Difelice v. Aetna U.S. Healthcare

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
10-15-2003
DiFelice v. Aetna US Healthcare
Precedential or Non-Precedential: Precedential
Docket No. 02-3381
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PRECEDENTIAL
Filed October 15, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 02-3381
JOSEPH V. DIFELICE, JR.,
Appellant
v.
AETNA U.S. HEALTHCARE; MICHAEL PICARIELLO, M.D.;
SARAH FOWLER; EAR NOSE & THROAT ASSOC. OF
CHESTER COUNTY, INC.; CHESTER COUNTY HOSPITAL
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil No. 02-cv-03641)
District Judge: Honorable John P. Fullam
Argued March 14, 2003
Before: BECKER, Chief Judge,* RENDELL and
AMBRO, Circuit Judges.
(Filed October 15, 2003)
James I. Devine, Esq. [ARGUED]
509 Swede Street
Norristown, PA 19401
Counsel for Appellant
* Judge Becker completed his term as Chief Judge on May 4, 2003.
2
Jonathan B. Sprague, Esq.
Post & Schell
1800 JFK Boulevard, 19th Floor
Philadelphia, PA 19103
Roy T. Englert, Jr., Esq. [ARGUED]
Robbins, Russell, Englert, Orseck
& Untereiner
1801 K Street, N.W., Suite 411
Washington, DC 20006
Counsel for Appellee Aetna U.S.
Healthcare
Michael O. Pitt, Esq.
James P. Kilcoyne & Associates
2250 Hickory Road
Suite 216, Hickory Pointe
Plymouth Meeting, PA 19462
Counsel for Appellees Michael
Picariello, Sarah Fowler, Ear Nose
& Throat Assoc. of Chester County,
Inc.
Cathy A. Wilson, Esq.
White & Williams
1500 Lancaster Avenue, Suite 206
Paoli, PA 19301
Counsel for Appellee Chester
County Hospital
3
OPINION OF THE COURT
RENDELL, Circuit Judge.
We are once again called upon to determine whether a
lawsuit claiming medical negligence is completely
preempted by the civil enforcement provision of the
Employee Retirement Income Security Act (“ERISA”), 29
U.S.C. § 1132(a). Joseph V. DiFelice, Jr., appeals the order
of the United States District Court for the Eastern District
of Pennsylvania dismissing his complaint against
Aetna/U.S. Healthcare, Inc. (“Aetna”) for negligent conduct
in regard to his medical treatment for sleep apnea and
upper airway obstruction. DiFelice filed suit in state court,
alleging that Aetna’s instruction to his treating physician
that a specially designed tracheostomy tube was “medically
unnecessary” and Aetna’s insistence that he be discharged
from the hospital before his attending physician deemed it
appropriate amounted to negligent conduct under state law.
Aetna removed the case to federal court on the basis of
ERISA preemption and then moved to dismiss the claim.
The District Court, relying on our decision in Pryzbowski v.
U.S. Healthcare, Inc., 245 F.3d 266 (3d Cir. 2001), held that
the claim was completely preempted and dismissed it in its
entirety. For the reasons that follow, we will affirm in part
and reverse in part.
I.
DiFelice participates in an ERISA-governed employee
welfare benefit plan that is administered by Aetna, a health
maintenance organization (“HMO”). Under the terms of this
plan, DiFelice is entitled to certain “Covered Benefits.”
Unless there is a specific provision for a particular type of
treatment, a benefit is only covered if, in the determination
of Aetna, it is “Medically Necessary.” “Medically Necessary”
is a defined term, meaning the service or supply must be
“care or treatment as likely to produce a significant positive
outcome as, and no more likely to produce a negative
outcome than, any alternative service or supply;” must be
“related to diagnosis of an existing illness or injury;” may
4
“include only those services and supplies that cannot be
safely and satisfactorily provided at home;” and, “as to
diagnosis, care and treatment[, must] be no more costly
(taking into account all health expenses incurred in
connection with the service or supply) than any equally
effective service or supply.”
In March 2001, DiFelice was diagnosed with “sleep
apnea/upper airway obstruction,” for which he required a
tracheostomy tube.1 His doctor, Dr. Michael Picariello,
surgically inserted a tracheostomy tube to eliminate the
obstruction, but that tube continually came out. Dr.
