- Aetna v. Davila/Cigna v. Calad
- Cicio v. Vytra Healthcare
- Corporate Health Insurance, Inc. v. Texas Department of Insurance
- Kentucky Association of Health Plans v. Miller
- Pappas v. Asbel
- Pegram v. Herdrich
- Roark v. Humana
- Rush Prudential HMO, Inc. v. Moran
Aetna v. Davila/Cigna v. Calad, 542 U.S. 200 (2004)
Issue
The issue in these consolidated cases was whether federal ERISA law preempted the Texas Health Care Liability Act (THCLA), which allowed HMO beneficiaries to sue the HMOs for damages on non-contractual grounds because of an improper denial of benefits.
AMA interest
The AMA believes that HMOs should be liable for the injuries they cause patients on account of improper denials of medically necessary care.
Case summary
Davila
Juan Davila, an arthritic and diabetic post-polio patient, received Aetna HMO coverage through his employer's health plan. His primary care physician had prescribed Vioxx for arthritic pain. Before it would pay for the prescription, however, Aetna required Davila to enter its "step program," under which Davila first had to try two less expensive medications. Only if he suffered a detrimental reaction to the medications or failed to improve would Aetna consider paying for Vioxx.
After three weeks on the cheaper medication, Davila was rushed to the emergency room, suffering from bleeding ulcers, which had nearly caused a heart attack. The doctors kept him in critical care for five days. Davila contended that, by requiring its step protocol, Aetna had failed to use ordinary care in making a "medical necessity" decision.
Calad
Through her husband's employer, Ruby Calad had received medical care from CIGNA Healthcare of Texas, Inc., also an HMO. A CIGNA physician had performed a hysterectomy, with rectal, bladder, and vaginal repair. A CIGNA nurse decided that Calad should be discharged after one day in the hospital and that the longer stay Calad's doctor had recommended was medically unnecessary under CIGNA's standard procedures. Calad suffered complications from the early discharge and had to return to the emergency room a few days later. She contended that CIGNA had failed to use ordinary care in determining that she should be discharged from the hospital.
Davila and Calad each sued in Texas state court, claiming violations of THCLA. The HMOs removed their respective cases to federal court based on ERISA preemption. Ultimately, their cases were appealed to the United States Supreme Court, where the issue was whether, by passing ERISA, Congress had intended to preclude state laws, such as THCLA, which provide remedies beyond those specified in ERISA. The HMOs argued that the remedies enumerated in ERISA § 502 are intended to preclude all other possible remedies for an HMO's violation of its obligation to provide and pay for medically necessary treatment. Thus, by implication ERISA "completely preempted" the THCLA remedies.
The Supreme Court, by a unanimous decision, held in favor of the HMOs. It found that ERISA was intended to preclude state legislation that might provide additional monetary compensation to injured patients. Two of the justices wrote a concurring opinion, in which they joined the "the rising chorus urging that Congress and [the Supreme] Court revisit what is an unjust and increasingly tangled ERISA regime."
Litigation Center involvement
The Litigation Center filed an amicus curiae brief to support patients' rights to secure their promised health insurance benefits under state law. The brief argued that the explicit language of ERISA § 514 (b) contradicted the HMOs' position regarding preemption and that issues involving health care should be left to the separate states.
View the brief (PDF, 1.6MB).
Cicio v. Vytra Healthcare, 385 F.3d 156 (2d Cir. 2004)
Issue
The primary issue in this case was whether preemption by the federal Employee Retirement Income Security Act (ERISA) should immunize HMOs against tort (i.e., non-contractual) litigation when the HMOs make improper coverage decisions based on “mixed” criteria of legal and medical analysis.
AMA interest
The AMA supports a reasonable, but not overly-broad, interpretation of the preemptive scope of ERISA, particularly in cases involving state laws that regulate medical decision making.
Case summary
Carmine Cicio received employer-sponsored health insurance coverage through Vytra Health Care, an HMO. Mr. Cicio was diagnosed with multiple myeloma, a form of blood cancer. His treating physician, Dr. Edward Samuel, asked Vytra to approve a double stem cell transplant for Mr. Cicio. Dr. Samuel described this treatment as medically necessary and possibly life saving. Vytra denied the request, stating that a double stem cell transplant was an “experimental/investigational” procedure and thus not covered under Mr. Cicio’s policy. Mr. Cicio, through Dr. Samuel, appealed Vytra’s decision, and Vytra ultimately approved a single stem cell transplant. However, by that time the window of opportunity for an effective treatment had passed. Mr. Cicio died approximately 6 weeks later.
