ERISA Preempts State PBM “Any-Willing-Provider” and Anti-Steering Incentive Restrictions that Dictate Pharmacy Network Design and Cost-Sharing

3.1. Precedents Cited (and How They Shaped the Decision)

• Rutledge v. PCMA, 592 U.S. 80 (2020)
  Role: The Commissioner invoked Rutledge as permission for broader PBM regulation. The Sixth Circuit instead used Rutledge’s framework to distinguish permissible “cost regulation” from impermissible dictation of plan structure. Rutledge’s “connection with” tests—state laws that (i) mandate plan structures, (ii) bind administrators to benefit choices, (iii) govern central plan administration, or (iv) disrupt national uniformity—anchored the preemption analysis. The panel held Tennessee’s laws were unlike Rutledge’s reimbursement tethering because they compelled network inclusion and flattened cost-sharing differentials across pharmacies.
• Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312 (2016)
  Role: Provided the “central matter of plan administration” and “nationally uniform plan administration” concepts. The panel leaned on Gobeille to emphasize ERISA’s goal of avoiding a 50-state compliance patchwork for plan administrators.
• Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983)
  Role: Supported the proposition that ERISA preemption reaches state laws that prohibit employers from structuring plans in certain ways—here, Tennessee’s laws effectively removing the plan’s discretion to design a limited or tiered pharmacy network.
• N.Y. State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995)
  Role: Used both for the “bind plan administrators to a particular choice” phrasing and for the caution that not every cost impact triggers preemption; only sufficiently “acute” impacts that effectively dictate plan choices do. The panel used Travelers to differentiate ordinary economic effects from network-design mandates.
• Cal. Div. of Lab. Standards Enf't v. Dillingham Constr., N.A., Inc., 519 U.S. 316 (1997)
  Role: Supplied the “nature of the effect” lens for “connection with” analysis. Tennessee’s statutes were judged by their functional effect on plan administration and benefit design.
• Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141 (2001)
  Role: Reinforced the patchwork concern: state-by-state variations force administrators to track, update, and litigate diverse state rules—exactly what ERISA seeks to prevent. The panel used Egelhoff to underscore why Tennessee-specific network rules are preempted even if framed as PBM regulation.
• Kentucky Ass'n of Health Plans, Inc. v. Nichols, 227 F.3d 352 (6th Cir. 2000), aff'd sub nom. Kentucky Ass'n of Health Plans, Inc. v. Miller, 538 U.S. 329 (2003)
  Role: A critical intra-circuit comparator for AWP laws. Nichols held Kentucky AWP statutes “connected with” ERISA plans because they effectively required purchase of a “certain structure” of benefits by forcing provider inclusion. The panel treated Tennessee’s AWP provisions as materially similar: they remove the plan’s option to design a narrower network by requiring access for any pharmacy willing to accept set terms.
• PCMA v. Mulready, 78 F.4th 1183 (10th Cir. 2023)
  Role: Served as persuasive authority aligning with Nichols and the panel’s reading of Rutledge. Mulready treated pharmacy network composition and differential cost-sharing as “key benefit designs” and held comparable Oklahoma PBM provisions preempted where they required inclusion in preferred networks and prohibited differential cost-sharing. The Sixth Circuit used Mulready to reinforce that “anti-steering” and AWP rules can dictate plan design, not merely prices.
• PCMA v. Dist. of Columbia, 613 F.3d 179 (D.C. Cir. 2010)
  Role: Supported the proposition that rules disabling cost-sharing arrangements can operate as regulation of ERISA plans themselves. The Sixth Circuit used this to frame Tennessee’s incentive provisions as more than ordinary market regulation.
• Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987) and FMC Corp. v. Holliday, 498 U.S. 52 (1990)
  Role: Controlled the saving clause/deemer clause structure. Even assuming Tennessee’s PBM laws “regulate insurance,” the deemer clause prevents applying such laws to self-funded ERISA plans by “deeming” them insurers.
• US Airways, Inc. v. McCutchen, 569 U.S. 88 (2013), Mertens v. Hewitt Assocs., 508 U.S. 248 (1993), and CIGNA Corp. v. Amara, 563 U.S. 421 (2011)
  Role: Used to confirm that injunctions are “typically available in equity,” supporting the availability of equitable relief under ERISA § 1132(a)(3).
• Armstrong v. Exceptional Child Ctr., Inc., 575 U.S. 320 (2015) and Ex parte Young, 209 U.S. 123 (1908)
  Role: Provided the doctrinal pathway for suing state officials for prospective equitable relief to stop enforcement of allegedly preempted state laws (and the general “long history” of such review).
• Susan B. Anthony List v. Driehaus, 573 U.S. 149 (2014) and McKay v. Federspiel, 823 F.3d 862 (6th Cir. 2016)
  Role: Framed the pre-enforcement standing test and the “credible threat of prosecution” factors. The court found credible threat based on complaint-driven enforcement mechanisms and the Commissioner’s repeated insistence that ERISA plans were covered.
• Plan fiduciary status authorities: Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312 (2016); Briscoe v. Fine, 444 F.3d 478 (6th Cir. 2006); Tiara Yachts, Inc. v. Blue Cross Blue Shield of Mich., 138 F.4th 457 (6th Cir. 2025); Hunter v. Caliber Sys., Inc., 220 F.3d 702 (6th Cir. 2000); and the monitoring duty discussion referencing Hughes v. Nw. Univ., 595 U.S. 170 (2022) and Tibble v. Edison Int'l, 575 U.S. 523 (2015).
  Role: These cases supported the functional determination that McKee, which designed and administered key plan features and made discretionary network decisions (including exclusion of a pharmacy after an audit), qualified as an ERISA fiduciary eligible to sue under ERISA’s civil enforcement provision.

