Brief Fact Summary. On remand from federal court, a state court ordered Rush Prudential HMO, Inc. (Rush) (Defendant) to comply with a state statute that provides for its beneficiary, Debra C. Moran (Plaintiff), a right to independent medical review.Â Rush (Defendant) continued to deny Plaintiff’s claim and the court of appeals reversed.Â
Synopsis of Rule of Law. A state HMO statute that provides a right to independent medical review of particular denials of benefits is not preempted by the Employment Retirement Income Security Act of 1974 (ERISA).
We can begin, and in this case end, the analysis by simply asking if state law conflicts with the provisions of ERISA or operates to frustrate its objects.View Full Point of Law
Issue. Is a state HMO statute that provides a right to independent medical review of particular denials of benefits preempted by the Employment Retirement Income Security Act of 1974 (ERISA)?
Held. (Souter, J.)Â No.Â A state HMO statute that provides a right to independent medical review of particular denials of benefits is not preempted by the Employment Retirement Income Security Act of 1974 (ERISA).Â The ERISA statute preempts state laws related to employee benefit plans.Â The Plaintiff is a beneficiary of an employee benefit plan.Â However, the ERISA statute has a savings clause stating that it is not meant to relieve any person from any law of any state which regulates insurance, banking, or securities.Â Defendant’s argument that HMOs are not insurers does not measure up.Â HMOs have taken over much of the business that was previously performed by traditional indemnity insurers, and they are almost universally regulated as insurers under state law.Â In this case, the HMO Act in question is directed toward the insurance industry and is therefore saved from preemption by ERISA.
Dissent. (Thomas, J.)Â Section 502, the civil enforcement provision of ERISA, provides the exclusive procedure for benefit claims ERISA oversees.Â State laws creating more corrective schemes are completely preempted by the broad language of section 514(a) providing that ERISA “Shall supersede any and all State Laws insofar as they â€¦ relate to any employee benefit plan.”Â Today the Court breaks from precedent, and from congressional intent, so that Plaintiff may exercise an additional state statutory remedy provided by section 4-10 of the Illinois HMO Act allowing her benefit claim to be determined by a procedure similar to an arbitration.Â An independent HMO benefit review provision may sound appealing, but it undermines the ability of the HMO to control the costs of health care, and the ability of employers to provide basic coverage to all of its employees.
Discussion. As drafted, the ERISA statute leaves much doubt as to its interpretation and countless issues for the courts to determine.