New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co.

OCTOBER TERM, 1994

															Syllabus

															NEW YORK STATE CONFERENCE OF BLUE CROSS & BLUE SHIELD PLANS
ET AL. v. TRAVELERS INSURANCE CO. ET AL. CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND
CIRCUIT

															No. 93-1408. Argued January 18, 1995-Decided April 26, 1995*

															A New York statute requires hospitals to collect surcharges from
patients covered by a commercial insurer but not from patients
insured by a Blue Cross/Blue Shield plan, and also subjects certain
health maintenance organizations (HMO's) to surcharges. Several
commercial insurers and their trade associations filed actions
against state officials, claiming that § 514(a) of the Employee
Retirement Income Security Act of 1974 (ERISA)-under which state
laws that "relate to" any covered employee benefit plan are
superseded-pre-empts the imposition of surcharges on bills of
patients whose commercial insurance coverage is purchased by an
ERISA plan, and on HMO's insofar as their membership fees are paid
by an ERISA plan. Blue Cross/Blue Shield plans (collectively the
Blues) and a hospital association intervened as defendants, and
several HMO's and an HMO conference intervened as plaintiffs. The
District Court consolidated the actions and granted the plaintiffs
summary judgment. The Court of Appeals affirmed, relying on this
Court's decisions in Shaw v. Delta Air Lines, Inc., 463 U. S. 85 , and District of Columbia v. Greater Washington Ed. of
Trade, 506 U. S.
125 , holding that ERISA's pre-emption clause must be read
broadly to reach any state law having a connection with, or
reference to, covered benefit plans. The court decided that the
surcharges were meant to increase the costs of certain insurance
and HMO health care and held that this purposeful interference with
the choices that ERISA plans make for health care coverage
constitutes a "connection with" ERISA plans triggering
pre-emption. Held: New York's surcharge provisions do not "relate to"
employee benefit plans within the meaning of § 514(a) and, thus,
are not pre-empted. Pp. 654-668.

															*Together with No. 93-1414, Pataki, Governor of New York, et al.
v.

															Travelers Insurance Co. et al., and No. 93-1415, Hospital
Association of New York State v. Travelers Insurance Co. et al.,
also on certiorari to the same court. 646 646 NEW YORK STATE CONFERENCE OF BLUE CROSS & BLUE SHIELD
PLANS v. TRAVELERS INS. CO. Syllabus

															(a) Under Shaw, supra, the provisions "relate to" ERISA
plans if they have a "connection with," or make "reference to," the
plans. They clearly make no reference to ERISA plans, and ERISA's
text is unhelpful in determining whether they have a "connection
with" them. Thus, the Court must look to ERISA's objectives as a
guide to the scope of the state law that Congress understood would
survive. Pp. 654-656.

															(b) The basic thrust of the pre-emption clause was to avoid a
multiplicity of regulation in order to permit the nationally
uniform administration of employee benefit plans. Thus, ERISA
pre-empts state laws that mandate employee benefit structures or
their administration as well as those that provide alternative
enforcement mechanisms. The purpose and effects of New York's
statute are quite different, however. The principal reason for
charge differentials is that the Blues provide coverage to many
subscribers whom the commercial insurers would reject. Since the
differentials make the Blues more attractive, they have an indirect
economic effect on choices made by insurance buyers, including
ERISA plans. However, an indirect economic influence does not bind
plan administrators to any particular choice or preclude uniform
administrative practice or the provision of a uniform interstate
benefit package. It simply bears on the costs of benefits and the
relative costs of competing insurance to provide them. Cost
uniformity almost certainly is not an object of pre-emption. Rate
differentials are common even in the absence of state action, and
therefore it is unlikely that ERISA meant to bar such indirect
influences under state law. The existence of other common state
actions with indirect economic effects on a plan's cost-such as
quality control standards and workplace regulation-leaves the
intent to pre-empt even less likely, since such laws would have to
be superseded as well. New York's surcharges leave plan
administrators where they would be in any case, with the
responsibility to choose the best overall coverage for the money,
and thus they do not bear the requisite "connection with" ERISA
plans to trigger pre-emption. Pp. 656-662.

															(c) This conclusion is confirmed by the decision in Mackey v. Lanier Collection Agency & Service,
Inc., 486 U. S.
825 , that ERISA preemption falls short of barring application
of general state garnishment statutes to participants' benefits in
the hands of an ERISA plan. And New York's surcharges do not impose
the kind of substantive coverage requirement binding plan
administrators that was at issue in Metropolitan Life Ins.
Co. v. Massachusetts, 471 U. S. 724 , since they
do not require plans to deal with only one insurer or to insure
against an entire category of illnesses the plans might otherwise
choose not to cover. Pp. 662-664. 647 (d) Any conclusion other than the one drawn here would have the
unsettling result of barring any state regulation of hospital costs
on the theory that all laws with indirect economic effects on ERISA
plans are pre-empted. However, there is no hint in ERISA's
legislative history or elsewhere that Congress intended to squelch
the efforts of several States that were regulating hospital charges
to some degree at the time ERISA was passed. Moreover, such a broad
interpretation of § 514 would have rendered nugatory an entire
federal statute-enacted after ERISA by the same Congress-that gave
comprehensive aid to state health care rate regulation. Pp.
664-667.

															(e) In reaching this decision, the Court does not hold that
ERISA pre-empts only direct regulation of ERISA plans. It is
possible that a state law might produce such acute, albeit
indirect, economic effects as to force an ERISA plan to adopt a
certain scheme of coverage or effectively restrict its choice of
insurers, but such is not the case here. P.668. 14 F.3d
708 , reversed and remanded.

															SOUTER, J., delivered the opinion for a unanimous Court. M. Patricia Smith, Assistant Attorney General of New
York, argued the cause for petitioners in all cases. With her on
the briefs for petitioners in No. 93-1414 were G. Oliver
Koppell, Attorney General, Jerry Boone, Solicitor
General, Peter H. Schiff and Andrea Green, Deputy
Solicitors General, and Jane Lauer Barker, Assistant
Attorney General. Robert A. Bicks, Patricia Anne Kuhn, Alan C. Drewsen, Jeffrey D. Chansler, Bartley J. Costello III, Eileen M. Considine, and Beverly
Cohen filed briefs for petitioners in No. 93-1408. Jeffrey J. Sherrin, Philip Rosenberg, and H. Bartow Farr III filed briefs for petitioner in No.
93-1415.

