.S.C. § 1144(b)(6)(B).
6
Plaintiff presents a strained argument that because Colorado law prohibits that
which ERISA permits, the laws are inconsistent. ERISA contemplates such an approach
by the state. For example, 29 U.S.C. § 1144(b)(6)(A) specifically allows state regulation
of even fully insured MEWAs in a manner more strict than ERISA would require. Under
ERISA, welfare benefit plans are not subject to funding requirements, but under §
1144(b)(6)(A)(i)(I) states may require "maintenance of specified levels of reserves and
specified levels of contributions."
7
Nothing in the record suggests that the Benefit Trust will be unable to procure a
(continued...)

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pleaded facts--not conclusory allegations. Jojola v. Chavez, 55 F.3d 488, 494 n.8 (10th

Cir. 1995). Without pointing to specific conflicting regulations, plaintiff is reduced to

asserting, without factual support, that ERISA and the Colorado insurance code are in

conflict. Absent these conclusory allegations, it appears that plaintiff’s argument rests on

the proposition that it is unlawful to deem a MEWA to be engaged in the business of

insurance. We disagree. As discussed above, the MEWA clause contemplates states

deeming MEWAs to be engaged in the business of insurance.8

Plaintiff’s suggestion that by requiring MEWAs to form or buy a wholly-owned

insurance company, Colorado may force the plan to engage in a transaction prohibited by

ERISA, see 29 U.S.C. § 1106(a), again asks us to speculate beyond the complaint.

Colorado's licensing scheme, which merely requires MEWAs to be subject to the

jurisdiction of the division of insurance, cannot be read to include a requirement that a

MEWA become an entity repugnant to ERISA.9 We are unwilling to preempt Colo. Rev.

7
(...continued)
certificate; the cease and desist order merely characterizes the plan’s activities as the
“unauthorized transaction of insurance.”
8
Plaintiff does suggest that by exempting MEWAs in existence since 1983, §
10-3-903.5(7), Colorado effectively outlaws more recent MEWAs from operating in the
state. A plain reading of § 10-3-903.5 does not support this proposition. The exemption
for MEWAs that have operated since 1983 does not prohibit more recent MEWAs from
operating in Colorado, it merely requires them to be subject to the jurisdiction and
examination powers of the Division.
9
In any event, it is unclear to us why ERISA would prevent the Benefit Trust,
which is an independent trust, from being required to become an insurance entity. See 29
(continued...)

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Stat. § 10-3-903.5 based on speculation that at some future point the Division may

attempt to impose state requirements putting the Benefit Trust in violation of ERISA.

C. Does Colo. Rev. Stat. § 10-3-903.5 Create an Irrational Classification?

Plaintiff argues that Colorado's MEWA regulatory regime creates an irrational

classification, thus violating the Equal Protection Clause. See Nordlinger v. Hahn, 505

U.S. 1, 10 (1992) (under rational basis review, “the Equal Protection Clause requires only

that the classification rationally further a legitimate state interest”). Specifically, he

complains that MEWAs established after 1982 are prohibited from providing benefits as

MEWAs, but must become insurance-type entities. See Colo. Rev. Stat. §10-3-

903.5(7)(c)(I). Defendants defend the classification, arguing that MEWAs established

after 1982 can provide benefits in Colorado, but must submit to the panoply of insurance

regulation. MEWAs established before 1983 are exempted from insurance regulation

because the MEWA clause amending ERISA was added in 1983. Pub. L. No. 94-473, §

302(b) (96 Stat. 2613) (1983). The state therefore justifies the classification as a

grandfathering provision established to protect the reasonable expectations of plans

created before states’ rights were clarified with respect to MEWAs.

We do not reach the substance of plaintiff’s equal protection challenge because

he lacks Article III standing to raise it. The “constitutional minimum of standing,” in

9
(...continued)
U.S.C. § 1104(a)(1)(A)(ii) (fiduciary may use assets of plan to defray the reasonable
expenses of administering the plan); Googins, 2 F.3d at 6 (MEWA plan’s funds may be
used to comply with state regulatory expenses).

