MANAGED
CARE LIABILITY TO CONSUMERS OF HEALTH CARE (CONTUNUED)
V. IN THE MID-1990’S, THE U.S. SUPREME
COURT SET SOMEWHAT LIMITED THE SCOPE OF ERISA
Since Pilot
Life, courts have tended towards a broad definition of what constitutes an employee
benefit plan. In fact, until 1995, the trend of federal decisions was to expand ERISA
preemption to every possible claim. That trend has been halted by the U.S. Supreme Court
in a trio of decisions which appear to retreat from the inclusive approach of the last 10
years. The first case to signal a modest retreat on the sweep of ERISA preemption was New
York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co. 514
U.S. 645, 115 S. Ct. 1671 (1995). While the case was unrelated to plaintiffs’
claims against health plans, the court’s analysis of a dispute over the application
of a New York statute that imposes hospital surcharges on certain HMOs and commercial
insurers demonstrated an attempt to reestablish limits on the application of ERISA. The
court cautioned that the "relate to" portion of the preemptive language in ERISA
should not be "taken to extend to the furthest stretch of its indeterminacy".
The Supreme
Court further signaled its desire to set limits on ERISA preemption in the cases of California
Division of Labor Standards v. Dillingham Construction, N.A., Inc. 519 U.S. 316, 117
S.Ct. 832 (1997); and DeBuono v. NYSA-ILA Medical & Clinical Services Fund,
520 U.S. 806, 117 S.Ct. 1747 (1997). In DeBuono, the court commented,
But in
Travelers we confronted directly the question whether ERISA's "relates to"
language was intended to modify "the starting presumption that Congress does not
intend to supplant state law." 514 U.S., at 654, 115 S.Ct., at 1676 [FN8]. We
unequivocally concluded that it did not, and we acknowledged "that our prior
attempt[s] to construe the phrase 'relate to' d[o] not give us much help drawing the line
here."
While none
of these Supreme Court cases directly address damage claims by disgruntled
insureds, the
cases do seem to signal for the first time since Pilot Life a desire by the Supreme
Court to curb the expansion of ERISA preemption. Pressure from the media and consumer
groups has inspired the introduction in Congress of a number of bills intended to lift the
preemption for purposes of individual claims against managed care plans. Currently there
are several bills before Congress on managed care, some of which address limiting the
ERISA preemption of state claims, including proposals by Representatives Norwood, Gansky
and Chafee, but "it is not yet clear how this is going to play out, not just on
liability but any issue involving health care."
VI. MANAGED CARE LEAVES TO CLAIMS FOR MEDICAL
MALPRACTICE – AND A POSSIBLE WAY AROUND ERISA
At the
circuit court level, there has been a growing tendency to find against ERISA preemption.
This trend is primarily a result of changes in the health care payment system from a
traditional indemnity insurer, fee for service payor, to "managed care" where
payors more involved in making medical decisions and providers are given incentives to cut
costs, which usually involves limiting care. These two characteristics, which weren’t
common when Pilot Life was first published, and certainly not when ERISA was first
enacted, are the primary bases on which more recent cases have permitted plaintiffs to
avoid the ERISA preemption and bring their claims in state court. In these cases, payors
making medical decisions, as well as provider cost cutting incentives, have allegedly
resulted in inadequate medical care. Where the poor care caused injury to the patient, it
may result in a claim against the health plan for medical malpractice.
Claims
against health plans for medical malpractice were usually held to be preempted by ERISA.
In Corcoran v. United Healthcare, Inc., the plaintiff’s physician recommended
a pregnant patient be hospitalized due to complications, while the plan decided she should
instead have ten hours per day of home nursing care. During a period when the nurse
wasn’t there, the fetus went into distress and died. The Corcorans sued for wrongful
death, not bad faith. The Fifth Circuit found the claim was nonetheless preempted by
ERISA, because the medical decisions were made "in the context of making a
determination about the availability of benefits under the plan." The court was
clearly troubled by the fact that the ERISA remedy was of no use to the plaintiffs, noting
that cost containment features such as the one at issue did not exist when Congress passed
ERISA:
"Fundamental
changes such as the widespread institution of utilization review would seem to warrant a
reevaluation of ERISA so that is can continue to see its noble purpose of safeguarding the
interests of employees. Our system, of course, allocates this task to Congress, not the
courts, and we acknowledge our role today by interpreting ERISA in a manner consistent
with the expressed intentions of its creators."
