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The Wagner Law Group

The Wagner Law Group is a nationally recognized practice in the areas of ERISA and employee benefits, estate planning, employment, labor and human resources and investment management.


Established in 1996, The Wagner Law Group is dedicated to the highest standards of integrity, excellence and thought leadership and is considered to be amongst the nation's premier ERISA and employee benefits law firms. The firm has seven offices across the country, providing unparalleled legal advice to its clients, including large, small and nonprofit corporations as well as individuals and government entities worldwide. The Wagner Law Group's 31 attorneys, senior benefits consultant and four paralegals combine many years of experience in their fields of practice with a variety of backgrounds. Seven of the attorneys are AV-rated by Martindale-Hubbell and six are Fellows of the American College of Employee Benefits Counsel, an invitation-only organization of nationally recognized employee benefits lawyers.  Seven of the firm's attorneys have been named to the prestigious Super Lawyers list for 2017, which highlights outstanding lawyers based on a rigorous selection process.




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The Wagner Law Group


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 ERISA Doesn't Preempt Montana's Mental Health

Parity Law

January 25, 2018




A federal district court, in Sand-Smith v. Liberty Life Assurance Company of Boston, determined that ERISA did not preempt Montana's mental health parity law and that the state law was therefore applicable against long-term disability insurer.  The court reached this conclusion  because the state law regulated health insurance policies and was directed at entities that engage in insurance.

Law.  In general, mental health parity laws prevent group health plans and health insurance issuers that provide mental health (or substance use disorder) benefits from imposing less favorable benefit limitations than those on medical benefits.

ERISA preempts state laws relating to employee benefit plans, but state laws regulating insurance are saved from ERISA preemption and enforceable.  The Supreme Court applies the "savings clause" test to determine whether a state law governs insurance practices (and not merely insurance companies) and is, therefore, saved from ERISA preemption.  Specifically, the savings clause test provides that a state law regulates insurance if it:


  1. Is specifically directed at entities engaged in insurance, and
  2. Substantially affects the risk pooling arrangement between the insurer and the insured.

Facts.  In Sand-Smith, the plaintiff, who was disabled due to bipolar disorder, sued after benefits from her employer's long-term disability plan were terminated based on applicable insurance policy terms that limited benefits for mental illness to 24 months.  In particular, the plaintiff asserted that the policy's limitation violated Montana's mental health parity law.  Conversely, the insurer argued that ERISA preempted the state law.



District Court.  In reviewing the matter, the court determined that Montana's mental health parity law satisfied both prongs of the Supreme Court's savings clause test because it: (i) regulates health and disability insurance policies and is directed at entities that engage in insurance; and (ii) increases the benefit of risk pooling by ensuring that consumers will  receive the same level of benefits for mental and physical illnesses.




After concluding that Montana's mental health parity law was not preempted by ERISA, the court reviewed whether the law applied to the disability policy at issue.  The insurer argued that the Montana law addressed benefits for care of mental illness and not lost wages.  However, the court concluded that under the law, "disability insurance" encompasses both health insurance against bodily injury or disablement and income replacement relating to disability.  The court noted that although most states' mental health parity laws apply only to health insurance, Montana's law specifically applied to disability insurance, and income replacement is typically a component of disability insurance.  




In reaching this conclusion, the court observed that the Montana law was expressly inapplicable to certain types of insurance benefits (e.g., workers' compensation) and that the state legislature would have expressly excluded disability income benefits if it so intended.  Accordingly, the court ordered the disability insurer to comply with the Montana law and provide the same benefits to the participant as it would provide if her disability were physical in nature. 




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This Newsletter is provided for information purposes by The Wagner Law Group to clients and others who may be interested in the subject matter, and may not be relied upon as specific legal advice.  This material is not to be construed as legal advice or legal opinions on specific facts. Under the Rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.