State Power to Mandate Health Benefits Upheld : Court Rules Insurance Firms May Be Ordered to Offer Coverage Exceeding That Set by U.S. Law

Times Staff Writer

The Supreme Court, upholding laws in California and 25 other states, ruled Monday that employers can be required to provide workers with a wide array of group health insurance benefits, ranging from treatment for mental illness to pregnancy complications.

The justices, in a decision affecting millions of employees, held 8 to 0 that federal statutes do not preclude the states from requiring wider coverage than mandated under federal law. The court gave states broad authority to make sure that employees are covered for certain specific illnesses under company health plans.

In recent years, state legislatures throughout the nation have enacted so-called “mandated-benefit” statutes in increasing numbers. Such laws require that health insurance contracts provide coverage for certain illnesses and/or for treatment by particular medical service providers.

According to the Health Insurance Assn. of America, 26 states have enacted about 69 mandated-benefit laws. Twenty-two states require that insurers offer, on an optional basis, about 50 types of illness coverage to employers purchasing group plans. Also, in many instances, coverage by certain kinds of health care providers--such as dentists or optometrists--either must be included or offered under those state laws.


In California, treatment for pregnancy complications and mastectomies and prenatal diagnosis must be included--and treatment for alcoholism and mental illness and for some kinds of home health care must be offered to employers. The court’s ruling, in an opinion by Justice Harry A. Blackmun, was issued in the case of a Massachusetts law that forced health insurance firms to provide coverage for mental and nervous disorders.

The Metropolitan Life Insurance Co. and Travelers Insurance Co. challenged the Massachusetts law, saying that it conflicted with federal law covering employee benefit plans. The insurance companies, supported by numerous business groups, contended that such laws force costly and sometimes unwanted health care coverage on employees, increasing the cost of insurance. And, they said, adjusting employee benefit plans to suit constantly changing state laws is proving burdensome and expensive.

Low-Cost Coverage

The state of Massachusetts, joined by several states and some health care groups, argued that regulating insurance is a long and well-established function of state government. Such laws, they said, represent the only practical means of obtaining low-cost coverage for many disorders suffered by employees.


In its decision (Metropolitan Life vs. Massachusetts, 84-325), the Supreme Court said that the Massachusetts law--and, by implication, similar laws in other states--conflicted with neither the health-insurance regulations of the federal Employees Retirement Income Security Act nor the collective-bargaining process, governed by the National Labor Relations Act.

“Massachusetts’ mandated-benefit law is an insurance regulation designed to implement the (state’s) policy on mental health care,” Blackmun wrote, “and, as such, is a valid and unexceptional exercise of its police power.”

Justice Lewis F. Powell Jr. took no part in the decision.

The decision is “basically a very good one for the states,” in the view of Joseph P. Powers, a senior attorney for the California Department of Insurance. A substantial majority of employees in the state is covered under company plans, he noted.


“The states have been going back and forth on this question (of federal preemption) for some time,” Powers said. “Obviously, this will help the states in continuing to regulate such plans.”

In other action Monday, the justices ruled that municipalities may not be held liable under federal civil rights law for a police officer’s wrongful use of deadly force, unless it resulted from an official policy or custom.

By a vote of 7 to 1, the court overturned a $1.5-million verdict against Oklahoma City for an officer’s fatal shooting of a man he tried to take into custody at a bar. The jury found that the killing stemmed from inadequate police training by the city, and a federal court of appeals upheld the award.

But the justices held that a single, isolated action by an officer in itself is insufficient to hold a city at fault. Justice William H. Rehnquist, in an opinion joined by Chief Justice Warren E. Burger and Justices Byron R. White and Sandra Day O’Connor, declared: “To impose liability under those circumstances would be to impose it simply because the municipality hired one ‘bad apple.’ ”


Justice William J. Brennan Jr., joined by Justices Thurgood Marshall and Blackmun, issued a separate opinion concurring in the court’s decision to overturn the verdict. Justice John Paul Stevens dissented and Powell did not participate.

Charges of excessive force by police officers are often tried under the federal Civil Rights Act, which permits damage actions when an officer, acting under color of the law, infringes on the constitutional rights of an individual. Such cases are frequently brought in conjunction with allegations of wrongful death under state statutes.

The court, in its decision (Oklahoma City vs. Tuttle, 83-1919), sent the case back for further proceedings to see whether there was sufficient evidence beyond the fatal shooting itself to hold the city liable because of its allegedly inadequate officer training program.

In addition, the justices agreed to hear next term a case with important implications for news organizations facing libel suits. The court said that it would review a suit brought by the Liberty Lobby against columnist Jack Anderson and a magazine he publishes known as The Investigator. The suit was brought over two 1981 articles, written for the magazine by Charles Bermant, that described the group and its leader as pro-Nazi.


Case Ordered to Trial

A federal district judge dismissed the suit, saying there was insufficient evidence that the magazine article was published with “actual malice"--that is, with knowledge that the information was false or with reckless disregard for the truth. But a federal appeals panel here reinstated the suit, ruling that it could go to trial. The panel, in a decision by Judge Antonin Scalia, said that the plaintiffs need not show before trial the same “clear and convincing evidence” they would need to show to win a verdict after trial.

Attorneys for Anderson urged the high court to rule that the same standard should be applied in summary proceedings before trial as a means of halting unfounded libel claims before costly and burdensome trials (Anderson vs. Liberty Lobby, 84-1602).