On September 2, 2025, a U.S. District Court in Illinois dismissed an ERISA preemption lawsuit by Central States, Southeast, and Southwest Areas Health and Welfare Fund against the Arkansas Insurance Commissioner and Department. Specifically, the plaintiff (a self-funded, multiple employer welfare plan) challenged an Arkansas state rule that permits the Arkansas Insurance Commissioner (the commissioner) to review the adequacy of pharmacy reimbursement payments made by health plan PBMs, arguing that the rule's reporting and dispensing fee requirements were preempted by ERISA.
The court ultimately held that the plaintiff failed to sufficiently allege that the rule referred to, or had an impermissible connection with, ERISA plans and dismissed the case.
At issue in the case was a rule issued by the commissioner (Rule 128) in response to the Arkansas Pharmacy Benefits Manager Licensure Act (PBMLA). The rule allowed the commissioner to impose a dispensing fee (payable to pharmacies) if pharmacy compensation is not deemed “fair and reasonable” and also included a reporting provision that required health plans to submit to the commissioner certain pharmacy compensation information. The plaintiff argued that ERISA expressly preempts any state law that may relate to an employee benefit plan (29 U.S.C. § 1144(a)). Specifically, a law “relates to” an employee benefit plan if it has a connection with or reference to the plan. The plaintiff also argued that the rule's reporting and dispensing fee requirements had a reference to ERISA plans because the rule imposes obligations directly on plans (as opposed to merely regulating PBMs). However, in its ruling, the court noted that benefit plans subject to the rule did not necessarily need to be ERISA plans and held the plaintiffs failed to allege that the rule acted exclusively on ERISA plans or that the existence of an ERISA plan was essential to the rule's operation.
In addition, the court held that the rule’s dispensing fee requirement was not ERISA-preempted because it was essentially a cost regulation that did not impose substantive requirements for ERISA plans and noted that the rule may (but does not automatically) impose an additional fee on plans. The court also dismissed the preemption claim against the rule’s reporting requirement, citing a Sixth Circuit Court of Appeals decision in Self-Ins. Inst. of Am., Inc. v. Snyder, 827 F.3d 549, 558 (Sixth Cir. 2016), which held that ERISA does not preempt state laws that impose incidental reporting obligations on ERISA plans.
Employer Takeaway
While the court’s dismissal of the preemption claim may be viewed as a validation of state laws that regulate PBMs, there has been a growing number of cases involving challenges to state PBM laws under ERISA. As noted in our previous Compliance Corner article, nearly every state has implemented laws that seek to impose wide‑ranging reforms on PBMs and regulate PBM business practices. Nonetheless, courts have remained largely split regarding the applicability of state PBM laws to self-funded plans, and whether the ERISA preemption doctrine applies. As a result, employers should not rely on the assumption that a self-funded plan is automatically exempt from state PBM regulations or reporting obligations. Employers should continue to monitor legal developments in this area and carefully evaluate the scope and applicability of state PBM laws for prescription drug plans.
Read the full case: Cent. States, Se. & Sw. Areas Health & Welfare Fund v. McClain, (N.D. Ill. Sept. 2, 2025)