															Deputy Solicitor General Kneedler argued the cause for the
United States as amicus curiae urging reversal. With him on the
brief were Solicitor General Days, James A. Feldman, Allen H.
Feldman, Nathaniel 1. Spiller, and Judith D. Heimlich. Craig P. Murphy argued the cause for respondents
Travelers Insurance Co. et al. in all cases. With him on the brief
were Darrell M. Joseph, Stephen M. Shapiro, Kenneth S. 648 648 NEW YORK STATE CONFERENCE OF BLUE CROSS & BLUE SHIELD
PLANS v. TRAVELERS INS. CO. Counsel

															Geller, Andrew J. Pincus, Charles Rothfeld, Donald M.
Falk, Zoe Baird, Theresa L. Sorota, Philip E. Stano, and Raymond A.
d'Amico. Harold N. Iselin argued the cause for respondents New York
State Health Maintenance Organization Conference et al. in all
cases. With him on the brief were Wendy L. Ravitz and Glen D.
Nager. t

															t Briefs of amici curiae urging reversal were filed for
the State of Minnesota et al. by Hubert H. Humphrey III, Attorney General of Minnesota, and Richard S. Slowes, Assistant Attorney General, Richard Blumenthal, Attorney
General of Connecticut, and Phyllis E. Hyman, Assistant
Attorney General, J. Joseph Curran, Jr., Attorney
General of Maryland, and Stanley Lustman and Elizabeth M.
Kameen, Assistant Attorneys General, Roland W Burris, Attorney General of Illinois, Pamela Carter, Attorney
General of Indiana, Scott Harshbarger, Attorney General of
Massachusetts, Jeremiah W (Jay) Nixon, Attorney General of
Missouri, Joseph P. Mazurek, Attorney General of Montana, Ernest D. Preate, Jr., Attorney General of Pennsylvania, Dan Morales, Attorney General of Texas, Darrell V.
McGraw, Jr., Attorney General of West Virginia, and Joseph
B. Meyer, Attorney General of Wyoming; for the American
Federation of State County and Municipal Employees, AFL-CIO, by Larry P. Weinberg, John C. Dempsey, Robert M. Weinberg,
Ian D. Lanoff, and Andrew D. Roth; for the American
Hospital Association et al. by Peter F. Nadel,
Margaret J. Hardy, William T. McGrail, and Dorothy Grandolfi Wagg; and for the National Governors'
Association et al. by Richard Ruda and Lee
Fennell. Briefs of amici curiae urging affirmance were filed for
the Association of Private Pension and Welfare Plans et al. by Edward R. Mackiewicz; for Group Health Association of
America, Inc., by Alan J. Davis and Brian
D. Pedrow; for the Federation of American Health Systems by Carl Weissburg and Robert E. Goldstein; for the
National Carriers' Conference Committee by Benjamin W Boley,
David P. Lee, and William H. Dempsey; for the National
Coordinating Committee for Multiemployer Plans by Gerald M.
Feder and Diana L. S. Peters; for the NYSA-ILA
Welfare Fund et al. by C. Peter Lambos, Donato Caruso, Thomas W
Gleason, Ernest L. Mathews, Jr., and Kevin Marrinan; and
for the Trustees of and the Pension Hospitalization Benefit Plan of
the Electrical Industry et al. by Edward J. Groarke. Briefs of amici curiae were filed for the International
Foundation of Employee Benefit Plans by Paul J. Ondrasik, Jr., and Sara E. Hauptfuehrer; and for the
Self-Insurance Institute of America, Inc., by George J. Pantos. 649 JUSTICE SOUTER delivered the opinion of the Court.

															A New York statute requires hospitals to collect surcharges from
patients covered by a commercial insurer but not from patients
insured by a Blue Cross/Blue Shield plan, and it subjects certain
health maintenance organizations (HMO's) to surcharges that vary
with the number of Medicaid recipients each enrolls. N. Y. Pub.
Health Law § 2807-c (McKinney 1993). These cases call for us to
decide whether the Employee Retirement Income Security Act of 1974
(ERISA), 88 Stat. 829, as amended, 29 U. S. C. § 1001 et
seq. (1988 ed. and Supp. V), pre-empts the state provisions for
surcharges on bills of patients whose commercial insurance coverage
is purchased by employee health-care plans governed by ERISA, and
for surcharges on HMO's insofar as their membership fees are paid
by an ERISA plan. We hold that the provisions for surcharges do not
"relate to" employee benefit plans within the meaning of ERISA's
preemption provision, § 514(a), 29 U. S. C. § 1144(a), and
accordingly suffer no pre-emption.

															I A

															New York's Prospective Hospital Reimbursement Methodology
(NYPHRM) regulates hospital rates for all in-patient care, except
for services provided to Medicare beneficiaries.1 N. Y. Pub. Health
Law § 2807-c (McKinney 1993).2 The scheme calls for patients to be
charged not for the cost of their individual treatment, but for the
average cost of treating the patient's medical problem, as
classified under one or another of 794 Diagnostic Related Groups
(DRG's). The

															1 Medicare rates are set by the Federal Government unless States
obtain an express authorization from the United States Department
of Health and Human Services. See 42 U. S. C. § 1395 et
seq.; see also Part II-D, infra. 2 References are made to the laws of New York as they stood at
the times relevant to this litigation. 650 650 NEW YORK STATE CONFERENCE OF BLUE CROSS & BLUE SHIELD
PLANS v. TRAVELERS INS. CO. charges allowable in accordance with DRG classifications are
adjusted for a specific hospital to reflect its particular
operating costs, capital investments, bad debts, costs of charity
care, and the like.

