Academic journal article Journal of Law and Health

A Framework for Analysis of ERISA Preemption in Suits against Health Plans and a Call for Reform

Academic journal article Journal of Law and Health

A Framework for Analysis of ERISA Preemption in Suits against Health Plans and a Call for Reform

Article excerpt

A FRAMEWORK FOR ANALYSIS OF ERISA PREEMPTION IN SUITS AGAINST HEALTH PLANS AND A CALL FOR REFORM

SUSAN O. SCHEUTZOW(1)

I. Introduction

II. Overview of Risk and the Structure of Health Plans

III. "Management if Care" and Types of Managed Care Liability

A. Management of Care

B. Types of Managed Care Liability

1. Benefit Determination

2. Utilization Review

3. Negligent Selection, Supervision, and Plan Design

4. Pure Vicarious or Derivative Liability

5. Continuum of Liability

IV. ERISA Preemption

A. Benefit Determination

B. Utilization Review

C. Dependent Liability and Vicarious Liability For Provider Malpractice

V. A Call for Corrective Action

A. Revealing Health Plan Financial Incentives to Patients

B. Challenge to Benefit Denials and Utilization Decisions

1. HMOs

2. ERISA Plans VI. Conclusion

I. INTRODUCTION

"To Sue or Not To Sue, a Wrinkle In Federal Law Makes It Harder Than Ever To Win a Malpractice Claim" -- Newsweek.(2) "HMOs Claiming Immunity Against Malpractice Suits" -- St. Louis Post Dispatch.(3) "HMOs Want To Dictate Care, Yet Avoid Malpractice Suits." -- The Sacramento Bee.(4) The popular press is replete with stories of the application of the preemption rules of the Employee Retirement Income Security Act of 1974 (ERISA)(5) to managed care plans and the resulting inability of individuals covered by ERISA regulated plans to sue their managed care plans for damages caused by provider malpractice.

The public demand is growing for the courts to "level the playing field" and permit beneficiaries of ERISA regulated plans to sue their health plans for malpractice and thereby afford the same opportunities to beneficiaries of ERISA regulated health plans as are enjoyed by beneficiaries of health plans not regulated by ERISA.(6) This controversy has also gained the attention of the federal government with the United States Department of Labor filing amicus briefs in several major preemption cases requesting that the courts permit beneficiaries under ERISA regulated health plans to sue their plans for the malpractice of plan physicians(7) and former Labor Secretary Robert Reich speaking out in favor of the courts permitting ERISA regulated health plans to be sued for physician malpractice.(8)

This debate, however, often has focused narrowly upon the ability of beneficiaries to sue their ERISA regulated health maintenance organizations (HMOs) for malpractice or has failed to make distinctions between suits against ERISA regulated plans for the independent actions of health plans in making benefit determinations and performing utilization review and vicarious liability suits against health plans for physician malpractice. While it is possible that the courts can allow plaintiffs to bring suits for damages against ERISA regulated health plans for physician malpractice, it is extremely unlikely absent legislative change that the courts will allow plaintiffs to bring suits for damages against ERISA regulated health plans for the plans' actions in utilization review and benefit determinations. In addition, while permitting suits against health plans arguably would be a deterrent to health plans engaging in overzealous benefit denials and utilization review and would provide redress for those who are injured by health plans' actions, permitting retrospective lawsuits is not sufficient to provide truly effective remedies. Since benefit denials and utilization decisions often result in the denial of coverage for life-saving treatment, the desired outcome in most of these cases is for the beneficiary to receive payment for the health care treatment in question so the treatment may be obtained. While multi-million dollar judgments make headlines, the parties involved undoubtedly would have preferred that payment for the treatment had been available and that the treatment had been obtained and the life of the loved one saved. …

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