{"id":4214,"date":"2026-04-19T10:27:53","date_gmt":"2026-04-19T10:27:53","guid":{"rendered":"https:\/\/www.insuracarelife.com\/blog\/sixth-circuit-holds-tennessee-pbm-network-and-steering-rules-are-erisa-preempted-troutman-pepper-locke\/"},"modified":"2026-04-19T10:27:53","modified_gmt":"2026-04-19T10:27:53","slug":"sixth-circuit-holds-tennessee-pbm-network-and-steering-rules-are-erisa-preempted-troutman-pepper-locke","status":"publish","type":"post","link":"https:\/\/www.insuracarelife.com\/blog\/sixth-circuit-holds-tennessee-pbm-network-and-steering-rules-are-erisa-preempted-troutman-pepper-locke\/","title":{"rendered":"Sixth Circuit Holds Tennessee PBM Network and Steering Rules Are ERISA\u2011Preempted | Troutman Pepper Locke"},"content":{"rendered":"<div id=\"html-view-content\">\n<p>Recently, the Sixth Circuit issued a significant ERISA preemption ruling for employers and pharmacy benefit managers (PBMs). The court held that Tennessee\u2019s PBM laws, which require \u201cany willing\u201d pharmacy access and limiting incentives that steer members to plan\u2011favored pharmacies, are preempted as applied to self\u2011funded ERISA plans. The ruling draws a clear line between permissible PBM cost regulation and impermissible interference with plan design and administration.<\/p>\n<p><strong>Background<\/strong><\/p>\n<p>McKee Foods sponsors a self\u2011funded ERISA health plan and uses a PBM to administer its prescription drug benefits. McKee designs the plan\u2019s network and cost\u2011sharing, including preferred pharmacy tiers and lower copays at its own onsite pharmacy. After McKee and its PBM excluded a specific pharmacy from the network over billing issues, Tennessee enacted two laws aimed squarely at PBM practices.<\/p>\n<p>Those laws require PBMs and \u201ccovered entities\u201d to admit any licensed pharmacy willing to accept standard terms (any\u2011willing\u2011provider provisions), and (2) prohibit higher copays or other financial disadvantages for using certain in\u2011network pharmacies and prohibit incentives to use PBM\u2011owned or affiliated pharmacies (incentive\/steering provisions). Tennessee expressly stated that these PBM laws apply to ERISA plans.<\/p>\n<p>After multiple administrative complaints were filed under these statutes, McKee sued the Tennessee insurance commissioner, seeking a declaration that ERISA preempts the PBM laws and an injunction against their enforcement.<\/p>\n<p><strong>Threshold Rulings<\/strong><\/p>\n<p>The Sixth Circuit first confirmed that McKee could bring a pre\u2011enforcement ERISA claim.<\/p>\n<ul class=\"wp-block-list\">\n<li>McKee is a plan fiduciary under ERISA because it exercises discretionary authority over plan design and administration, including pharmacy network decisions. As a fiduciary, it can seek equitable relief under 29 U.S.C. \u00a7 1132(a)(3).<\/li>\n<li>McKee had standing: it already engages in conduct the PBM laws prohibit (excluding certain pharmacies, offering lower copays at its own pharmacy), the Commissioner has stated he will enforce the laws against ERISA plans, and multiple complaints have been filed. That combination creates a credible threat of enforcement.<\/li>\n<li>The suit was ripe and not barred by sovereign immunity. Under <em>Ex parte Young<\/em>, McKee could seek prospective declaratory and injunctive relief against the Commissioner for ongoing violations of federal law.<\/li>\n<\/ul>\n<p>These holdings confirm that plan fiduciaries may challenge state PBM regulations before facing an actual enforcement action.<\/p>\n<p><strong>ERISA Preemption<\/strong><\/p>\n<p>On the merits, the court analyzed ERISA\u2019s \u201cconnection with\u201d preemption. A state law is preempted if it requires or forbids particular plan structures, governs a central matter of plan administration, or undermines nationally uniform administration.<\/p>\n<p>The court distinguished a prior Supreme Court decision, which upheld an Arkansas law regulating PBM reimbursement rates as mere cost regulation. Tennessee\u2019s PBM laws, by contrast, alter the basic architecture of ERISA plans\u2019 pharmacy benefits.<\/p>\n<p><strong>Any\u2011Willing\u2011Provider Provisions<\/strong><\/p>\n<p>The any\u2011willing\u2011provider provisions require PBMs and covered entities to allow any licensed pharmacy willing to accept network terms to participate, including in preferred networks, and bar interference with members\u2019 pharmacy choice.