															Patients with Blue Cross/Blue Shield coverage, Medicaid
patients, and HMO participants are billed at a hospital's DRG rate.
N. Y. Pub. Health Law § 2807-c(1)(a); see also Brief for
Petitioners Pataki et al. 4.3 Others, however, are not. Patients
served by commercial insurers providing inpatient hospital coverage
on an expense-incurred basis, by self-insured funds directly
reimbursing hospitals, and by certain workers' compensation,
volunteer firefighters' benefit, ambulance workers' benefit, and
no-fault motor vehicle insurance funds, must be billed at the DRG
rate plus a 13% surcharge to be retained by the hospital. N. Y.
Pub. Health Law § 2807-c(1)(b). For the year ending March 31, 1993,
moreover, hospitals were required to bill commercially insured
patients for a further 11% surcharge to be turned over to the
State, with the result that these patients were charged 24% more
than the DRG rate. § 2807-c(11)(i).

															New York law also imposes a surcharge on HMO's, which varies
depending on the number of eligible Medicaid recipients an HMO has
enrolled, but which may run as high as 9% of the aggregate monthly
charges paid by an HMO for its members' in-patient hospital care.
§§ 2807-c(2-a)(a) to (2-a)(e). This assessment is not an increase
in the rates to be paid by an HMO to hospitals, but a direct
payment by the HMO to the State's general fund.

															B

															ERISA's comprehensive regulation of employee welfare and pension
benefit plans extends to those that provide "medical, surgical, or
hospital care or benefits" for plan par-

															3 Under certain circumstances, New York law permits HMO's to
negotiate their own hospital payment schedules subject to state
approval. § 2807-c(2)(b)(i). 651 ticipants or their beneficiaries "through the purchase of
insurance or otherwise." § 3(1), 29 U. S. C. § 1002(1). The federal
statute does not go about protecting plan participants and their
beneficiaries by requiring employers to provide any given set of
minimum benefits, but instead controls the administration of
benefit plans, see § 2, 29 U. S. C. § 1001(b), as by imposing
reporting and disclosure mandates, §§ 101-111, 29 U. S. C. §§
1021-1031, participation and vesting requirements, §§201-211, 29 U.
S. C. §§ 1051-1061, funding standards, §§ 301-308, 29 U. S. C. §§
1081-1086, and fiduciary responsibilities for plan administrators,
§§ 401-414, 29 U. S. C. §§ 1101-1114. It envisions administrative
oversight, imposes criminal sanctions, and establishes a
comprehensive civil enforcement scheme. §§ 501-515, 29 U. S. C. §§
11311145. It also pre-empts some state law. § 514, 29 U. S. C. §
1144.

															Section 514(a) provides that ERISA "shall supersede any and all
State laws insofar as they ... relate to any employee benefit plan"
covered by the statute, 29 U. S. C. § 1144(a), although pre-emption
stops short of "any law of any State which regulates insurance." §
514(b)(2)(A), 29 U. S. C. § 1144(b)(2)(A). (This exception for
insurance regulation is itself limited, however, by the provision
that an employee welfare benefit plan may not "be deemed to be an
insurance company or other insurer ... or to be engaged in the
business of insurance .... " § 514(b)(2)(B), 29 U. S. C. §
1144(b)(2)(B).) Finally, ERISA saves from pre-emption "any
generally applicable criminal law of a State." § 514(b)(4), 29 U.
S. C. § 1144(b)(4).

															C

															On the claimed authority of ERISA's general pre-emption
provision, several commercial insurers, acting as fiduciaries of
ERISA plans they administer, joined with their trade associations
to bring actions against state officials in United States District
Court seeking to invalidate the 13%, 11%, and 652 652 NEW YORK STATE CONFERENCE OF BLUE CROSS & BLUE SHIELD
PLANS v. TRAVELERS INS. CO. 9% surcharge statutes. The New York State Conference of Blue
Cross and Blue Shield plans, Empire Blue Cross and Blue Shield
(collectively the Blues), and the Hospital Association of New York
State intervened as defendants, and the New York State Health
Maintenance Organization Conference and several HMO's intervened as
plaintiffs. The District Court consolidated the actions and granted
summary judgment to the plaintiffs. Travelers Ins. Co. v. Cuomo, 813 F. Supp. 996 (SDNY 1993). The court found that
although the surcharges "do not directly increase a plan's costs or
[a]ffect the level of benefits to be offered" there could be
"little doubt that the [s]urcharges at issue will have a
significant effect on the commercial insurers and HMOs which do or
could provide coverage for ERISA plans and thus lead, at least
indirectly, to an increase in plan costs." Id., at 1003
(footnote omitted). It found that the "entire justification for the
[s]urcharges is premised on that exact result-that the [s]urcharges
will increase the cost of obtaining medical insurance through any
source other than the Blues to a sufficient extent that customers
will switch their coverage to and ensure the economic viability of
the Blues." Ibid. (footnote omitted). The District Court
concluded that this effect on choices by ERISA plans was enough to
trigger pre-emption under § 514(a) and that the surcharges were not
saved by § 514(b) as regulating insurance. Id., at
1003-1008. The District Court accordingly enjoined enforcement of
"those surcharges against any commercial insurers or HMOs in
connection with their coverage of ... ERISA plans." Id., at
1012.4

															4 The District Court and the Court of Appeals both held that the
injunctive remedy was not prohibited by the Tax Injunction Act, 28
U. S. C. § 1341, which provides that federal district courts "shall
not enjoin, suspend or restrain the assessment ... of any tax under
State law where a plain, speedy and efficient remedy may be had in
the courts of such State." Although these courts considered the
surcharges to be taxes, they found no "plain, speedy and efficient
remedy" to exist in state court, since ERISA § 502(e), 29 U. S. C.
§ 1132(e)(1) (1988 ed., Supp. V), divests state courts of
jurisdiction over such claims. See 813 F. Supp., at 1000-1001; 653 The Court of Appeals for the Second Circuit affirmed, relying on
our decisions in Shaw v. Delta Air Lines, Inc., 463 U. S. 85 (1983), and District of Columbia v. Greater
Washington Bd. of Trade, 506 U. S. 125 (1992),
holding that ERISA's pre-emption clause must be read broadly to
reach any state law having a connection with, or reference to,
covered employee benefit plans. Travelers Ins. Co. v. Cuomo, 14 F.3d
708 , 718 (1994). In the light of our decision in Ingersoll-Rand Co. v. McClendon, 498 U. S. 133 , 141
(1990), the Court of Appeals abandoned its own prior decision in Rebaldo v. Cuomo, 749 F.2d
133 , 137 (1984), cert. denied, 472 U. S. 1008 (1985), which had
drawn upon the definition of the term "State" in ERISA § 514(c)(2),
29 U. S. C. § 1144(c)(2), to conclude that "a state law must
'purpor[t] to regulate ... the terms and conditions of employee
benefit plans' to fall within the preemption provision" of ERISA.
14 F. 3d, at 719 (internal quotation marks omitted). Rejecting that
narrower approach to ERISA pre-emption, it relied on our statement
in Ingersoll-Rand that under the applicable "'broad
common-sense meaning,' a state law may 'relate to' a benefit plan,
and thereby be pre-empted, even if the law is not specifically
designed to affect such plans, or the effect is only indirect." 498
U. S., at 139; see 14 F. 3d, at 718. Travelers Ins. Co. v. Cuomo, 14
F.3d 708 , 713-714 (CA2 1994). Neither party challenges
this conclusion and we have no occasion to examine it.