Bonnie Cicio, Mr. Cicio’s widow, sued Vytra and its medical director in the New York Supreme Court. She alleged 18 causes of action, mostly based in tort, under New York state law. Defendants removed the case to the United States District Court for the Eastern District of New York, contending that Mrs. Cicio’s claims were covered under ERISA. The defendants moved to dismiss, based on ERISA preemption. Both the magistrate judge, to whom the case had been assigned for evaluation, and the presiding judge granted the motion and dismissed the case. Mrs. Cicio appealed to the United States Court of Appeals for the Second Circuit.
The Court of Appeals, by a two to one decision, reversed the dismissal of the medical malpractice claim, holding that Mrs. Cicio could potentially sue the HMO and its medical director. The court did not rule on whether New York law actually recognizes a cause of action for medical malpractice in this situation but only that ERISA does not preempt such cause of action if it does exist. It found that ERISA does not apply to, and therefore does not preempt, determinations of medical necessity or utilization review.
The Court of Appeals also affirmed the dismissal of all counts in the complaint other than the medical malpractice claims. It remanded those claims to the District Court for further determination. The defendants’ attorneys sought en banc review (i.e. by all members of the court), but the Second Circuit denied that request.
The defendants then asked the United States Supreme Court to hear the case. Following its ruling in the Aetna v. Davila and CIGNA v. Calad cases, the United States Supreme Court vacated the Second Circuit judgment and remanded the case to the Second Circuit for further consideration.
Unfortunately, the Second Circuit vacated its prior decision and affirmed the district court's dismissal of Mrs. Cicio's lawsuit.
Litigation Center involvement
The Litigation Center filed an amicus curiae brief to support Mrs. Cicio. The brief argued that both Vytra and its medical director had made a medical decision when they denied the double stem cell transplant and contended that ERISA was not intended to preempt the state laws that regulate such decision making.
Two and a half years later, the AMA and the Medical Society of the State of New York submitted a letter brief to the Second Circuit, urging that, notwithstanding the United States Supreme Court decision vacating the Second Circuit’s judgment, it should uphold its earlier ruling against the HMO medical director.
View the brief. (PDF, 89KB)
Corporate Health Insurance, Inc. v. Texas Department of Insurance,
314 F.3d 784 (5th Cir. 2002)
Issue
The issue in this case was the scope of preemption of the Texas Health Care Liability Act (THCLA) by the federal Employee Retirement Income Security Act (ERISA).
AMA interest
The AMA supports a reasonably narrow interpretation of the preemptive scope of ERISA in cases involving state laws that regulate medical care and decision making.
Case summary
Several insurance companies, most notably Aetna Life Insurance Company, sued the Texas Department of Insurance for a declaration that the THCLA is preempted by ERISA and is therefore invalid. In a widely reported decision by Judge Vanessa Gilmore, the trial court held that certain portions of the THCLA were preempted while other portions were not. Both sides appealed.
The United States Court of Appeals for the Fifth Circuit found that ERISA did not entirely preempt the Texas statute. The court held that the following statutory provisions were not preempted because they implicate quality of medical practice, not coverage: (1) the provision permitting suits against entities that fail to meet an ordinary care standard for treatment decisions; (2) the provision barring retaliation against physicians for advocating medically necessary care for patients; and (3) the provision proscribing indemnity clauses that would hold HMOs harmless for their own acts. However, the court found that ERISA did preempt certain provisions for independent review of determinations by managed care entities. The court also determined that the review provisions were severable from the remainder of the statute.
The State of Texas petitioned for rehearing en banc (i.e., by all the judges of the Fifth Circuit) and for a panel rehearing (i.e., by the several judges who had earlier ruled). Those petitions were denied. The Texas Attorney General filed a petition for certiorari with the United States Supreme Court, seeking to challenge that portion of the ruling that struck down the independent review provisions of the Texas statute.
