Academic journal article The Review of Litigation

The Duty of Ordinary Care for HMOs: Can Texas Senate Bill 386 Weather the Storm of ERISA Preemption?

Academic journal article The Review of Litigation

The Duty of Ordinary Care for HMOs: Can Texas Senate Bill 386 Weather the Storm of ERISA Preemption?

Article excerpt

I. Introduction: A New Day in HMO Liability

Texas recently became the first state in the nation to adopt legislation creating liability for negligence in health care decisions made by health care providers.' On September 1, 1997, Senate Bill 386 (SB 386) became effective, amending Title 4 of the Civil Practice and Remedies Code by adding Chapter 88.2 The purpose of the legislation was to make health care providers responsible for any medical decisions they may make.3 At least twenty states are in the process of enacting similar laws, and state legislatures are increasingly beginning to consider the issue.4 The merits of consideration and adoption of this type of legislation has generated an enormous debate in the media.5

This Note considers the validity of Texas Senate Bill 386 in light of the broad preemption of state law malpractice claims under the Employee Retirement Income Security Act of 1974 (ERISA). Part II examines the ERISA statute and the development of the broad preemption doctrine. Part III highlights the recent Supreme Court decision in New York State Conference of Blue Cross and Blue Shield Plans v. Travelers Insurance Group, which added several significant considerations to the preemption doctrine. Finally, Part IV discusses SB 386 under the current federal law, and provides analysis on the likelihood that the legislation will survive judicial scrutiny.

II. ERISA: The Dawn of a New Era in Regulation of Employee Benefit Plans

ERISA was enacted in 1974 in response to the rapid "growth in size, scope, and numbers of employee benefit plans. "6 The legislation was enacted to provide for regulation of employers' health, medical, and pension-related services to their employees throughout the United States.7 The purpose of ERISA was to protect interstate commerce and the interests of participants in employee benefit plans and their beneficiaries, by requiring the disclosure and reporting to participants and beneficiaries of financial and other information with respect thereto, by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal Courts.8

Another principal reason for the enactment of ERISA was to establish uniform standards regarding the administration of benefit plans and the communication of information regarding the benefit plans to concerned employees.9 To effectuate the uniformity of regulation, Congress included a broad preemption clause to supersede state laws.10

To further the goals of the statute, section 1132(a) provides for civil remedies in the event of a statutory violation of ERISA.II Outside of the listed remedies, however, no other actions against an ERISA plan may be maintained.l2 Common law state malpractice claims are not among those actions allowed by the statute.13 While the statute does provide for ready access to the federal courts, extra-contractual damages are limited under ERISA.14 So, plaintiffs face two insurmountable barriers when asserting a state common law claim that involves an employee benefit or welfare plan. First, the federal preemption will most likely render their state cause of action moot. Second, even if the plaintiff can establish a violation of the ERISA statute, the recovery of damages will be limited to the amount of premiums paid into the plan,15 an amount substantially less than the generous tort law of most states for medical malpractice.

III. ERISA Preempts State Laws that "Relate to" ERISA Plans

The preemption provision of ERISA, commonly referred to as 514(a), has three basic sections. The first section, which is the focus of this Note, is the actual preemption clause that supersedes state laws that "relate to" a qualified ERISA plan.l6 Specifically, the statute states that "[t]he provisions of this subchapter. . . shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan. …

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