															Nor do we address the surcharge statute insofar as it applies to
selfinsured funds. The trial court's ERISA analysis originally led
it to enjoin defendants "from enforcing those surcharges against
any commercial insurers or HMOs in connection with their coverage
of ... ERISA plans," without any further mention of self-insured
funds. 813 F. Supp., at 1012. After staying its decision as to the
13% surcharge pending appeal, see id., at 1012-1015, it
ordered all named parties, including the Travelers Insurance
Company (which served as fiduciary to a self-insured plan), to pay
that surcharge whenever required by state law, see Travelers
Ins. Co. v. New York State Health Maintenance
Conference, No. 92 Civ. 3999 (SDNY Apr. 27, 1993), reprinted in
Brief for National Carriers' Conference Committee as Amicus
Curiae 29a-31a. The Court of Appeals, in turn, did not
expressly address this application of the surcharge and,
accordingly, we leave it for consideration on remand. 654 654 NEW YORK STATE CONFERENCE OF BLUE CROSS & BLUE SHIELD
PLANS v. TRAVELERS INS. CO. The Court of Appeals agreed with the trial court that the
surcharges were meant to increase the costs of certain insurance
and health care by HMO's, and held that this "purpose[ful]
interfer[ence] with the choices that ERISA plans make for health
care coverage ... is sufficient to constitute [a] 'connection with'
ERISA plans" triggering pre-emption. Id., at 719. The
court's conclusion, in sum, was that "the three surcharges 'relate
to' ERISA because they impose a significant economic burden on
commercial insurers and HMOs" and therefore "have an impermissible
impact on ERISA plan structure and administration." Id., at
721. In the light of its conclusion that the surcharge statutes
were not otherwise saved by any applicable exception, the court
held them pre-empted. Id., at 723. It recognized the
apparent conflict between its conclusion and the decision of the
Third Circuit in United Wire, Metal and Machine Health and
Welfare Fund v. Morristown Memorial Hosp., 995 F.2d
1179 , 1191, cert. denied, 510 U. S. 944 (1993), which held that
New Jersey's similar rate setting statute "does not relate to the
plans in a way that triggers ERISA's preemption clause." See 14 F.
3d, at 721, n. 3. We granted certiorari to resolve this conflict,
513 U. S. 920 (1994), and now reverse and remand.

															II

															Our past cases have recognized that the Supremacy Clause, U. S.
Const., Art. VI, may entail pre-emption of state law either by
express provision, by implication, or by a conflict between federal
and state law. See Pacific Gas & Elec. Co. v. State Energy Resources Conservation and Development Comm'n, 461 U. S. 190 ,
203-204 (1983); Rice v. Santa Fe Elevator Corp., 331 U. S. 218 ,
230 (1947). And yet, despite the variety of these opportunities for
federal preeminence, we have never assumed lightly that Congress
has derogated state regulation, but instead have addressed claims
of pre-emption with the starting presumption that Congress does not
intend to supplant state law. See Maryland v. 655 Louisiana, 451 U. S. 725 , 746
(1981). Indeed, in cases like this one, where federal law is said
to bar state action in fields of traditional state regulation, see Hillsborough County v. Automated Medical Laboratories,
Inc., 471 U. S.
707 , 719 (1985), we have worked on the "assumption that the
historic police powers of the States were not to be superseded by
the Federal Act unless that was the clear and manifest purpose of
Congress." Rice, supra, at 230. See, e. g., Cipollone v. Liggett Group, Inc., 505 U. S. 504 , 516
(1992); id., at 532-533 (Blackmun, J., concurring in part,
concurring in judgment in part, and dissenting in part); Metropolitan Life Ins. Co. v. Massachusetts, 471 U. S. 724 , 740
(1985); Jones v. Rath Packing Co., 430 U. S. 519 (1977); Napier v. Atlantic Coast Line R. Co., 272 U. S. 605 , 611
(1926).

															Since pre-emption claims turn on Congress's intent, Cipollone, supra, at 516; Shaw, supra, at 95, we
begin as we do in any exercise of statutory construction with the
text of the provision in question, and move on, as need be, to the
structure and purpose of the Act in which it occurs. See, e. g., Ingersoll-Rand, supra, at 138. The governing text
of ERISA is clearly expansive. Section 514(a) marks for preemption
"all state laws insofar as they ... relate to any employee benefit
plan" covered by ERISA, and one might be excused for wondering, at
first blush, whether the words of limitation ("insofar as they ...
relate") do much limiting. If "relate to" were taken to extend to
the furthest stretch of its indeterminacy, then for all practical
purposes pre-emption would never run its course, for "[r]eally,
universally, relations stop nowhere," H. James, Roderick Hudson xli
(New York ed., World's Classics 1980). But that, of course, would
be to read Congress's words of limitation as mere sham, and to read
the presumption against pre-emption out of the law whenever
Congress speaks to the matter with generality. That said, we have
to recognize that our prior attempt to construe the phrase "relate
to" does not give us much help drawing the line here. 656 656 NEW YORK STATE CONFERENCE OF BLUE CROSS & BLUE SHIELD
PLANS v. TRAVELERS INS. CO. In Shaw, we explained that "[a] law 'relates to' an
employee benefit plan, in the normal sense of the phrase, if it has
a connection with or reference to such a plan." 463 U. S., at
96-97. The latter alternative, at least, can be ruled out. The
surcharges are imposed upon patients and HMO's, regardless of
whether the commercial coverage or membership, respectively, is
ultimately secured by an ERISA plan, private purchase, or
otherwise, with the consequence that the surcharge statutes cannot
be said to make "reference to" ERISA plans in any manner. Cf. Greater Washington Bd. of Trade, 506 U. S., at 130 (striking
down District of Columbia law that "specifically refers to welfare
benefit plans regulated by ERISA and on that basis alone is
pre-empted"). But this still leaves us to question whether the
surcharge laws have a "connection with" the ERISA plans, and here
an uncritical literalism is no more help than in trying to construe
"relate to." For the same reasons that infinite relations cannot be
the measure of pre-emption, neither can infinite connections. We
simply must go beyond the unhelpful text and the frustrating
difficulty of defining its key term, and look instead to the
objectives of the ERISA statute as a guide to the scope of the
state law that Congress understood would survive.