Picariello then placed an order for a specially designed
tube. However, Aetna instructed Dr. Picariello that the
special tube was “medically unnecessary.” Instead of
ordering the special tube, the doctor then inserted a
different tube, which caused DiFelice severe pain and
resulted in an infection. DiFelice was later admitted to
Chester County Hospital for treatment, but, the complaint
avers, was thereafter discharged “at Aetna’s insistence.”2
DiFelice filed a five-count complaint in the Philadelphia
Court of Common Pleas against Aetna, his treating
physicians, and the hospital. In Count I, he alleged that
Aetna negligently interfered with his medical care “by
instructing Dr. Picariello that the specially designed
tracheostomy tube he deemed necessary was medically
unnecessary for [DiFelice] and improperly interfering with
Dr. Picariello’s medical decision concerning the
tracheostomy tube and insisting on [DiFelice’s] discharge
1. Our recitation of the facts is derived from DiFelice’s complaint.
2. DiFelice objects to our consideration of the terms of the Plan in
determining whether his complaint should be dismissed because he does
not reference the Plan in his complaint, and Aetna did not argue below
that the Plan provisions were dispositive. However, in ruling on a motion
to dismiss, we may consider an extrinsic document that is “integral” to
the complaint. See In re Burlington Coat Factory Sec. Litig., 114 F.3d
1410, 1426 (3d Cir. 1997). Here, DiFelice’s reference to “medical
necessity” is clearly derived from the terms of the Plan. Furthermore,
even if Aetna did not explicitly argue that the Plan provisions controlled
the decision in this case, Aetna attached the Plan as an exhibit to its
brief and motion before the District Court. DiFelice was certainly on
notice that the Plan terms were integral to Aetna’s argument.
5
from the [hospital] . . . before his attending physician was
planning on discharging [him].” The other counts involved
claims against parties other than Aetna. Aetna removed the
case to the District Court on the grounds that the claim
against it was completely preempted under ERISA and then
moved to dismiss. DiFelice opposed the motion to dismiss
and moved to remand to state court.
The District Court denied DiFelice’s motion to remand
and granted Aetna’s motion to dismiss as to Count I, and
granted the motion to remand on the remaining counts
against the other parties. The Court held that the
disposition of Count I was “squarely controlled by the Third
Circuit’s decision in Pryzbowski,” in which we held that a
claim challenging the “administration of or eligibility for
benefits” was completely preempted by section 502(a)(1)(B)
of ERISA. Pryzbowski, 245 F.3d at 273. The Court reasoned
that the claim against Aetna was completely preempted
because DiFelice was challenging Aetna’s decision that he
was not entitled to the special tube under the Plan, which
was entirely a matter of administration, and because Aetna
was not actually involved in providing any medical services
to DiFelice. DiFelice appeals the District Court’s order
dismissing Count I.
II.
We have jurisdiction over the District Court’s final order
pursuant to 28 U.S.C. § 1291, and review the Court’s
exercise of jurisdiction and order of dismissal de novo.
Pryzbowski, 245 F.3d at 268. Aetna bears the burden of
proving the federal jurisdiction it seeks. Spectacor Mgt.
Group v. Brown, 131 F.3d 120, 127 (3d Cir. 1997). In
reviewing the complaint, we must accept as true all of
DiFelice’s factual allegations and draw all reasonable
inferences therefrom. Langford v. City of Atlantic City, 235
F.3d 845, 847 (3d Cir. 2000).
DiFelice challenges the District Court’s removal
jurisdiction over Count I of his complaint and asks us to
remand to state court. He argues that his negligence action
against Aetna is entirely a matter of state law and provides
no basis for removal. Aetna counters that DiFelice’s
6
negligence action is in fact nothing more than an action to
recover benefits due under his plan, and as such is
completely preempted by the civil enforcement provision of
ERISA, section 502(a).
A. Framework
Under the “well-pleaded complaint” rule, federal question
jurisdiction only exists where an issue of federal law
appears on the face of the complaint. Franchise Tax Bd. of
Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S.
1, 24 (1983). However, there is an exception to this rule:
when a purportedly state-law claim “comes within the scope
of [an exclusively] federal cause of action,” it “necessarily
‘arises under’ federal law,” and is completely preempted.
Id.; see also Beneficial Nat’l Bank v. Anderson, 123 S. Ct.
2058, 2062 (2003) (explaining the preemptive effect of
ERISA). The question before us is therefore whether
DiFelice’s claims of state law negligence on the part of
Aetna fall within the scope of the federal causes of action
provided in section 502(a) of ERISA, that is, whether the
claims could have been brought under that section. If so,
then the existence of the federal claim would provide the
basis for federal question jurisdiction but at the same time
would require dismissal based on complete preemption.
