On April 26, 1995, the United States Supreme Court limited the reach of the preemption provision of ERISA in New York State Conference of Blue Cross & Blue Shield Plans v. Tavelers Insurance Co. (115 S. Ct. 1671 (1995)). In Travelers, the Supreme Court upheld the validity of a New York statute requiring hospitals to collect surcharges from patients covered by commercial insurers and requiring health maintenance organizations (HMOs) to pay a surcharge to the state's general fund that varies depending on the number of Medicaid-eligible HMO members enrolled. Neither patients insured by Blue Cross/Blue Shield plans nor the plans themselves are similarly charged under the statute. Several commercial insurers and HMOs claimed the surcharges should be preempted under ERISA because they are levied on patients whose insurance or HMO membership premiums are purchased by an ERISA plan.

The ERISA preemption clause means that federal regulation, or lack thereof, supersedes state regulation that is related to employee pension and benefit plans. This preemption clause prevents states from changing health care and benefit law for a significant portion of state residents.