															A

															As we have said before, § 514 indicates Congress's intent to
establish the regulation of employee welfare benefit plans "as
exclusively a federal concern." Alessi v. RaybestosManhattan, Inc., 451 U. S. 504 , 523
(1981). We have found that in passing § 514(a), Congress
intended "to ensure that plans and plan sponsors would be subject to a
uniform body of benefits law; the goal was to minimize the
administrative and financial burden of complying with conflicting
directives among States or between States and the Federal
Government ... , [and to prevent] the potential for conflict in
substantive law ... requiring 657 the tailoring of plans and employer conduct to the peculiarities
of the law of each jurisdiction." IngersollRand, 498 U. S.,
at 142. This objective was described in the House of Representatives by
a sponsor of the Act, Representative Dent, as being to "eliminat[e]
the threat of conflicting and inconsistent State and local
regulation." 120 Congo Rec. 29197 (1974). Senator Williams made the
same point, that "with the narrow exceptions specified in the bill,
the substantive and enforcement provisions ... are intended to
preempt the field for Federal regulations, thus eliminating the
threat of conflicting or inconsistent State and local regulation of
employee benefit plans." Id., at 29933. The basic thrust of
the pre-emption clause, then, was to avoid a multiplicity of
regulation in order to permit the nationally uniform administration
of employee benefit plans.

															Accordingly in Shaw, for example, we had no trouble
finding that New York's "Human Rights Law, which prohibit[ed]
employers from structuring their employee benefit plans in a manner
that discriminate[d] on the basis of pregnancy, and [New York's]
Disability Benefits Law, which require[d] employers to pay
employees specific benefits, clearly 'relate[d] to' benefit plans."
463 U. S., at 97. These mandates affecting coverage could have been
honored only by varying the subjects of a plan's benefits whenever
New York law might have applied, or by requiring every plan to
provide all beneficiaries with a benefit demanded by New York law
if New York law could have been said to require it for anyone
beneficiary. Similarly, Pennsylvania's law that prohibited "plans
from ... requiring reimbursement [from the beneficiary] in the
event of recovery from a third party" related to employee benefit
plans within the meaning of § 514(a). FMC Corp. v. Holliday, 498
U. S. 52 , 60 (1990). The law "prohibit[ed] plans from being
structured in a manner requiring reimbursement in the event of
recovery from a third party" and "require[d] plan providers to
calculate benefit levels in 658 658 NEW YORK STATE CONFERENCE OF BLUE CROSS & BLUE SHIELD
PLANS v. TRAVELERS INS. CO. Pennsylvania based on expected liability conditions that differ
from those in States that have not enacted similar antisubrogation
legislation," thereby "frustrat[ing] plan administrators'
continuing obligation to calculate uniform benefit levels
nationwide." Ibid. Pennsylvania employees who recovered in
negligence actions against tortfeasors would, by virtue of the
state law, in effect have been entitled to benefits in excess of
what plan administrators intended to provide, and in excess of what
the plan provided to employees in other States. Along the same
lines, New Jersey could not prohibit plans from setting workers'
compensation payments off against employees' retirement benefits or
pensions, because doing so would prevent plans from using a method
of calculating benefits permitted by federal law. Alessi,
supra, at 524. In each of these cases, ERISA pre-empted state
laws that mandated employee benefit structures or their
administration. Elsewhere, we have held that state laws providing
alternative enforcement mechanisms also relate to ERISA plans,
triggering pre-emption. See IngersollRand, supra. B

															Both the purpose and the effects of the N ew York surcharge
statute distinguish it from the examples just given. The charge
differentials have been justified on the ground that the Blues pay
the hospitals promptly and efficiently and, more importantly,
provide coverage for many subscribers whom the commercial insurers
would reject as unacceptable risks. The Blues' practice, called
open enrollment, has consistently been cited as the principal
reason for charge differentials, whether the differentials resulted
from voluntary negotiation between hospitals and payers as was the
case prior to the NYPHRM system, or were created by the surcharges
as is the case now. See, e. g., Charge Differential
Analysis Committee, New York State Hospital Review and Planning
Council, Report (1989), reprinted in Joint Appendix in No. 93-7132
(CA2), pp. 702, 705, 706 (J. A. CA2); J. Corcoran, 659 Superintendent of Insurance, Update of 1984 Position Paper of
The New York State Insurance Department on Inpatient Reimbursement
Rate Differential Provided Non-Profit Insurers 6-7 (1988) (J. A.
CA2, at 699-700); R. Trussell, Prepayment for Hospital Care In New
York State 170 (1958) (J. A. CA2, at 664) (Trussell); Thorpe, Does
All-Payer Rate Setting Work? The Case of the New York Prospective
Hospital Reimbursement Methodology, 12 J. Health Politics, Policy,
& Law 391, 402 (1987).5 Since the surcharges are presumably
passed on at least in part to those who purchase commercial
insurance or HMO membership, their effects follow from their
purpose. Although there is no evidence that the surcharges will
drive every health insurance consumer to the Blues, they do make
the Blues more attractive (or less unattractive) as insurance
alternatives and thus have an indirect economic effect on choices
made by insurance buyers, including ERISA plans.