In a two sentence order, the United States Supreme Court granted certiorari, reversed the Fifth Circuit judgment, and remanded the case to the Fifth Circuit for further consideration in light of its decision in Moran v. Rush-Prudential HMO, which addressed the Illinois independent review law. The Fifth Circuit then asked the parties for further briefing on how Moran should apply to the Texas independent review law, and invited briefs from amici curiae.
Subsequently, the Fifth Circuit, modifying its earlier decision, held that ERISA does not preempt the Texas independent review law as it applies to employees covered under insurance company-funded employee benefit plans, because the independent review law falls within the ERISA savings clause. However, it also held that ERISA does preempt the independent review law for self-insured plans, because of ERISA’s “deemer” clause which exempts those plans from ERISA’s Insurance Savings Clause. The Fifth Circuit further held that the independent review law is preempted for employees of the federal government, who are covered by a federal statute similar in its scope to ERISA, but without a savings clause.
Litigation Center involvement
The Litigation Center and the Texas Medical Association (TMA) filed an amicus brief in the Fifth Circuit during the appellate court’s first consideration of the case in order to support the validity of the THCLA. Amici’s brief focused on the Insurance Savings Clause, a proviso to the general ERISA preemption statute. The brief argued that Judge Gilmore correctly interpreted the controlling precedents from the Fifth Circuit, but those precedents themselves were erroneous. Amici criticized numerous Fifth Circuit decisions as misunderstandings of congressional intent and Supreme Court rulings.
Additionally, the Litigation Center and TMA filed an amicus brief in support of the State of Texas in its petition to the United States Supreme Court for certiorari.
Moreover, the Litigation Center, on behalf of the AMA and the TMA, filed a supplemental amicus brief in support of THCLA’s validity when the case was on remand to the Fifth Circuit.
View the brief. (PDF, 89KB)
Kentucky Association of Health Plans v. Miller, 538 U.S. 329 (2003)
Issue
The issue in this case was whether Kentucky’s “any willing provider” (“AWP”) law was preempted by the federal ERISA statute.
AMA interest
The AMA opposes federal preemption of state AWP laws.
Case summary
The Kentucky Health Care Reform Act included an AWP provision requiring that health insurers accept any providers willing and qualified to participate on the insurers’ managed care panels. Plaintiffs, a trade association of health care plans and several managed care organizations, sued to have the Kentucky AWP laws declared invalid, as preempted by the federal ERISA statute.
The trial court ruled against them, and the plaintiffs appealed. The United States Court of Appeals for the Sixth Circuit affirmed, by a split decision. Following this ruling, the plaintiffs again appealed, this time to the United States Supreme Court.
The Supreme Court upheld the Kentucky AWP laws, stating that it was making a “clean break” from earlier cases that analyzed whether state laws are saved from preemption because they “regulate insurance.” Under the Court’s holding, a state law is deemed to regulate insurance under ERISA § 514(b) if it (1) is specifically directed toward entities engaged in insurance and (2) substantially affects the risk pooling arrangement between the insured and the insurer.
Litigation Center involvement
The Litigation Center joined the Kentucky Medical Association and several specialty medical societies in an amicus curiae brief that argued that the Kentucky AWP laws are valid, because they do not “relate to” employee benefit plans under ERISA § 514(a).
View the brief (PDF, 206KB)
Pappas v. Asbel, 768 A.2d 1089 (Pa. S. Ct. 2001)
The question in this case was whether ERISA preempted a state law under which a managed care organization was liable to its insured for medical malpractice.
Plaintiff, Basile Pappas, was insured by U.S. Healthcare. Pappas sought treatment at Haverford Community Hospital for an epidural abscess. Despite the treating physician’s recommendation that Pappas be transferred to a university hospital, U.S. Healthcare refused to approve the transfer. Pappas suffered permanent spinal damage as a result.
Basile and Theodora Pappas filed a medical malpractice action against David Asbel, D.O. and Haverford Community Hospital. Defendants, in turn, filed a lawsuit against U.S. Healthcare, alleging that U.S. Healthcare bore sole responsibility for Pappas’ injury. U.S. Healthcare moved to dismiss the complaint filed by Asbel and Haverford, claiming that the action “related to” a health benefits plan governed by the Employee Retirement Income Security Act (ERISA), and therefore, was preempted by ERISA.
