April 16, 1980 – Standard Oil Company of California v. Agsalud, 633 F.2d 760 (9th Cir. 1980) is argued before the U.S. Court of Appeals for the Ninth Circuit. A case that would have been lost to obscurity has been resurrected by the Affordable Care Act.
In 1974, Hawaii enacted the Hawaii Prepaid Health Care Act. It required employers in Hawaii to provide their workers with a comprehensive prepaid health care plan. At the time, Standard Oil was a substantial employer in Hawaii who provided their employees with a self-funded health care plan which complied with ERISA but did not comply with all provisions in Hawaii’s Act.
On Dec. 7, 1976, Standard Oil filed a lawsuit in the U.S. District Court for the Northern District of California, challenging Hawaii’s Act. The district court found in favor of Standard Oil, deciding that ERISA preempts Hawaii’s Act, and Hawaii appealed to the 9th Circuit.
Hawaii raised a number of issues on appeal, including that the 10th Amendment to the U.S. Constitution prohibited ERISA preempting Hawaii’s statute. The 9th Circuit disagreed, and affirmed the district court’s decision on Oct. 15, 1980. Finding that Hawaii’s act directly and expressly regulates employers and the benefits they provide employees, the 9th Circuit determined Hawaii’s Act related to employee benefit plans within the meaning of ERISA’s broad preemption provision, and therefore was preempted by ERISA.
Carol K. Yamamoto and Mario R. Ramil represented the State of Hawaii before the 9th Circuit.
Ronald Y. Amemiya, Edward H. Nakamura, Linda K.C. Luke, Philip S. Uesato and Mario R. Ramil represented the State of Hawaii before the U.S. District Court for the Northern District of California.
Michael H. Salinsky represented the Standard Oil Company of California before the 9th Circuit.
Parker A. Maddux and Woodrow R. Cossey represented the Standard Oil Company of California before the U.S. District Court for the Northern District of California.
In 1983, Congress granted an express waiver from ERISA’s preemption provisions to Hawaii specifically for the Hawaii Prepaid Health Care Act. Section 301 of the Periodic Payment Settlement Tax Act of 1982, Pub. L. 97-473, added ERISA section 514(b)(5) (29 U.S.C. 1144(b)(5)(A)), which states:
(5)(A) Except as provided in subparagraph (B), subsection (a) of this section shall not apply to the Hawaii Prepaid Health Care Act (Haw. Rev. Stat. Secs. 393-1 through 393-51).
In 2010, Congress included a reference to Hawaii’s Act in the Patient Protection and Affordable Care Act (PPACA) and in the Health Care and Education Reconciliation Act of 2010 (HCERA), collectively known as the Affordable Care Act. Section 1560 of PPACA states:
(b) Rule of Construction Regarding Hawai’i's Prepaid Health Care Act.–Nothing in this title (or an amendment madc by this title) shall be construed to modify or limit the application of the exemption for Hawai’i's Prepaid Health Care Act (Haw. Rev. Stat. 393-1 et seq.) as provided for under section 514(b)(5) of the Employee Retirement Income Security Act of 1974 (29 V.S.c. § I I 44(b)(5)).