															An indirect economic influence, however, does not bind plan
administrators to any particular choice and thus function as a
regulation of an ERISA plan itself; commercial insurers and HMO's
may still offer more attractive packages

															5 Although respondents argue that the surcharges have become
superfluous now that all insurers have become subject to certain
open enrollment requirements, see Brief for Respondents Travelers
Insurance Co. et al. 6-7, n. 5; 1992 N. Y. Laws, ch. 501, §4
(effective Apr. 1, 1993), N. Y. Ins. Law § 3231 (McKinney Supp.
1995), it is not our responsibility to review the continuing
substantive rationale for the surcharges. Even so, the surcharges
may well find support in an effort to compensate the Blues for the
current makeup of their insurance pool, which presumably continues
to reflect their longer history of open enrollment policies. See J.
Corcoran, Superintendent of Insurance, Position Paper of New York
State Insurance Department on Inpatient Reimbursement Rate
Differential Provided Non-Profit Insurers 8 (1984) (J. A. CA2, at 679) ("If there is any possibility of an abrupt
abandonment of the current hospital discount, consideration should
be given to the past history of health insurance enrollment in New
York which has left the Blue Cross/Blue Shield Plans with a core of
uninsurables obtained over the years and the ongoing liability
resulting from that enrollment"). 660 660 NEW YORK STATE CONFERENCE OF BLUE CROSS & BLUE SHIELD
PLANS v. TRAVELERS INS. CO. than the Blues. Nor does the indirect influence of the
surcharges preclude uniform administrative practice or the
provision of a uniform interstate benefit package if a plan wishes
to provide one. It simply bears on the costs of benefits and the
relative costs of competing insurance to provide them. It is an
influence that can affect a plan's shopping decisions, but it does
not affect the fact that any plan will shop for the best deal it
can get, surcharges or no surcharges.

															There is, indeed, nothing remarkable about surcharges on
hospital bills, or their effects on overall cost to the plans and
the relative attractiveness of certain insurers. Rate variations
among hospital providers are accepted examples of cost variation,
since hospitals have traditionally "attempted to compensate for
their financial shortfalls by adjusting their price ... schedules
for patients with commercial health insurance." Thorpe, 12 J.
Health Politics, Policy, & Law, at 394. Charge differentials
for commercial insurers, even prior to state regulation, "varied
dramatically across regions, ranging from 13 to 36 percent,"
presumably reflecting the geographically disparate burdens of
providing for the uninsured. Id., at 400; see id., at
398-399; see also, e. g., Trussell 170 (J. A. CA2, at
664); Bobinski, Unhealthy Federalism:

															Barriers to Increasing Health Care Access for the Uninsured, 24
U. C. D. L. Rev. 255, 267, and n. 44 (1990).

															If the common character of rate differentials even in the
absence of state action renders it unlikely that ERISA preemption
was meant to bar such indirect economic influences under state law,
the existence of other common state action with indirect economic
effects on a plan's costs leaves the intent to pre-empt even less
likely. Quality standards, for example, set by the State in one
subject area of hospital services but not another would affect the
relative cost of providing those services over others and, so, of
providing different packages of health insurance benefits. Even
basic regulation of employment conditions will invariably affect
the cost and price of services. 661 Quality control and workplace regulation, to be sure, are
presumably less likely to affect premium differentials among
competing insurers, but that does not change the fact that such
state regulation will indirectly affect what an ERISA or other plan
can afford or get for its money. Thus, in the absence of a more
exact guide to intended pre-emption than § 514, it is fair to
conclude that mandates for rate differentials would not be
pre-empted unless other regulation with indirect effects on plan
costs would be superseded as well. The bigger the package of
regulation with indirect effects that would fall on the
respondents' reading of § 514, the less likely it is that federal
regulation of benefit plans was intended to eliminate state
regulation of health care costs.

															Indeed, to read the pre-emption provision as displacing all
state laws affecting costs and charges on the theory that they
indirectly relate to ERISA plans that purchase insurance policies
or HMO memberships that would cover such services would effectively
read the limiting language in § 514(a) out of the statute, a
conclusion that would violate basic principles of statutory
interpretation and could not be squared with our prior
pronouncement that "[p]re-emption does not occur ... if the state
law has only a tenuous, remote, or peripheral connection with
covered plans, as is the case with many laws of general
applicability." District of Columbia v. Greater
Washington Bd. of Trade, 506 U. S., at 130, n. 1 (internal
quotation marks and citations omitted). While Congress's extension
of pre-emption to all "state laws relating to benefit plans" was
meant to sweep more broadly than "state laws dealing with the
subject matters covered by ERISA[,] reporting, disclosure,
fiduciary responsibility, and the like," Shaw, 463 U. S., at
98, and n. 19, nothing in the language of the Act or the context of
its passage indicates that Congress chose to displace general
health care regulation, which historically has been a matter of
local concern, see Hillsborough County v. Automated
Medical Laboratories, Inc., 471 U. S., at 719; 1 B. Furrow, T.
Greaney, 662 662 NEW YORK STATE CONFERENCE OF BLUE CROSS & BLUE SHIELD
PLANS v. TRAVELERS INS. CO. S. Johnson, T. Jost, & R. Schwartz, Health Law §§ 1-6, 1-23
(1995).

															In sum, cost uniformity was almost certainly not an object of
pre-emption, just as laws with only an indirect economic effect on
the relative costs of various health insurance packages in a given
State are a far cry from those "conflicting directives" from which
Congress meant to insulate ERISA plans. See 498 U. S., at 142. Such
state laws leave plan administrators right where they would be in
any case, with the responsibility to choose the best overall
coverage for the money. We therefore conclude that such state laws
do not bear the requisite "connection with" ERISA plans to trigger
pre-emption.

