Brief Fact Summary. Two participants (Plaintiff) filed state law claims against their HMOs (Defendant) alleging they failed to administer proper care. The HMOs (Defendant) argued that their claims were preempted by the Employment Retirement Income Security Act of 1974 (ERISA). The U.S. Court of Appeals found in favor of the participants (Plaintiff). The HMOs (Defendant) appealed.
Synopsis of Rule of Law. If a person brings suit complaining that coverage for medical care was denied, where the person was entitled to such coverage only because of the terms of an employee benefit plan regulated by ERISA, and where no state or federal legal duty apart from ERISA or the terms of the plan are violated, the suit falls within the scope of ERISA § 502(a)(1)(B).
ERISA represents a careful balancing between ensuring fair and prompt enforcement of rights under a plan and the encouragement of the creation of such plans.
View Full Point of LawIssue. If a person brings suit complaining that coverage for medical care was denied, where the person was entitled to such coverage only because of the terms of an employee benefit plan regulated by ERISA, and where no state or federal legal duty apart from ERISA or the terms of the plan are violated, does the suit fall within the scope of ERISA § 502(a)(1)(B)?
Held. (Thomas, J.) Yes If a person brings suit complaining that coverage for medical care was denied, where the person was entitled to such coverage only because of the terms of an employee benefit plan regulated by ERISA, and where no state or federal legal duty apart from ERISA or the terms of the plan are violated, the suit falls within the scope of ERISA § 502(a)(1)(B). Section 502(a)(1)(B) provides that a civil action may be brought by a participant in the plan or a beneficiary to recover benefits due under the terms of his or her plan, to enforce his or her rights under the plan terms, and to clarify his or her rights to plan benefits in the future. The state law claims asserted by Davila (Plaintiff) and Calad (Plaintiff) fell within the scope of ERISA § 502(a)(1)(B) because Davila (Plaintiff) and Calad’s (Plaintiff) only relationship with or connection to Aetna (Defendant) and CIGNA (Defendant) was through ERISA-governed benefit plans. The conclusion that ERISA preempts the state law claims is supported by several other considerations. First, the duties imposed on HMOs (Defendant) by the THCLA did not arise independently of ERISA or the plans’ terms. The THCLA imposed on HMOs (Defendant) a duty to “exercise ordinary care when making health care treatment decisions.” But the THCLA provides that HMOs and other managed care entities are not liable under the state law if the relevant health plans do not provide coverage for certain medical procedures. Because interpretation of the terms of Davila (Plaintiff) and Calad’s (Plaintiff) benefit plans formed an essential part of their THCLA claims, their claims were preempted by ERISA. Second, the Fifth Circuit’s conclusion that Davila (Plaintiff) and Calad (Plaintiff) asserted “tort claims for tort damages,” which would not be preempted by ERISA, rather than “contract claim for contract damages,” which would be preempted by ERISA, is rejected. Distinguishing between preempted and non-preempted claims based on the particular label would elevate form over substance and permit parties to avoid the preemptive scope of ERISA by simply relabeling their claims. Third, The Fifth Circuit’s determination that, under earlier decisions by the Supreme Court, a state law is not preempted by ERISA unless it ‘duplicates” the elements of a claim available under ERISA is rejected, as is Davila (Plaintiff) and Calad’s (Plaintiff) argument that the THCLA was a law that regulated insurance and was therefore saved from preemption by ERISA. The intent of Congress to make the ERISA civil enforcement mechanism exclusive would be undermined if state causes of action that supplement the ERISA § 502(a) remedies were permitted, even if the elements of the state cause of action did not exactly duplicate the elements of an ERISA claim. Fourth, Davila (Plaintiff) and Calad (Plaintiff), as well as several federal courts, have read Pegram too broadly. In Pegram, the Supreme Court found that ERISA’s fiduciary duty requirements do not attach to treatment decisions and mixed eligibility and treatment decisions HMOs make. In this case, determination of benefits is “part and parcel” of the ordinary fiduciary responsibilities involved with the administration of a plan. This result is not altered by the fact that a benefits determination mixes with medical judgments. Pegram only makes sense when the underlying negligence that plausibly constitutes medical malpractice is caused by a party who is either a treating doctor or a doctor’s employer. In this case, Aetna (Defendant) and CIGNA (Defendant) are neither respondents’ treating physicians nor the employers of respondents’ treating physicians. The HMOs (Defendant) coverage decisions are pure and eligible decisions, and Pegram does not apply. Reversed and remanded.
Discussion. Members of Congress, concerned with the treatment of beneficiaries by health plans, reacted immediately when this case was decided. Rep. John D. Dingell (D-Mich.), ranking member of the House Energy and Commerce Committee, announced he and other Democrats would immediately reintroduce the Patients’ Bill of Rights. The statement released by Dingell said that a patients’ rights law is needed to “establish minimum federal law protections to permit patients injured by health plans to seek redress under state laws that provide additional health care protections for patients.” A statement by Sen. John Edwards (D-N.C.) said that the Court ruled “managed care insurance programs cannot be held responsible in state courts,” emphasizing the need for a national patient protection law. The decision “casts a legal cloud over similar provisions of patient protection laws in North Carolina and other states” and leaves millions of working people with “nowhere to go when HMO bureaucrats overrule their doctors’ decisions.” And Rep. Charles Norwood (R-Ga.) said in a statement that the ruling was a “blow to patients’ rights” and that “[w]ith this decision, Americans in a dozen states have lost their right to hold their HMO accountable and Americans in the rest of the country have had the door closed on them.