ERISA: No Duty to Disclose Physician Compensation Arrangements-Ehlmann V. Kaiser Found. Health Plan of Texas

Article excerpt

ERISA: No Duty to Disclose Physician Compensation Arrangements-Ehlmann v. Kaiser Found Health Plan of Texas1--The United States Court of Appeals for the Fifth Circuit held that Health Maintenance Organizations (HMOs) have no fiduciary obligation to disclose physician compensation under ERISA absent special circumstances or specific inquiry.2

Ehlmann, a participant in an employee health plan, sued several HMOs under section 404 of ERISA for breach of fiduciary duty. Elhmann argued that the HMOs had a duty to disclose their physician compensation arrangements, alleging that the arrangements give participating physicians incentives to keep usage of health care, referrals and testing to a minimum, and thus harm the patient. Additionally, Ehlmann alleged that the HMOs made misleading representations to its plan members, and that there was a conflict of interest between the HMOs' fiduciary duties and its desire for profits. The district court dismissed Ehlmann's claims, fording that ERISA does not impose a duty upon HMOs to disclose physician compensation arrangements. Ehlmann appealed, arguing that ERISA does require disclosure and that the district court failed to properly discuss the misrepresentation and conflict of interest claims.3

The Fourth Circuit, analyzing the text, structure and legislative history of ERISA, found that HMOs had no broad duty to disclose physician compensation arrangements. The court rejected the Ehlmann's argument that the duty can be inferred from the general fiduciary duty of section 404(a), which requires a fiduciary to "discharge his duties with respect to a plan solely in the interest of the plan participants and beneficiaries."4 First, the court looked to the cannon of statutory construction that the specific language of a statute trumps the general language. …