Id. at
1338.
Following Corcoran,
the Supreme Court rendered the opinions in Travelers, DeBuono and Dillingham,
supra, suggesting ERISA might not preempt every state law claim. Particularly,
statements in DeBuono that "The historic powers of the State include the
regulation of matters of health and safety," and in Travelers that
"nothing in the language of the Act or the context of its passage indicates that
Congress chose to displace general health care regulation, which historically has been a
matter of local concern," suggested that the court might not find preemption where
the state law claim against the employee benefit plan was for medical decision making, as
opposed to benefit determination.
VII. DUKES: PLANS CAN BE HELD LIABLE
FOR MALPRACTICE, FOR BOTH DIRECT NEGLIGENCE AND VICARIOUS NEGLIGENCE OF ITS PATIENTS
It was with
the benefit of these Supreme Court decisions that the Third Circuit decided Dukes v.
U.S. Healthcare Inc., in 1995. Dukes and its companion case, Visconti,
both involved claims against U.S. Healthcare. Like Corcoran, they involve very sad
facts and payor medical decision making. Unlike Corcoran, the Dukes court
found in both cases that plaintiffs could proceed with their medical malpractice claims in
state court, unhampered by ERISA.
In Dukes,
the patient’s physician ordered a blood test which the hospital didn’t perform.
The patient died a few days later with extremely high blood sugar levels, that the blood
test theoretically would have detected had it been performed as ordered. The plaintiff,
Mr. Dukes’ widow, brought a claim for medical malpractice against his doctors and the
hospital, and against his HMO, U.S. Healthcare. The theories alleged against U.S.
Healthcare were as follows:
- Vicarious
Liability for the hospital’s negligent failure to conduct blood tests; and
- Direct
Negligence for failure to properly screen hospital personnel.
In Visconti,
the companion case to Dukes (also against U.S. Healthcare and literally decided in the
same opinion) plaintiffs sued their physician for failure to properly treat/ diagnose
preeclampsia during pregnancy, causing their infant’s death. The suit also alleged
medical malpractice against U.S. Healthcare, claiming:
- Ostensible
and Actual Agency for the malpractice of its physicians and personnel; and
- Direct
Negligence
for failure to properly screen /select its personnel.
The court,
perhaps due to the somewhat maverick nature of its holding, gave a thorough explanation
for its conclusion that plaintiff’s malpractice claims against U.S. Healthcare could
proceed in state court:
"When
Congress enacted ERISA it was concerned in large part with the various mechanisms and
institutions involved in the funding and payment of plan benefits. That is, Congress was
concerned "that owing to the inadequacy of current minimum [financial and
administrative] standards, the soundness and stability of plans with respect to adequate
funds to pay promised benefits may be endangered." §2, 29 U.S.C. §1001(a). Thus,
Congress sought to assure that promised benefits would be available when plan participants
had need of them and §502 was intended to provide each individual participant with a
remedy in the event that promises made by the plan were not kept. We find nothing in
the legislative history suggesting that §502 was intended as a part of a federal scheme
to control the quality of the benefits received by plan participants. Quality control of
benefits, such as the health care benefits provided here, is a field traditionally
occupied by state regulation and we interpret the silence of Congress as reflecting an
intent that it remain such."
Id. at 357
[emphasis added]. The court also went to some lengths to distinguish Corcoran and
its holding:
The HMOs
reliance on Corcoran is misplaced. Although United's decisions in Corcoran
were in part medical decisions, United, unlike the HMOs here, did not provide, arrange
for, or supervise the doctors who provided the actual medical treatment for plan
participants. (Blue Cross played that role in Corcoran.) Instead, United only
performed an administrative function inherent in the "utilization review." The
difference between the "utilization review" and the "arranging for medical
treatment" roles is crucial for the purposes of §502(a)(1)(B) because only in a
utilization-review role is an entity in a position to deny benefits due under an ERISA
welfare plan.
…Stated
another way, unlike Corcoran, there is no allegation here that the HMO denied
anyone any benefits that they were due under the plan. Instead, the plaintiffs here are
attempting to hold the HMOs liable for their role as the arrangers of their
decedents’ medical treatment.
Id. at 360.
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