500,000 members were riding on a federal preemption bet that fell flat
A health fund covering roughly 500,000 members lost its bid to strike down Arkansas pharmacy pricing rules under ERISA.
On August 26, 2026, the Seventh Circuit Court of Appeals affirmed the dismissal of a challenge by Central States, Southeast and Southwest Areas Health and Welfare Fund, a self-funded multiemployer plan that covers about 500,000 participants nationwide, including in Arkansas. A district court had dismissed the case, and the three-judge panel agreed.
The fund wanted the courts to strike down Arkansas Insurance Department Rule 128, which protects pharmacies from being paid below "fair and reasonable" rates for dispensing drugs. The rule does two things to health plans operating in the state. It lets the Arkansas insurance commissioner require plans to pay extra "dispensing fees" to pharmacies. And it requires plans to report information about how they pay pharmacies.
The fund argued that ERISA, the federal law governing employee benefit plans, overrides both parts of the rule. ERISA is meant to give plans one national rulebook, and the fund said Arkansas was cutting into that uniformity.
The court disagreed. On the dispensing fee, it relied on a 2020 Supreme Court decision, Rutledge, which treated a similar Arkansas law as a "cost regulation." States can raise a plan's costs or shift its incentives, the court said, so long as they do not force the plan into a particular coverage design. Rule 128 does not tell the fund how to build its pharmacy network or what benefits to offer. It touches only cost.
The reporting requirement was a closer call. A 2016 Supreme Court case, Gobeille, held that ERISA blocks states from imposing "novel, inconsistent, and burdensome" reporting demands on plans. But Gobeille left room for reporting that is "incidental" to a valid state law. The court leaned on the fund's own filings: the fund said the reporting exists to enforce the fair pricing rule and never claimed it was burdensome. On those allegations, the court placed the requirement inside the exception, while noting a different set of facts could produce a different result.
The judges also pointed to a change coming from Washington. Congress recently amended ERISA to create uniform federal reporting rules for the same pharmacy pricing data Arkansas now collects. Those rules take effect for plan years starting 30 months after February 3, 2026. The court left open whether they will preempt Rule 128 once live.
For now, plans operating in Arkansas remain subject to the rule.