We have had numerous occasions to consider the
question of whether a plaintiff ’s claim against an HMO is
covered by section 502(a) and is therefore completely
preempted. See, e.g., Pryzbowski, 245 F.3d at 273-75;
Lazorko v. Pa. Hosp., 237 F.3d 242, 250 (3d Cir. 2000); In
re U.S. Healthcare, Inc., 193 F.3d 151, 162-63 (3d Cir.
1999); Dukes v. U.S. Healthcare, Inc., 57 F.3d 350, 358 (3d
Cir. 1995). Determining whether a claim could have been
brought under ERISA has proven to be anything but an
exact science. In fact, as my colleagues’ concurring
opinions point out all too well, the exercise seems to have
taken on a life of its own, and not a very satisfying or
productive life at that. In any event, the statute and our
case law chart the path we must follow.
Section 502(a) allows for civil actions to be brought “by a
participant or beneficiary . . . to recover benefits due to him
under the terms of his plan.” 29 U.S.C. § 1132(a)(1)(B). The
7
line between an action to recover benefits, which challenges
an administrative decision regarding whether a certain
benefit is covered under an ERISA plan, and an action
alleging negligence or malpractice, which challenges the
medical treatment actually provided to a patient, is a blurry
one. We have been continually refining the precise test we
use in evaluating such claims.
Most recently, in Pryzbowski, we synthesized the
discussions contained in our previous opinions and
adopted preferable new terminology. We explained that in
the past we had attempted to distinguish between claims
directed at the quality of benefits received — that is, as to
the treatment — which would not fall within section 502(a),
and claims that the plans erroneously withheld a quantum
of benefits due — focusing on the administration of the
plan — which would be completely preempted. Pryzbowski,
245 F.3d at 272. Following this “quality-quantity” rubric,
we had held that an allegation that an HMO had failed to
exercise reasonable care in providing medical treatment
was not preempted, Dukes, 57 F.3d at 358; an allegation
that an HMO’s policy of discharging newborns within 24
hours after their delivery was essentially a medical
determination and was not preempted, In re U.S.
Healthcare, 193 F.3d at 163; and an allegation that an
HMO’s financial disincentives discouraged medical
providers from hospitalizing a mentally ill woman was a
“quality of care” claim because it occurred in the course of
a treatment decision, and was therefore not preempted.
Lazorko, 237 F.3d at 250.
However, in Pryzbowski, we found the “quality-quantity”
distinction unclear, and suggested that more helpful
terminology was utilized by the Supreme Court in Pegram
v. Herdrich, 530 U.S. 211 (2000). Although we recognized
that Pegram “concerned fiduciary acts under ERISA and not
preemption,” we found useful “the distinction made there
between eligibility decisions, which turn on the plan’s
coverage of a particular condition or medical procedure for
its treatment,” and “treatment decisions, which are choices
in diagnosing and treating a patient’s condition,” and
determined that the distinction was “equally applicable for
complete preemption analysis.” Pryzbowski, 245 F.3d at
8
273 (quoting Pegram, 530 U.S. at 228) (emphasis added
and internal quotations omitted). We then explained,
Regardless of the language used, the ultimate
distinction to make for purposes of complete
preemption is whether the claim challenges the
administration of or eligibility for benefits, which falls
within the scope of § 502(a) and is completely
preempted, or the quality of the medical treatment
performed, which may be the subject of a state action.
Id.
Using this nomenclature, it was evident to us in
Pryzbowski that “a claim alleging that a physician
knowingly delayed in performing urgent surgery . . . would
relate to the quality of care,” while on the other hand, “a
claim alleging that an HMO declined to approve certain
requested medical services or treatment on the ground that
they were not covered under the plan would manifestly be
one regarding the proper administration of benefits.” Id.
(citing Jass v. Prudential Health Care Plan, Inc., 88 F.3d
1482, 1488-89 (7th Cir. 1996)). However, we were
presented there with claims that fell somewhere in between:
that an HMO had negligently delayed approval of an out-of-
network specialist, and that it had failed to supervise
properly its employees to make “thoughtful and reasonable
decisions as to healthcare.” Id. at 274. Were those claims
based on a treatment decision or on a determination as to
eligibility for a benefit? We explained that “[i]n analyzing
whether a claim falling between the[ ] two poles is
completely preempted, it is necessary to refer to § 502(a).”
Id. at 273. Paring the issue down to its essence, we stated
that the relevant question must be whether the claim
“could have been the subject of a civil enforcement action
under § 502(a).” Id. If it could have, then it was a plan
benefit claim, and Congress has clearly expressed its intent
that the claim be preempted by ERISA. Id. (citing
Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 66 (1987)).
