You asked if insurers or employers can require a person covered by a health care benefit plan to use a mail order prescription program.

SUMMARY

State law prohibits a group medical benefits contract, whether issued by an insurance company, a hospital or medical service corporation, or a health care center (i.e., HMO), that provides coverage for prescription drugs to require a person covered under the contract to obtain prescription drugs from a mail order pharmacy as a condition of obtaining drug benefits (CGS § 38a-544).

However, the state does not have jurisdiction over self-insured plans due to a federal law that preempts state law. Thus, an employer that offers employees health care benefits under a self-insured plan may establish a mandatory mail order prescription drug program.

SELF-INSURED PLAN AND ERISA PREEMPTION

A self-insured plan is one that is not backed by an insurance policy. The employer instead funds and administers its benefit plan (i.e., pays claims covered by the benefit plan from its own money; it takes on the claim risk). The employer may outsource or delegate the plan administration to a third-party administer (TPA) (often an insurance company), but this TPA does not provide the employer with any financial backing or assume any financial risk associated with the claims.

Federal law, the Employee Retirement Income Security Act of 1974 (ERISA), as amended from time to time, governs employee welfare plans (including health care coverage plans).  It specifically permits states to regulate the “business of insurance” but then exempts self-insured plans from such state regulation, saying that self-insured plans are not insurance.  Thus, states cannot regulate plans that are self-insured.  (The self-insured plans must follow the ERISA requirements for reporting, plan documents, benefits, and fiduciary duties.)

See OLR Research Report 2005-R-0753 for additional details on ERISA and its preemption of state benefit mandates.

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