The Pennsylvania Supreme Court ruled that ERISA did not preempt the medical malpractice claim. Congress did not intend to preempt state laws that govern the provision of safe medical care, the court held. The United States Supreme Court reviewed the decision by the Pennsylvania Supreme Court and sent the case back to the Pennsylvania Supreme Court for further consideration.
The Litigation Center and the Pennsylvania Medical Society (PaMS) filed friend of the court briefs before the Pennsylvania Supreme Court, in the original appeal and upon remand from the U.S. Supreme Court. The Litigation Center and PaMS contended in their original brief that ERISA does not preempt claims derived from substandard medical care. In their second brief, they further argued that regulation of medical care should be left to individual states and questions of medical malpractice are not governed by the federal ERISA statute.
The Pennsylvania Supreme Court confirmed its earlier decision, adopting many of amici’s arguments against ERISA pre-emption.
Pegram v. Herdrich, 530 U.S. 211 (2000)
Issue
The issue in this case was whether mixed treatment and eligibility decisions by HMO physician-employees are “fiduciary” decisions under the federal Employee Retirement Income Security Act (ERISA).
AMA interest
The AMA believes that physicians should not be deemed ERISA fiduciaries simply by rendering clinical care to ERISA plan participants and similarly, physicians’ receipt of compensation from a managed care organization for rendering clinical services does not trigger ERISA fiduciary status.
Case summary
Patient Cynthia Herdrich sued Lori Pegram, a physician-owner of Carle Clinic and Carle (an HMO) for malpractice and fraud based on Dr. Pegram having ordered that Herdrich, who had an inflamed mass in her abdomen, would have to wait eight days for an ultrasound at a Carle-staffed facility more than fifty miles away, instead of more promptly at a local hospital. Before the eight days elapsed, Herdrich’s appendix ruptured, causing peritonitis.
Pegram and Carle removed the case from state to federal court, claiming that ERISA preempted the fraud counts. Herdrich amended her complaint to allege that the provision of medical services at Carle, which rewarded physician owners for limiting medical care, entailed an inherent or anticipatory breach of an ERISA fiduciary duty, since the physicians were in effect incentivized to make medical decisions in their own interest, rather than in the exclusive interest of their patients.
The trial court dismissed the ERISA count, based on a determination that Pegram’s decision had not been made as an ERISA fiduciary. (A jury awarded Herdrich $35,000 on her original malpractice claims, however.) Herdrich appealed the dismissal of the ERISA claim to the Seventh Circuit Court of Appeals, which reversed, holding that Herdrich had adequately stated a claim in that incentives to physicians can rise to the level of a breach of fiduciary duty where the fiduciary trust between plan participants and plan fiduciaries no longer exits.
Pegram and Carle appealed to the United States Supreme Court, which reversed the Seventh Circuit. The Supreme Court held that, because mixed treatment and eligibility decisions by HMO physicians are not fiduciary decisions under ERISA, Herdrich had not stated on ERISA claim.
Litigation Center involvement
The Litigation Center filed an amicus brief arguing the points summarized above under “AMA Interest”.
Roark v. Humana, 307 F.3d 298 (5th Cir. 2002)
Issue
The issue in this case, which comprised four consolidated lawsuits, was whether the federal Employee Retirement Income Security Act (ERISA) preempts a claim under the Texas Health Care Liability Act (THCLA) for negligence by a health maintenance organization (HMO). In each of the separate lawsuits, the plaintiffs alleged that their physicians had recommended necessary medical treatment, but the HMOs had negligently refused to cover them. They claimed tort (i.e., non-contractual) damages.
AMA interest
The AMA supports a reasonable, but not overly-broad, interpretation of the preemptive scope of ERISA, particularly in cases involving state laws that regulate medical decision making.
Case summary
The plaintiffs originally filed their lawsuits in state court, but the HMOs removed those cases to federal court. The HMOs pointed out that each plaintiff received HMO coverage through an employer-sponsored plan. Therefore, they argued, the federal courts had jurisdiction to hear these cases by virtue of “complete preemption” under ERISA § 502. They further argued that, due to “conflict preemption” under ERISA § 514, the THCLA liability provisions were invalid and the cases should be dismissed.