Because the claims in Pryzbowski fell between the two
poles, we took extra care to examine the complaint for
“artful pleading,” to ensure that Pryzbowski was not
disguising an eligibility claim that could have been brought
9
under ERISA as a state law negligence claim. We explained
that, although the claim might be “ostensibly directed at
the provision of medical treatment,” we needed to “look
beyond the face of the complaint to determine whether
[Pryzbowski had] artfully pleaded his suit so as to couch a
federal claim in terms of state law.” Id. at 274 (quoting
Jass, 88 F.3d at 1488); see also Franchise Tax Bd., 463
U.S. at 22 (“[A] plaintiff may not defeat removal [to federal
court] by omitting to plead necessary federal questions in a
complaint.”). The ultimate question was whether, when the
basis for the claim was properly understood, the claim fell
under ERISA.
After carefully examining Pryzbowski’s complaint for the
true bases of his claims, we held that his claims were
completely preempted. First, regarding the delayed
approval, we concluded that underlying the HMO’s allegedly
negligent activities was a policy decision regarding payment
to and approval of out-of-network specialists, a decision
that fell “within the realm of the administration of benefits.”
Pryzbowski, 245 F.3d at 273. We explained that this claim
could have been brought under ERISA because “[h]ad
Pryzbowski sought to accelerate [the HMO]’s approval of the
use of out-of-network providers, she could have sought an
injunction under § 502(a) to enforce the benefits to which
she was entitled under the plan.” Id. at 273-74. Further,
her claim that the HMO had “failed to properly hire, train,
and supervise its employees to make thoughtful and
reasonable decisions as to healthcare” was also preempted
because, reading behind the artful “medical negligence”
pleading, the complaint did not allege that the HMO or its
employees had actually engaged in any medical treatment.
Id. at 274. Because the HMO’s only role was in
administering Pryzbowski’s benefits, it could not possibly
have been negligent in providing treatment. Id. Unlike the
situation in which an HMO fills dual roles as an
administrator of benefits and a provider of services, and
might therefore actually engage in medical treatment, the
HMO there was acting solely as an administrator. Id.
Pryzbowski thus instructs us to determine whether a
claim is preempted under section 502(a) by first examining
whether the claim falls at either of the two poles, entirely
10
treatment or entirely administrative. If based solely on a
medical treatment decision, then the claim is not
preempted. If based on an HMO administrator’s eligibility
decision, then the claim is preempted. In the more difficult
situation in which the claim falls somewhere in between, we
must scrutinize the complaint for “artful pleading,” and
then refer to section 502(a) itself and determine whether
the actual alleged wrongdoing underlying the cause of
action could have formed the basis of a suit under that
section.
As discussed more fully below, when we apply the
Pryzbowski framework to the complaint before us, we
conclude that DiFelice’s claim that Aetna “interfered with”
his medical treatment by declaring the special tube
“medically unnecessary” is preempted by ERISA because it
could have been brought as an action under section 502(a).
However, because it appears that DiFelice’s claim that he
was discharged “at the insistence of Aetna” does not rest on
any discharge policy set forth in the Plan, or any agreed
benefit, it would not be encompassed within the relief
available under section 502(a) and is therefore not
completely preempted.
B. The Tracheostomy Tube
We will first examine DiFelice’s claim that Aetna
interfered with Dr. Picariello’s medical decision regarding
the special tube. Under Pryzbowski, the first question is
whether Aetna’s “medical necessity” determination is clearly
either a medical treatment decision or an eligibility
decision. DiFelice has couched this claim in terms of
Aetna’s negligent interference with his care, which seems to
imply that Aetna itself engaged in medical treatment.
However, DiFelice’s complaint does not include any
allegation that Dr. Picariello was an agent of Aetna, that
Aetna did not exercise reasonable care in monitoring Dr.
Picariello’s care, or that Aetna itself provided medical
treatment; rather, his claim rests on Aetna’s “instruction”
to Dr. Picariello “that the specially designed tracheostomy
tube he deemed necessary was medically unnecessary,” a
direct reference to the “medical necessity” determination
called for in the Plan. Looking behind DiFelice’s use of
language sounding in negligence, he is alleging that Aetna
11
wrongfully denied him coverage for the special tube. Thus,
the complaint has aspects of treatment and coverage. That
is, in making its determination, Aetna necessarily had to
exercise some medical judgment, i.e., it had to determine
whether the special tube was “as likely to produce a
significant positive outcome as, and no more likely to
produce a negative outcome than, any alternative service or
supply, . . . [was] related to diagnosis of an existing illness
or injury, . . . [and was] no more costly (taking into account
all health expenses incurred in connection with the service
or supply) than any equally effective service or supply.”