3.2. Legal Reasoning

A. Threshold holdings enabling the merits decision

• ERISA cause of action / equitable relief: The court treated ERISA § 1132(a)(3) as providing a viable pathway for a fiduciary to seek injunctive and declaratory relief. Even while declining to definitively decide whether § 1132(a)(3)(A) covers preemption claims, it held the suit could proceed under § 1132(a)(3)(B)(ii) (equitable relief to enforce ERISA).
• Fiduciary status as functional: McKee’s discretionary authority over plan design and pharmacy network administration made it a fiduciary under 29 U.S.C. § 1002(21)(A), reinforced by the Commissioner’s judicial admission that McKee was a fiduciary.
• Standing / credible threat in a complaint-driven enforcement scheme: The court credited (i) prior administrative complaints, (ii) statutory features allowing public initiation of administrative proceedings, and (iii) the Commissioner’s repeated non-disavowal and affirmative statements that ERISA plans were included, as establishing an imminent enforcement risk.
• Ex Parte Young: Because McKee sought prospective relief against an ongoing alleged federal-law violation (ERISA preemption), sovereign immunity did not bar the suit against the Commissioner.

B. Merits: ERISA “connection with” preemption applied to PBM regulation

The court focused on ERISA’s express preemption clause, 29 U.S.C. § 1144(a), and specifically the “connection with” prong (rather than “reference to”). Following Rutledge v. PCMA, it identified multiple independent ways a state law can have an impermissible connection with ERISA. The Commissioner largely argued the laws did not bind administrators to a particular substantive benefits choice; the court held Tennessee’s laws nevertheless failed other “connection with” pathways.

1) Any-Willing-Provider (AWP) provisions

Tennessee’s AWP provisions (Tenn. Code Ann. §§ 56-7-2359, 3120(b)(1), 3121(a) and (b)) were treated as mandating pharmacy network inclusion—i.e., any Tennessee-licensed pharmacy willing to accept the “same terms and conditions” must be allowed into networks, including preferred networks. The court reasoned that:

• They require a particular plan structure: By eliminating the plan’s ability to maintain a limited network (and thereby leverage network design as a benefit/cost tool), they “require providers to structure benefit plans in particular ways.”
• They govern a central matter of plan administration: Pharmacy network design is “extremely important” and “central” to administration; forcing network scope alters plan administration, not merely market conditions.
• They undermine national uniformity: If replicated across states with variations, administrators would face state-by-state network mandates, the patchwork burden ERISA was enacted to prevent.

