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The ERISA Working Group, a division of the National Association of Insurance Commissioners (NAIC), is considering establishing a drafting group to address the Employee Retirement Income Security Act (ERISA) preemption of state pharmacy benefit manager (PBM) laws. The NAIC has called for interested insurance regulators to contact them. If the NAIC follows through with its intentions, state insurance regulators could give their input on the complex relationship between ERISA and state PBM laws and regulations.
PBMs assist health insurance companies, employer self-insured health plans, and other similar entities in operating prescription drug plans and negotiating lower prices for prescription drugs. Critics of PBMs, which include pharmacy groups and drug manufacturers, claim the three largest PBMs use their relationships to increase employers' pharmacy benefits costs and retain the profits. In response, PBMs claim that their critics are envious of their success in holding down drug costs and reducing other entities' profit margins.
An ERISA provision preempts state laws that attempt to regulate ERISA-governed employee benefit plans. The preemption provision makes it difficult for the states to take any action to regulate self-insured health plans or plan administrators. Instead, parties are supposed to address any concerns they may have with the Employee Benefits Security Administration (EBSA), a division of the U.S. Department of Labor (DOL).
The U.S. Supreme Court issued a 2020 decision in Rutledge v. Pharmaceutical Care Management Association, which permits states to establish some regulation of PBMs. In that case, the high Court approved the ability of Arkansas to set rules that affect PBM activities without directly relating to ERISA-governed plans. However, in 2025, the Supreme Court passed on the chance to review a decision of the U.S. Court of Appeals for the Tenth Circuit that upheld the PBMs' challenge to an Oklahoma PBM law. That action left PBMs and state insurance regulators unclear about what PBM laws might be permissible.
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