However, here there is no allegation that Aetna actually
provided the medical care, and Aetna’s use of medical
judgment could only have led to an eligibility, not a
treatment, decision.
Because the decision here was in some sense both a
medical treatment and an eligibility decision, thus falling
between the two poles discussed in Pryzbowski, we must
refer to section 502(a) and determine whether DiFelice’s
claim regarding the tube could have been the subject of a
civil enforcement action under ERISA. Pryzbowski, 245
F.3d at 273. Clearly, it could have been. DiFelice could
have challenged Aetna’s “medical necessity” determination
by filing a claim under 502(a)(1)(B) “to recover benefits due
to him under the terms of his plan,” and arguing that the
special tube was in fact “medically necessary,” and was
therefore a “covered benefit.” He could have requested an
injunction forcing Aetna to pay for the special tube, or
alternatively, paid for the tube himself and then later filed
an action for reimbursement. Numerous ERISA participants
have in fact brought such actions challenging their HMO’s
“medical necessity” determinations and seeking to recover
benefits they alleged were due under their plans. See, e.g.,
Mario v. P&C Food Mkts., Inc., 313 F.3d 758, 762-63 (2d
Cir. 2002) (reviewing claim under section 502(a) challenging
HMO’s determination that sex change operation was not
“medically necessary”); Fritcher v. Health Care Serv. Corp.,
301 F.3d 811, 814-15 (7th Cir. 2002) (reviewing claim
under section 502(a) challenging HMO’s determination that
custodial care was not “medically necessary”); Kopicki v.
Fitzgerald Auto. Family Employee Benefits Plan, 121 F.
Supp. 2d 467, 480 (D. Md. 2000) (granting preliminary
12
injunction to prevent HMO from denying preauthorization
for cancer treatment it had deemed not “medically
necessary”); see also Heasley v. Belden & Blake Corp., 2
F.3d 1249, 1253 (3d Cir. 1993) (reviewing claim under
section 502(a) challenging an HMO’s determination that a
liver/pancreas treatment was an “experimental procedure”).
DiFelice’s claim falls squarely within this jurisprudence.
Because DiFelice’s claim that Aetna improperly deemed his
special tube to be “medically unnecessary” could have been
brought under section 502(a), it is completely preempted by
ERISA. We will therefore affirm the District Court’s exercise
of removal jurisdiction and its order dismissing Count I as
to Aetna’s conduct regarding the tracheostomy tube.
DiFelice urges that this result is inconsistent with the
Supreme Court’s decision in Pegram and our decisions in
U.S. Healthcare and Lazorko. We disagree.
In Pegram, the Supreme Court answered the question
whether an HMO may be liable for a breach of fiduciary
duty when its physician owners make “mixed eligibility and
treatment decisions.” Pegram, 530 U.S. at 229. There, a
physician, who was also an owner of the HMO that covered
her patient, waited to order an ultrasound for the patient’s
inflamed appendix, and the appendix ruptured. Id. at 215.
The patient sued the HMO for breach of fiduciary duty,
alleging that the HMO created an incentive for the
physicians to make decisions in their own financial
interests, rather than in the exclusive interests of the plan
participants. Id. The Court held that HMOs do not act as
“fiduciaries” as envisioned by ERISA when their physician
owners make decisions that touch both on the patient’s
medical treatment and the patient’s eligibility for benefits
under the plan. Id. at 218.
The Court first set forth a framework for understanding
the kinds of acts that physician owners acting on an HMO’s
behalf might undertake. On the one hand are “pure
‘eligibility decisions’ ” turning on the plan’s coverage for a
particular medical treatment, and on the other are
“treatment decisions,” choices about how to go about
diagnosing and treating a patient’s condition. Id. at 228. In
between are situations in which the “eligibility decision and
the treatment decision [are] inextricably mixed,” that is,
13
when an eligibility decision necessarily rests on the
“physicians’ judgments about reasonable medical
treatment.” Id. The Court found that it was presented with
just such a “mixed” decision: the physician owner had
determined that the patient’s “condition did not warrant
immediate action; the consequence of that medical
determination was that [the HMO] would not cover
immediate care.” Id.Having concluded that the decision before it was a
“mixed” decision, the Court went on to hold that an HMO’s
physician owners do not act as fiduciaries under ERISA
when making such decisions. Id. at 231. The Court focused
on the nature of “fiduciaries,” explaining that these mixed
decisions are not “fiduciary in nature,” and bear “only a
limited resemblance to the usual business of trustees.” Id.The Court feared that a contrary result would open the
floodgates to malpractice suits against HMOs and
individual physicians under the guise of ERISA breach of
fiduciary duty claims, and would erode the distinction
between state malpractice and federal ERISA actions. Id. at
235-36.
