Sponsors of self-insured health plans should take note of a recent Seventh Circuit case addressing when states can regulate their plans.
On August 26, 2026, the Seventh Circuit upheld the lower court’s ruling in Central States, Southeast and Southwest Areas Health and Welfare Fund and Charles A. Whobrey v. McClain.
The case deals with the way in which states may regulate pharmacy benefit managers (PBMs) and, by extension, self-insured health plan sponsors.
In 2024, Arkansas adopted a rule that requires health plans and payors, including self-insured plans, to report information to the state. Also, the new law permits the state insurance commissioner to require additional dispensing-fee payments if plan payments are not “fair and reasonable.”
The plaintiffs argued that ERISA “preempted” the rule, but the Seventh Circuit disagreed.
The court held that the dispensing-fee requirement was a permissible cost regulation because it governed what plans must pay pharmacies, without dictating plan design, network structure, or substantive benefits. The court viewed the reporting requirement as a closer question, but concluded that the requirement was incidental to enforcing the state’s fair-reimbursement rule and does not intrude on a core matter of plan administration.
The decision is a reminder that plan sponsors should work with ERISA counsel to evaluate state rules, including PBM and pharmacy-reimbursement rules carefully, rather than assuming that ERISA preemption might apply.
A copy of the court’s decision is available here.