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Associated Insdustries Magnagement Services v. Moda Health Plan, Inc.

United States District Court, D. Oregon

July 16, 2015

ASSOCIATED INSDUSTRIES MAGNAGEMENT SERVICES, in its fiduciary capacity as administrator for an association or member-governed group plans; THE ASSOCIATION OR MEMBER GROUP-GOVERNED PLANS; and JAMES DeWALT, in his capacity as a participant in one of the above-referenced plans, Plaintiffs,
MODA HEALTH PLAN, INC., dba MODA HEALTH INSURANCE, an Oregon Corporation, Defendant.


ANN AIKEN, District Judge.

Plaintiffs filed suit pursuant to the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001, et seq, seeking declaratory and injunctive relief. On behalf of themselves and participating associations, plaintiffs seek a declaration that the Association or Member-Group Governed Plans (the Health Benefit Trusts) are each sponsored by an "employer" within the meaning of ERISA. 29 U.S.C. § 1002(5). Plaintiffs also seek injunctive relief enjoining defendant Moda Health Plans, Inc. (Moda) from terminating group insurance contracts issued through the Health Benefit Trusts, solely on the basis that the Health Benefit Trusts are not sponsored by "employers" under ERISA.

Plaintiffs move for summary judgment on whether the Health Benefit Trusts are sponsored by "employers" as defined by ERISA. The motion is denied.


Plaintiff Associated Industries Management Services (AIMS) is the third-party administrator of the relevant Health Benefit Trusts. The Health Benefit Trusts are sponsored by the following industry associations: the ALLtech Information Technology Group, the Greater Columbia Manufacturing Industry Group, the Columbia Retail Industry Group, the Greater Northwest Health Industry Group, the Pacific Business Resource Industry Group, and Associated Industries of the Inland Northwest, Inc. (collectively, the Industry Groups).

Moda is an insurance carrier; since 2011, has it partnered with each of the Industry Groups to offer large group medical coverage for each group's members.

Prior to January 1, 2014, employers purchasing health plans through an association were exempt from the Washington State small group community rating requirements. See Rev. C. Wash. §§ 48.44.024, 48.46.068, 48.21.047. According to the parties, as of January 1, 2014, the federal community rating requirements under the Affordable Care Act became applicable to all non-grandfathered group health plans, unless the health plan is sponsored by an "employer" within the meaning of ERISA. As a result, Moda is prohibited from issuing insured large group contracts through the Health Benefit Trusts in Washington State, unless each Trust is sponsored by an "employer" within the meaning of ERISA. See 29 U.S.C. § 1002(5); Wash. Admin. C. XXX-XXX-XXX.

Further, Washington law requires Moda to make a good faith effort to ensure that each Health Benefit Trust is sponsored by an "employer" and thus eligible to obtain large group insurance contracts. Moda's Response to Pl.'s Motion for Summ. J. at 2. Significantly, the State of Washington Insurance Commissioner has apparently determined that the Health Benefit Trusts are not sponsored by "employers" within the meaning of ERISA and ineligible to purchase large group insurance for their members. See id. at 3 ("[T]he Insurance Commissioner stated that the Trusts at issue in this case did not meet the Employer' definition under ERISA").[1]

Accordingly, plaintiffs filed this action and now move for summary judgment. Moda does not oppose plaintiffs' motion and instead seeks clarification as to its obligations; Moda will not offer group insurance contracts to the Health Benefit Trusts absent a court ruling or other verification that they are sponsored by "employers."

While plaintiffs' motion was pending, the court learned that a similar case had been filed in the Western District of Washington - where the underlying basis of plaintiffs' claims undeniably arises - and plaintiffs were ordered to show cause why this action should not be transferred. Plaintiffs strenuously oppose transfer; plaintiffs argue that their complaint raises a purely federal question under ERISA, that their choice of forum is entitled to deference, and that venue is appropriate in the District of Oregon. Plaintiffs also emphasize the factual distinctions between this case and the Washington case and claim they will suffer irreparable harm from a transfer.

I remain unconvinced that this District is the most appropriate forum; plaintiffs' underlying purpose in this case is to obtain an order rendering the Industry Groups eligible for large group insurance contracts in the State of Washington. However, given plaintiffs' choice of forum and the narrow federal question presented, I do not find sufficient justification to transfer this case sua sponte.


The question presented by plaintiffs' motion for summary judgment is whether each of the Industry Groups qualifies as an "employer" within the meaning of ERISA.

Under § 3(5) of ERISA, the term "employer" is defined as "any person acting directly as an employer, or indirectly in the interest of an employer, in relation to' an employee benefit plan; and includes a group or association of employers acting for an employer in such capacity." 29 U.S.C. § 1002(5). However, a "group of employers that establishes and maintains [a health benefits] plan must be a bona fide' association of employers tied by a common economic or representation interest, unrelated to the provision of benefits.'" Gruber v. Hubbard Bert Karle Weber, Inc., 159 F.3d 780, 787 (3d Cir. 1998) (quoting Wis. Educ. Ass'n Trust v. Iowa State Bd., 804 F.2d 1059, 1063 (8th Cir. 1986)). Further, "the employer-members of the organization that sponsors the plan must exercise control, ...

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