Although, as we noted above, Pegram set forth helpful
terminology for preemption analysis, see Pryzbowski, 245
F.3d at 273, the Court’s holding that a “mixed”
determination made by a physician owner does not subject
an HMO to liability for breach of fiduciary duty does not
translate to, or govern in, the preemption context. Rather,
Pegram sets a standard for when liability is to be imposed
on individuals acting in a fiduciary capacity. It does not
presume to encompass ERISA claims enforcement as such.
In fact, the Pegram Court specifically stated that it was not
discussing the standards governing a claim that a patient
had been wrongfully denied benefits due under a plan nor
the interaction between such a claim and state law causes
of action. Pegram, 530 U.S. at 229 n.9; accord Roark v.
Humana, Inc., 307 F.3d 298, 308 (5th Cir. 2002) (stating
that the Supreme Court has not decided whether section
502(a)(1)(B) preempts a medical malpractice claim involving
“mixed decisions,” but holding under Fifth Circuit law that
it does not). In fact, it could be argued that allowing
plaintiffs to do an end-run around ERISA by permitting
14
them to couch plan decisions that have some impact on
treatment in negligence terms would have a similar effect of
undermining ERISA as was feared by the Court in Pegram.
We remain convinced that, after Pryzbowski, we look at
what decisions are subject to enforcement, which is a
radically different inquiry from when can an HMO be sued
for breach of fiduciary duty.3
We are also not persuaded that U.S. Healthcare and
Lazorko — both of which pre-date Pryzbowski and rely on
the “quality-quantity” distinction — compel a different
result. In U.S. Healthcare, we held that a suit against an
HMO challenging its policy of pre-certifying a twenty-four
hour discharge of mother and newborn was not preempted
by ERISA because it went to the quality of the health care
provided. U.S. Healthcare, 193 F.3d at 162. Significantly,
we noted that the plaintiffs did not allege “a failure to
provide or authorize benefits under the plan,” nor did they
3. We note that other federal courts of appeals have followed different
paths in determining whether a claim is preempted under section 502(a).
Some have concluded, on the facts before them, that a suit challenging
a “medical necessity” determination was preempted, see Marks v.
Watters, 322 F.3d 316, 326-27 (4th Cir. 2003) (holding that a suit
against an HMO utilization review case manager was completely
preempted under section 502(a) because the HMO did not actually
provide medical treatment); Jass v. Prudential Health Care Plan, Inc., 88
F.3d 1482, 1489 (7th Cir. 1996) (holding that a negligence claim against
an HMO utilization review case manager was completely preempted
because the claim was “in effect a claim for denial of benefits”), and
some have concluded that it was not. See Land v. CIGNA Healthcare of
Fla., 339 F.3d 1286, 1293 (11th Cir. 2003) (holding that claims that an
HMO failed to correctly diagnose a condition and authorize proper
medical treatment were tort claims outside of the scope of section
502(a)); Cicio v. Does, 321 F.3d 83, 102 (2d Cir. 2003) (concluding that
under Pegram, a state law medical malpractice action based on a
“mixed” decision is not preempted by ERISA when the state law cause of
action “challenges an allegedly flawed medical judgment as applied to a
particular patient’s symptoms”); Roark v. Humana, Inc., 307 F.3d 298,
309 (5th Cir. 2002) (holding that a claim that an HMO had failed to use
ordinary care in making a medical necessity determination sounded in
tort and was not preempted). We believe that the framework we set forth
in Pryzbowski provides the controlling method of analysis here and
compels the conclusion that DeFelice’s claim regarding the tube is
preempted.
15
claim “that they were denied any of the benefits that were
due under the plan.” Id. Rather, they alleged that the HMO
was negligent in adopting the discharge policy and in
supervising the physicians with whom they contracted for
services, and that the HMO’s incentive structure adversely
affected the physicians’ medical judgment regarding when
newborns should be discharged. The plaintiffs were not
seeking to enforce benefits they thought were due to them
under the plan; they were challenging the discharge policy
itself and the HMO’s actions “in its role as a provider or
arranger of medical services,” not in its role as
administrator of benefits. Id. at 163. The HMO’s “policy and
incentive structure were such that the [patients] never had
the option of making an informed decision as to whether to
pay for the hospitalization themselves, as would occur in a
situation in which coverage is sought and denied.” Id.
Although we analyzed the claims in U.S. Healthcare under
the “quality-quantity” rubric, our holding squares with the
preemption framework we later set forth in Pryzbowski.