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addition to requiring the plaintiff to allege an actual or imminent invasion of a legally

protectable interest “fairly traceable” to the challenged action, requires a showing that it is

“‘likely,’ as opposed to merely ‘speculative,’ that the injury will be ‘redressed by a

favorable decision.’” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61

(1992)(quoting Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, 38, 41-43

(1976)). Based on the complaint, it is clear that any claimed equal protection injury to the

Benefit Trust plan cannot be “redressed by a favorable decision.”

Subsection (7)(c)(V)(C) of the Colorado statute requires MEWAs exempt from

direct insurance regulation, in addition to having been in existence since 1982, to “be

sponsored and maintained by an association which . . . . [h]as been in existence for a

period of at least ten years.” Colo. Rev. Stat. § 10-3-903.5(7)(c)(V)(C). Plaintiff admits

the IAEA was formed in 1992, but does not challenge the ten year requirement. Even if

we were to strike the challenged provision, the Benefit Trust plan still would not fulfill

the remaining requirements of the Colorado statute, and could not benefit from our

decision.10 We thus dismiss this claim for lack of jurisdiction. See Clajon Prod. Corp. v.

10
Northeastern Florida Contractors v. Jacksonville, 113 S. Ct. 2297 (1993) does
not suggest a different result. In that case, the Court held that a plaintiff challenging
under the Equal Protection Clause a legal barrier to compete for a government contract,
need not show that in the absence of the challenged provision he would have been
awarded the contract, only that he would have qualified for the opportunity to bid for it.
113 S. Ct. at 2303. Here, even if we struck down the requirement that the Benefit Trust
have existed since 1983, the plan still would not have the opportunity to qualify for the
Colorado exemption for pre-1983 MEWAs because its sponsoring association is, by
plaintiff’s own account, less than ten years old.

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Petera, 70 F.3d 1566, 1574 (10th Cir. 1995).

D. Does Colorado's law requiring MEWAs to comply with the
state's insurance regulations violate the Commerce Clause?

Plaintiff asserts that Colorado's workmen’s compensation laws and insurance laws,

as applied to prohibit MEWAs from doing business in Colorado, violate the dormant

Commerce Clause because they act to keep multistate MEWAs out of Colorado. The

Commerce Clause provides that “Congress shall have Power . . . to regulate Commerce . .

. among the several States. U.S. Const., Art. I, § 8, cl. 3. Even absent congressional

action, the courts may decide that state regulations challenged under the Commerce

Clause impermissibly burden interstate commerce. See, e.g., Philadelphia v. New Jersey,

437 U.S. 617 (1978). The Supreme Court has specifically held that Congress removed all

Commerce Clause limitations on state regulation of "the business of insurance" by

passing the McCarran-Ferguson Act. Western and Southern Life Ins. Co. v. State Bd. of

Equalization, 451 U.S. 648, 653 (1981). Plaintiff’s only response is to argue, without

authority, that ERISA preemption somehow has carved out a new area for the dormant

Commerce Clause to work. In light of the Supreme Court cases that specifically look to

the McCarron-Ferguson Act in interpreting the scope of ERISA preemption, see, e.g.,

Pilot Life, 481 U.S. at 48-49, it is implausible to suggest that Congress silently intended

to deny states power to effectuate their insurance laws, while expressly allowing such

regulation in the ERISA scheme. Because Colo. Rev. Stat. § 10-3-903.5 regulates the

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"business of insurance" within the meaning of the McCarron-Ferguson Act, it falls

outside the sphere of exclusive federal regulation reserved by Congress.

CONCLUSION

When Congress amended ERISA to include provisions allowing for state MEWA

regulation, it envisioned that states would regulate these arrangements as insurance.

Plaintiff complains because Colorado has done just that. The district court properly

dismissed the complaint, and its judgment is AFFIRMED.

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