															C

															This conclusion is confirmed by our decision in Mackey v. Lanier Collection Agency & Service, Inc., 486 U. S. 825 (1988), which held that ERISA pre-emption falls short of barring
application of a general state garnishment statute to participants'
benefits in the hands of an ERISA welfare benefit plan. We took no
issue with the argument of the Mackey plan's trustees that
garnishment would impose administrative costs and burdens upon
benefit plans, id., at 831, but concluded from the text and
structure of ERISA's preemption and enforcement provisions that
"Congress did not intend to forbid the use of state-law mechanisms
of executing judgments against ERISA welfare benefit plans, even
when those mechanisms prevent plan participants from receiving
their benefits." Id., at 831-832. If a law authorizing an
indirect source of administrative cost is not pre-empted, it should
follow that a law operating as an indirect source of merely
economic influence on administrative decisions, as here, should not
suffice to trigger pre-emption either.

															The commercial challengers counter by invoking the earlier case
of Metropolitan Life Ins. Co. v. Massachusetts, 471 U. S. 724 (1985), which considered whether a State could mandate coverage of
specified minimum mental-health-care 663 benefits by policies insuring against hospital and surgical
expenses. Because the regulated policies included those bought by
employee welfare benefit plans, we recognized that the law
"directly affected" such plans. Id., at 732. Although we
went on to hold that the law was ultimately saved from pre-emption
by the insurance saving clause, § 514(b)(2)(A), 29 U. S. C. §
1144(b)(2)(A), respondents proffer the first steps in our decision
as support for their argument that all laws affecting ERISA plans
through their impact on insurance policies "relate to" such plans
and are pre-empted unless expressly saved by the statute. The
challengers take Metropolitan Life too far, however.

															The Massachusetts statute applied not only to "'[a]ny blanket or
general policy of insurance ... or any policy of accident and
sickness insurance' " but also to " 'any employees' health and
welfare fund which provide[d] hospital expense and surgical expense
benefits.'" 471 U. S., at 730, n. 11. In fact, the State did not
even try to defend its law as unrelated to employee benefit plans
for the purpose of § 514(a). Id., at 739. As a result, there
was no reason to distinguish with any precision between the effects
on insurers that are sufficiently connected with employee benefit
plans to "relate to" the plans and those effects that are not. It
was enough to address the distinction bluntly, saying on the one
hand that laws like the one in Metropolitan Life relate to
plans since they "bea[r] indirectly but substantially on all
insured benefit plans, ... requir[ing] them to purchase the
mental-health benefits specified in the statute when they purchase
a certain kind of common insurance policy," ibid., but
saying on the other that "laws that regulate only the insurer, or
the way in which it may sell insurance, do not 'relate to' benefit
plans," id., at 741. Even this basic distinction recognizes
that not all regulations that would influence the cost of insurance
would relate to employee benefit plans within the meaning of §
514(a). If, for example, a State were to regulate sales of
insurance by commercial insurers more stringently 664 664 NEW YORK STATE CONFERENCE OF BLUE CROSS & BLUE SHIELD
PLANS v. TRAVELERS INS. CO. than sales by insurers not for profit, the relative cost of
commercial insurance would rise; we would nonetheless say,
following Metropolitan Life, that such laws "do not 'relate
to' benefit plans in the first instance." Ibid. And on the
same authority we would say the same about the basic tax exemption
enjoyed by nonprofit insurers like the Blues since the days long
before ERISA, see Marmor, New York's Blue Cross and Blue Shield,
1934-1990: The Complicated Politics of Nonprofit Regulation, 16 J.
Health Politics, Policy, & Law 761, 769 (1991) (tracing New
York Blue Cross's special tax treatment as a prepayment
organization back to 1934); 1934 N. Y. Laws, ch. 595; and yet on
respondents' theory the exemption would necessarily be pre-empted
as affecting insurance prices and plan costs.

															In any event, Metropolitan Life cannot carry the weight
the commercial insurers would place on it. The New York surcharges
do not impose the kind of substantive coverage requirement binding
plan administrators that was at issue in Metropolitan Life. Although even in the absence of mandated coverage there might be a
point at which an exorbitant tax leaving consumers with a Hobson's
choice would be treated as imposing a substantive mandate, no
showing has been made here that the surcharges are so prohibitive
as to force all health insurance consumers to contract with the
Blues. As they currently stand, the surcharges do not require plans
to deal with only one insurer, or to insure against an entire
category of illnesses they might otherwise choose to leave without
coverage.

															D

															It remains only to speak further on a point already raised, that
any conclusion other than the one we draw would bar any state
regulation of hospital costs. The basic DRG system (even without
any surcharge), like any other interference with the hospital
services market, would fall on a theory that all laws with indirect
economic effects on ERISA 665 plans are pre-empted under § 514(a). This would be an unsettling
result and all the more startling because several States, including
New York, regulated hospital charges to one degree or another at
the time ERISA was passed, see, e. g., Cal. Ins. Code
Ann. § 11505 (West 1972) (nonprofit hospitals); Colo. Rev. Stat. §§
10-16-130, 10-17-108(2) to 108(3), 10-17-119(b) (1973); Conn. Gen.
Stat. §§33-166, 33-172 (medical service corporations), § 33-179k
(health care centers) (1975); Md. Ann. Code, Art. 43, §§ 568H,
568U, 568W (Michie Supp. 1976); Mass. Gen. Laws Ann., ch. 176A, §§
5, 6 (West 1958), as amended by 1968 Mass. Acts, ch. 432, § 2, and
1969 Mass. Acts, ch. 874, § 1 (hospital service corporations),
Mass. Gen. Laws Ann., ch. 176B, § 4 (West 1958 and Supp. 1987)
(medical service corporations); Health Maintenance Organization
Act, 1973 N. J. Laws, ch. 337, § 8, N. J. Stat. Ann. § 26:2J-8(b)
(West Supp. 1986); N. Y. Pub. Health Law § 2807 (McKinney 1971);
1973 Wash. Laws, ch. 5, § 15, Rev. Code Wash. Ann. § 70.39.140
(West 1975). And yet there is not so much as a hint in ERISA's
legislative history or anywhere else that Congress intended to
squelch these state efforts.