Because the plaintiffs in U.S. Healthcare were not suing for
any benefits due under the plan, but rather were
challenging the plan itself, they could not have sued under
section 502(a), and therefore, even under Pryzbowski, their
claims would not have been preempted.
Lazorko involved a similar issue. There, we held that a
claim that financial disincentives imposed by an HMO
discouraged medical providers from hospitalizing a patient
who later committed suicide was a “quality of care” claim
and therefore not preempted. Lazorko, 237 F.3d at 249-
250. We noted that Lazorko was not claiming that the HMO
plan was supposed to include hospitalization, but rather
that her doctor was influenced in his decision-making by
the incentive structure. Id. As in U.S. Healthcare, the
patient could not have sued under ERISA because she
never had the option of seeking continued hospitalization —
her doctor, as influenced by the HMO policy, did not offer
it to her. Id.Unlike in U.S. Healthcare and Lazorko, here, DiFelice is
suing based on denial of a benefit he claims he was due
under the Plan. He is not claiming that Aetna negligently
adopted a particular policy regarding tracheostomy tubes or
16
imposed an incentive structure that interfered with his
physician’s independent medical judgment. Rather, he
claims that the special tube was not “medically
unnecessary,” and that Aetna wrongfully determined that it
was, a claim that is based on the language of the Plan and
pertains to the nature of benefits provided. Unlike the
plaintiffs in U.S. Healthcare and Lazorko, DiFelice sought
and was denied coverage for a benefit, and could have paid
for the benefit himself and sued under section 502(a) for
reimbursement.
Because under our most recent controlling precedent,
Pryzbowski, DiFelice’s claim that Aetna was negligent in
determining that the special tube was “medically
unnecessary” could have been the subject of a suit under
section 502(a) for benefits due under the Plan, his claim is
preempted by ERISA.4 We will therefore affirm the District
Court’s exercise of removal jurisdiction and subsequent
dismissal of the claim with respect to the tube.
C. The Discharge from the Hospital
Count I also includes a claim that Aetna improperly
interfered with DiFelice’s medical treatment by “insisting on
[his] discharge from the [hospital] . . . before his attending
physician was planning on discharging [him].” The District
Court did not address this aspect of the claim in its order
dismissing the complaint.
4. Aetna argues that the Supreme Court’s decision in Rush Prudential
HMO, Inc. v. Moran, 536 U.S. 355 (2002), compels this result, but we
find that case to be inapposite. The Court in Moran was faced with an
Illinois statute that provided HMO participants “with a right to
independent medical review of certain denials of benefits,” id. at 359,
and required HMOs to provide any service that the independent
reviewing physician deemed “medically necessary.” Id. at 361. The Court
held that “it was beyond serious dispute” that the statute “related to” an
ERISA plan and was therefore preempted under 29 U.S.C. § 1144(a), but
went on to hold that the statute was saved from preemption under 29
U.S.C. § 1144(b)(2)(A) because it regulated insurance. Id. at 365-66.
Thus, the Court was not faced with the question of whether a suit
challenging an HMO’s medical necessity determinations would be
preempted under ERISA absent a particular state statute that imposed
additional burdens on the HMO, which is the issue before us here.
17
Unlike his claim regarding the tracheostomy tube,
DiFelice does not allege that Aetna deemed the hospital
stay to be “medically unnecessary” and therefore not
covered by the Plan. The claim also does not appear to rely
on a discharge policy in the Plan or any agreed benefit.
Indeed, it is difficult to tell from DiFelice’s vague pleadings
what precisely he is alleging that Aetna did or the form this
“insistence” took. If Aetna in some way forced the hospital
to discharge him, or imposed financial incentives like those
in U.S. Healthcare and Lazorko that unduly affected his
physician’s judgment, then DiFelice has pled a negligence
cause of action that is not preempted by ERISA.
At the dismissal stage, it was Aetna’s burden to prove
federal jurisdiction by proving that this is an ERISA claim.
See Spectacor Mgt. Group, 131 F.3d at 127. There is
nothing apparent from the pleadings that would foreclose
DiFelice from being able to prove that the discharge
decision was not a plan benefit. Unlike his claim that the
tube was erroneously determined to be “medically
unnecessary” under the Plan, this claim on its face is not
plan-related. Therefore, because DiFelice’s claim of
“insistence” on the discharge could give rise to state law
negligence liability, we hold that it is not completely
preempted by section 502(a) of ERISA.
Aetna argues that, even if DiFelice’s hospital discharge
claim is cognizable as a state law cause of action, we
should uphold the District Court’s dismissal of that claim
on the alternative ground that it is nonetheless expressly
preempted by virtue of section 514 of ERISA, 29 U.S.C.
