ERISA: Supreme Court Holds ERISA Does Not Preempt Illinois Independent Review Law-Rush Prudential HMO, Inc. v. Moran1-The U.S. Supreme Court, in a 5-4 decision, held that the Employee Retirement Income and Security Act (ERISA)2 does not preempt the Illinois Health Maintenance Organization Act (Illinois Act).3 In response to widespread employer mismanagement of employee pension funds, Congress enacted ERISA to create a uniform system of federal law to regulate private sector employee benefits programs, including employment-based health coverage.4 By alleviating the administrative burden of complying with an amalgam of state laws, Congress intended to encourage and enable more employers to provide benefits for their employees and to increase access to these benefits.5 To effectuate these goals of uniform regulation, Congress expressly dictated that ERISA preempts all state laws that relate to ERISA plans.6 ERISA's unbridled preemption raised federalism concerns about the respective roles of the state and federal government. Traditionally, states have regulated insurance; to preserve some role for state authority, ERISA provides a narrow exception to its preemptive power over state laws. Under this "savings clause," state laws that regulate the business of insurance are saved from ERISA preemption even if such state laws relate to ERISA plans.
ERISA was enacted in 1974, before the advent of health maintenance organizations (HMOs). As many commentators have noted, the emergence of HMOs as the primary providers of healthcare and health insurance in the U.S. has muddled the question of ERISA preemption. The ERISA preemption quandary results from the fact that many HMOs perform multiple functions, including management and provision of healthcare, and administration of ERISA plans.
Moran is the most recent Supreme Court case to address where ERISA regulation ends and state regulation begins under ERISA preemption. Writing for the majority, Justice Souter aptly surmised the general issue that has plagued ERISA jurisprudence, namely the interpretation of the difficult language of ERISA that "seems simultaneously to preempt everything and hardly anything."7 In Moran, the Court addressed another issue stemming from this underlying quandary, which is whether the Illinois Act was a permissible state regulation of insurance or whether the Act was preempted by ERISA.
Section 4-10 of the Illinois Act requires HMOs to submit benefit denials to an independent physician reviewer "in the event of a dispute between the primary care physician and the [HMO] regarding the medical necessity of a covered service proposed by a primary care physician."8 Under the Act, an independent physician reviewer must be unaffiliated with the HMO and jointly selected by the HMO and the patient. If the independent reviewer decides that the treatment is medically necessary and is a covered service under the contract, the HMO must provide the covered service.
Respondent Debra Moran was a beneficiary of petitioner Rush Prudential's health plan, which was sponsored by her husband's employer. Under its Certificate of Group coverage issued to plan beneficiaries, Rush promised to provide its participants with medically necessary health services. Under Rush's plan, each participant selected a primary care physician from a group of physicians who had a contract with Rush. According to its contract, Rush was obliged to pay for medical services performed by an unaffiliated physician only if the services had been authorized by both the primary care physician and Rush's medical director.9
Moran suffered pain and numbness in her right shoulder. Her primary care physician's attempts to alleviate her discomfort through conservative treatments were unsuccessful. Moran's primary care physician recommended that Rush approve surgery by an unaffiliated specialist who had developed an unconventional treatment for Moran's condition. Despite her physician's recommendations, Rush denied Moran's request for coverage of the surgery because it found that the procedure was not medically necessary. …