After various rulings in the lower courts, all four cases were appealed to the Fifth Circuit. A panel of the Fifth Circuit ruled that ERISA § 502 did not completely preempt three of the four lawsuits. The federal courts therefore lacked jurisdiction to hear those cases, and the panel did not reach the ERISA § 514 conflict preemption issue in those suits.
As to the fourth case, brought by Mrs. Roark and then, after she died, by her estate, the panel noted that the pleadings had raised legal theories different from those of the other three cases. Accordingly, the panel held that the federal courts did have jurisdiction over the fourth suit by virtue of complete preemption under ERISA § 502. The panel further held that ERISA § 514 conflicted with and therefore preempted the THCLA liability provisions. Ultimately, it ruled, the case had been properly dismissed.
To complicate matters further, the panel stated that it based its ERISA conflict preemption decision on an old Fifth Circuit case, which, under recent Supreme Court rulings, was of doubtful validity. The old Fifth Circuit case had never been explicitly overruled, and so, despite its doubts, the panel felt bound to follow it.
Following the Fifth Circuit panel decision, Mrs. Roark's estate petitioned for en banc review by the entire Fifth Circuit. So did the HMO defendants in the first three cases, which had been consolidated with her appeal. The Fifth Circuit denied the petition.
Mrs. Roark's estate then petitioned the United States Supreme Court for further review. Ultimately, the Roark case settled and the Supreme Court dismissed the petition for certiorari.
Litigation Center involvement
The Litigation Center, acting on behalf of the AMA and the Texas Medical Association, filed an amicus curiae brief to support the Roark petition for en banc review by the Fifth Circuit.
The Litigation Center, acting through the AMA and the Texas Medical Association, also filed an amicus curiae brief to support the estate's certiorari petition to the United States Supreme Court.
View the Fifth Circuit brief. (PDF, 56KB)
View the United States Supreme court brief.(PDF, 97KB)
Rush Prudential HMO v. Moran, Inc., 536 U.S. 355 (2002)
Issue
The issue in this case was whether the federal ERISA statute preempted the “independent review” provision of the Illinois HMO Act.
AMA interest
The AMA supports state laws that require managed care organizations to treat beneficiaries fairly.
Case summary
Moran sought reimbursement for the expense she incurred in having microneurolysis surgery. Rush, her HMO, contended that her treatment was not medically necessary and denied her claim. The Illinois HMO Act requires that, in such disputes, the matter be submitted to an independent reviewer for a binding determination. Rush refused to provide the independent reviewer, so Moran obtained a court order compelling the independent review. The trial court denied Rush’s objection that ERISA preempted the Illinois HMO Act’s independent review requirement.
The independent reviewer found that the microneurolysis surgery was medically necessary, but Rush still refused to pay. When Moran sought a court order requiring Rush to pay, however, the same court that had ordered the independent review now found for Rush. It held that, although ERISA did not preempt the HMO Act’s requirement of independent review, it did preempt that portion of the Act which required the HMO to comply with the findings of the independent reviewer.
Moran appealed to the United States Court of Appeals for the Seventh Circuit. The Seventh Circuit reversed, holding that the independent review provision of the Illinois HMO Act fell within ERISA’s “savings clause” and thus was not preempted by ERISA. The United States Supreme Court granted Rush’s request to hear the case, and, by a five to four decision, held in Moran’s favor. The case was remanded to the trial court to ascertain whether the HMO was liable for Moran’s attorneys fees and, if so, for how much.
Litigation Center involvement
The Litigation Center and the Illinois State Medical Society (ISMS) filed an amicus curiae brief on the plaintiff’s behalf in the Seventh Circuit. The Litigation Center and ISMS argued that the Illinois law addressed matters of health care regulation, which the federal government never intended to be governed by the ERISA statute.
The Litigation Center and ISMS (along with the American Psychiatric Association) also filed an amicus curiae brief on behalf of Moran and the Illinois HMO Act in the United States Supreme Court.
View the appellate court brief (PDF, 97KB).
View the U.S. Supreme Court brief (PDF, 197KB).
Content provided by: Office of the General Counsel
Copyright 1995-2008 American Medical Association. All rights reserved.