<\/p>\n<p>The Sixth Circuit held these provisions:<\/p>\n<ul class=\"wp-block-list\">\n<li>Force plans to structure their pharmacy networks in a particular way by mandating inclusion of all willing pharmacies;<\/li>\n<li>Govern a core aspect of plan administration, i.e., who is in the network and on what terms; and<\/li>\n<li>Disrupt national uniformity by requiring Tennessee\u2011specific network rules.<\/li>\n<\/ul>\n<p>Relying on prior precedent, the court concluded Tennessee\u2019s rules go well beyond indirect cost effects and instead mandate benefit structures, triggering ERISA preemption.<\/p>\n<p><strong>Incentive and Steering Provisions<\/strong><\/p>\n<p>The incentive provisions prohibit higher copays, additional fees, or penalties when members use certain in\u2011network pharmacies and ban financial incentives to steer members to PBM\u2011owned or affiliated pharmacies. They effectively require uniform copays and cost\u2011sharing across all in\u2011network pharmacies.<\/p>\n<p>The court held these provisions likewise have an impermissible connection with ERISA plans because they:<\/p>\n<ul class=\"wp-block-list\">\n<li>Eliminate the ability to use tiered copays and other differential cost\u2011sharing to steer members within the network; and<\/li>\n<li>Go beyond cost regulation by dictating a uniform cost\u2011sharing design, a \u201ckey benefit design\u201d choice for ERISA plans.<\/li>\n<\/ul>\n<p>The court held that forbidding differential cost\u2011sharing is the same as mandating identical cost\u2011sharing, in other words, an \u201cacute\u201d impact that \u201ceffectively dictate[s] plan choices\u201d and thus is preempted.<\/p>\n<p><strong>Saving Clause and Deemer Clause<\/strong><\/p>\n<p>The Commissioner argued that ERISA\u2019s saving clause, which preserves state laws that \u201cregulate insurance,\u201d should protect Tennessee\u2019s PBM laws. The Sixth Circuit found that even if the laws regulate insurance, ERISA\u2019s deemer clause prevents states from treating self\u2011funded ERISA plans as insurers.<\/p>\n<p>Because Tennessee\u2019s PBM definitions sweep self\u2011funded ERISA plans into the category of regulated entities, the deemer clause makes the saving clause unavailable. As applied to McKee\u2019s self\u2011funded plan and its PBM, the PBM laws remain preempted.<\/p>\n<p><strong>Our Take<\/strong><\/p>\n<p>McKee confirms that there are limits to state PBM regulation. States may regulate PBM reimbursement rates and other costs, but when they:<\/p>\n<ul class=\"wp-block-list\">\n<li>Require inclusion of all willing pharmacies in networks, or<\/li>\n<li>Prohibit differential copays and other steering mechanisms within networks,<\/li>\n<\/ul>\n<p>they are dictating ERISA plan structure and administration and risk preemption, at least as applied to self\u2011funded plans.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Recently, the Sixth Circuit issued a significant ERISA preemption ruling for employers and pharmacy benefit managers (PBMs). The court held that Tennessee\u2019s PBM laws, which require \u201cany willing\u201d pharmacy access and limiting incentives that steer members to plan\u2011favored pharmacies, are preempted as applied to self\u2011funded ERISA plans. The ruling draws a clear line between permissible [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":4215,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[1625,2991,1058,2311,2478,2989,2310,1757,2988,2990,1351,2309],"class_list":["post-4214","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","tag-circuit","tag-erisapreempted","tag-holds","tag-locke","tag-network","tag-pbm","tag-pepper","tag-rules","tag-sixth","tag-steering","tag-tennessee","tag-troutman"],"_links":{"self":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts\/4214","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/comments?post=4214"}],"version-history":[{"count":0,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts\/4214\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/media\/4215"}],"wp:attachment":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/media?parent=4214"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/categories?post=4214"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/tags?post=4214"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}