															Even more revealing is the National Health Planning and
Resources Development Act of 1974 (NHPRDA), Pub. L. 93641, 88 Stat.
2225, §§ 1-3, repealed by Pub. L. 99-660, title VII, § 701(a), 100
Stat. 3799, which was adopted by the same Congress that passed
ERISA, and only months later. The NHPRDA sought to encourage and
help fund state responses to growing health care costs and the
widely diverging availability of health services. § 2, 88 Stat.
2226-2227; see generally National Gerimedical Hospital and
Gerontology Center v. Blue Cross of Kansas City, 452 U. S. 378 ,
383-388 (1981). It provided for the organization and partial
funding of regional "health systems agencies" responsible for
gathering data as well as for planning and developing health
resources in designated health service areas. 88 Stat. 2229-2242.
The scheme called for designating state health planning and 666 666 NEW YORK STATE CONFERENCE OF BLUE CROSS & BLUE SHIELD
PLANS v. TRAVELERS INS. CO. development agencies in qualifying States to coordinate
development of health services policy. Id., at 2242-2244.
These state agencies, too, would be eligible for federal funding, id., at 2249, including grants "[f]or the purpose of
demonstrating the effectiveness of State Agencies regulating rates
for the provision of health care ... within the State." Ibid. Exemption from ERISA pre-emption is nowhere mentioned
as a prerequisite to the receipt of such funding; indeed, the only
legal prerequisite to be eligible for rate regulation grants was
"satisfactory evidence that the State Agency has under State law
the authority to carry out rate regulation functions in accordance
with this section .... " Ibid. The Secretary was required to provide technical assistance to
the designated agencies by promulgating "[a] uniform system for
calculating rates to be charged to health insurers and other health
institutions payors by health service institutions." Id., at
2254. Although the NHPRDA placed substantive restrictions on the
system the Secretary could establish, the subject matter (and
therefore the scope of envisioned state regulation) covers the same
ground that N ew York's surcharges tread. The Secretary's system
was supposed to: "(A) [b]e based on an all-inclusive rate for various categories
of patients ... [,] "(B) [p]rovide that such rates reflect the true cost of
providing services to each such category of patients ... [,] "(C) [p]rovide for an appropriate application of such system in
the different types of institutions ... [, and] "(D) [p]rovide that differences in rates to various classes of
purchasers (including health insurers, direct service payors, and
other health institution payors) be based on justified and
documented differences in the costs of operation of health service
institutions made 667 possible by the actions of such purchasers." Id., at
2254-2255. The last-quoted subsection seems to envision a system very much
like the one New York put in place, but the significant point in
any event is that the statute's provision for comprehensive aid to
state health care rate regulation is simply incompatible with
pre-emption of the same by ERISA. To interpret ERISA's pre-emption
provision as broadly as respondents suggest would have rendered the
entire NHPRDA utterly nugatory, since it would have left States
without the authority to do just what Congress was expressly trying
to induce them to do by enacting the NHPRDA. Given that the NHPRDA
was enacted after ERISA and by the same Congress, it just makes
good sense to reject such an interpretation.6

															6 The history of Medicare regulation makes the same point,
confirming that Congress never envisioned ERISA pre-emption as
blocking state health care cost control, but rather meant to
encourage and rely on state experimentation like New York's. See
generally K. Davis, G. Anderson, D. Rowland, & E. Steinberg,
Health Care Cost Containment 23-25, 81, 99 (1990). Since the time
DRG systems were tried out in the 1960's and 1970's, Congress has
consistently shown its awareness and encouragement of controlled
payment alternatives to the federal regulatory scheme. The Social
Security Amendments of 1967, Pub. L. 90-248, §402(a), 81 Stat.
930-931, as amended 42 U. S. C. § 1395b-1, for example, granted the
Secretary of Health, Education, and Welfare (now Health and Human
Services) the authority to waive Medicare rules to allow for
physician and hospital reimbursement according to approved state
payment schedules. In the Social Security Amendments of 1972, Pub.
L. 92-603, § 222(a)(5), 86 Stat. 1391, Congress specifically called
upon the Secretary to report on prospective reimbursement schemes
that had been thus favored already or could be in the future. Later
on, after the development of all-payor rate setting schemes like
the NYPHRM and New Jersey's Health Care Cost Reduction Act of 1978,
1978 N. J. Laws, ch. 83, Congress's Medicare waiver provisions
evolved to the point of explicit reference to a State's commitment
to apply its hospital reimbursement control system to a substantial
portion of hospitals and inpatient services statewide. See 42 U. S.
C. §§ 1395ww(c)(1), (c)(5)(A). Indeed, in its Report on the Social
Security Amendments of 668 668 NEW YORK STATE CONFERENCE OF BLUE CROSS & BLUE SHIELD
PLANS v. TRAVELERS INS. CO. III

															That said, we do not hold today that ERISA pre-empts only direct
regulation of ERISA plans, nor could we do that with fidelity to
the views expressed in our prior opinions on the matter. See, e.
g., Ingersoll-Rand, 498 U. S., at 139; Pilot Life Ins.
Co. v. Dedeaux, 481 U. S. 41 , 47-48
(1987); Shaw, 463 U. S., at 98. We acknowledge that a state
law might produce such acute, albeit indirect, economic effects, by
intent or otherwise, as to force an ERISA plan to adopt a certain
scheme of substantive coverage or effectively restrict its choice
of insurers, and that such a state law might indeed be pre-empted
under § 514. But as we have shown, New York's surcharges do not
fall into either category; they affect only indirectly the relative
prices of insurance policies, a result no different from myriad
state laws in areas traditionally subject to local regulation,
which Congress could not possibly have intended to eliminate.

															The judgment of the Court of Appeals is therefore reversed, and
the cases are remanded for further proceedings consistent with this
opinion.

															It is so ordered.

															1983, the House Committee on Ways and Means recommended that
States should not be held to traditional DRG-based reimbursement
systems. "State systems provide a laboratory for innovative methods
of controlling health care costs, and should, therefore, not be
limited to one methodology." H. R. Rep. No. 98-25, pt. 1, pp.
146-147 (1983). The Committee concluded that "State systems
covering all payors have proven effective in reducing health costs
and should be encouraged. Such State programs may be useful models
for our national system." Id., at 147-148. While the history
of Medicare waivers and implementing legislation enacted after
ERISA itself is, of course, not conclusive proof of the
congressional intent behind ERISA, the fact that Congress
envisioned state experiments with comprehensive hospital
reimbursement regulation supports our conclusion that ERISA was not
meant to pre-empt basic rate regulation.