The court aligned this analysis with Kentucky Ass'n of Health Plans, Inc. v. Nichols and found persuasive support in PCMA v. Mulready, treating AWP rules as benefit-structure mandates rather than permissible pricing regulation.

2) “Incentive” provisions (anti-steering and cost-sharing uniformity)

Tennessee’s incentive provisions (Tenn. Code Ann. §§ 56-7-3120(a), (b)(2), and 3121(c)) restrict higher copays/coinsurance and other penalties, and prohibit “financial or other incentives” to persuade beneficiaries to use PBM-owned or plan-owned pharmacies. The court characterized their functional effect as imposing uniform cost-sharing across the network—because “forbidding differential cost-sharing structures is the same as requiring identical cost-sharing structures.”

• They dictate plan benefit design: Differential copays and preferred-tier incentives are core tools for designing pharmacy benefits; the law removes that design choice.
• They are not Rutledge-style cost regulation: Unlike reimbursement-rate tethering, these rules affect the plan’s internal benefit structure and participant-facing incentives in a way the court deemed “so acute” that it effectively dictates plan choices.
• Direct reach reinforced by Tennessee’s definitions: Tennessee expanded “covered entity” and “pharmacy benefits manager” definitions to include ERISA plans and declared the PBM laws apply to ERISA plans “notwithstanding another law,” sharpening the ERISA conflict.

C. Saving clause and deemer clause

The Commissioner argued the saving clause (29 U.S.C. § 1144(b)(2)(A)) preserved the laws as insurance regulation, but the court held: (i) the argument was forfeited (not addressed below), and (ii) in any event the deemer clause (29 U.S.C. § 1144(b)(2)(B)) would block application to a self-funded ERISA plan. Citing FMC Corp. v. Holliday, the court emphasized that self-funded ERISA plans cannot be “deemed” insurers for purposes of state insurance regulation—particularly where Tennessee’s statutory scheme expressly swept ERISA plans into the PBM regulatory definitions.

3.3. Impact

1) Narrowing the post-Rutledge regulatory “green light”

The opinion is best read as a corrective to expansive interpretations of Rutledge v. PCMA. Rutledge is not a blanket approval of PBM statutes touching ERISA plans; it tolerates certain price/cost regulations that do not dictate plan design. Tennessee crossed the line by regulating (a) who must be in pharmacy networks and (b) how plans may structure participant cost-sharing and incentives.

2) Pharmacy networks and tiering are treated as “central” ERISA plan administration

By repeatedly framing network composition and differential cost-sharing as “central” and “key benefit design,” the Sixth Circuit signals that state laws reshaping preferred networks, limited networks, and steering incentives are particularly vulnerable to ERISA preemption when applied to self-funded plans.

3) Enforcement mechanics matter for standing—and thus for pre-enforcement challenges

The court’s standing analysis underscores that complaint-driven administrative schemes (where “any member of the public” can initiate proceedings) can generate a “credible threat” sufficient for pre-enforcement review, even absent warning letters or finalized sanctions. That lowers procedural barriers for ERISA fiduciaries seeking early federal adjudication of preemption.

4) Drafting choices that expressly include ERISA plans can backfire

Tennessee’s explicit expansion of statutory definitions to include ERISA plans—and the “notwithstanding” clause applying the PBM part to ERISA plans—made the ERISA collision unmistakable and strengthened the case for preemption, including via the deemer clause.

5) Practical consequences for states

States remain able to regulate PBMs in ways closer to Rutledge (e.g., reimbursement-rate methodology and pharmacy appeals processes), but must tread carefully when regulation effectively mandates: (i) open pharmacy networks, (ii) preferred-network access for any willing pharmacy, or (iii) uniform participant cost-sharing across pharmacies—at least as applied to self-funded ERISA plans.