§ 1144(a), which provides that ERISA “shall supersede any
and all State laws insofar as they may now or hereafter
relate to any employee benefit plan” covered by the statute.
However, “[u]nlike the scope of § 502(a)(1)(B), which is
jurisdictional and creates a basis for removal to federal
court, § 514(a) merely governs the law that will apply to
state law claims, regardless of whether the case is brought
in state or federal court.” Lazorko, 237 F.3d at 248. As we
have determined that the hospital discharge claim is not
preempted by section 502(a), we do not have jurisdiction
over that claim. Rather, the question of whether the
hospital discharge claim will be controlled by federal law
18
pursuant to section 514 must be decided by the District
Court on remand, should it choose to exercise
supplemental jurisdiction under 28 U.S.C. § 1367(a), or by
the state court. See Pryzbowski, 245 F.3d at 276 (where
District Court has jurisdiction over one claim by virtue of
preemption under section 502(a), it has discretion to decide
whether to exercise supplemental jurisdiction over claims
arising from the same factual predicate or remand to state
court).
III.
Because DiFelice’s claim that Aetna interfered with his
medical treatment by finding the special tracheostomy tube
to be “medically unnecessary” could have been brought
under section 502(a) of ERISA for the recovery of benefits
due under his plan, it is completely preempted. We will
therefore affirm the order of the District Court dismissing
that claim. However, because Aetna has not shown that
DiFelice’s claim that Aetna interfered with his medical
treatment by insisting on his discharge from the hospital is
based on any plan benefit, that claim is not completely
preempted. We will therefore reverse the District Court’s
order dismissing that claim and remand for further
proceedings.
19
BECKER, Circuit Judge, concurring.
I am satisfied that Judge Rendell’s opinion reaches the
correct result under our governing caselaw. While I thus
join in her opinion and in the judgment, I write separately
to add my voice to the rising judicial chorus urging that
Congress and the Supreme Court revisit what is an unjust
and increasingly tangled ERISA regime.
Congress enacted ERISA in 1974 “to promote the interest
of employees and their beneficiaries in employee benefit
plans.” Shaw v. Delta Airlines, Inc., 463 U.S. 85, 90 (1983)
(surveying Congressional statements of purpose). However,
with the rise of managed care and the Supreme Court’s
series of decisions holding preempted any action for
damages against HMOs, ERISA has evolved into a shield
that insulates HMOs from liability for even the most
egregious acts of dereliction committed against plan
beneficiaries, a state of affairs that I view as directly
contrary to the intent of Congress. Indeed, existing ERISA
jurisprudence creates a monetary incentive for HMOs to
mistreat those beneficiaries, who are often in the throes of
medical crises and entirely unable to assert what meager
rights they possess.
Lower courts have struggled to maintain some semblance
of equity notwithstanding the enormous breadth of the
preemption test, one that turns on whether the claim is
“related to” a benefit plan, inter alia, by identifying
exceptions to § 514 preemption, such as that for medical
malpractice liability. And in terms of the remedial scope of
§ 502, they have struggled to make sense out of the
distinction between eligibility decisions (which are
preempted) and medical decisions (which are not), a
hopeless endeavor, as I shall explain. Unfortunately, the
price of all this has been descent into a Serbonian bog1
1. A Serbonian bog is a mess from which there is no way of extricating
oneself. E. Cobham Brewer, The Dictionary of Phrase and Fable 1121-22
(First Hypertext ed.). The Serbonian bog itself was between Egypt and
Palestine. Strabo called it a lake, and said it was 200 stadia long, and
50 broad; Pliny made it 150 miles in length. Hume said that whole
armies have been lost therein, as did Milton: “A gulf profound as that
Serbonian bog, / Betwixt Damiata and Mount Cassius old, / Where
armies whole have sunk.” Milton, Paradise Lost, ii. 592.
20
wherein judges are forced to don logical blinders and split
the linguistic atom to decide even the most routine cases.
I.
A.
ERISA was enacted in 1974 to address the increasingly-
apparent insecurity of workers’ vested pension funds, a
problem that gained national recognition through such
notorious events as the Studebaker plant shutdown in
1963, which caused approximately 4,400 workers to lose
their pensions. See generally Michael S. Gordon, Overview:
Why Was ERISA Enacted?, U.S. Senate, Special Comm. on
Aging, The Employee Retirement Income Security Act of
1974: The First Decade 6-25 (Information Paper) (1984).
Prior to ERISA, workers were entitled only to the assets in
the pension plan or to nominal pension benefits, whichever
was lower; of course, it was entirely possible for a plan to
have zero assets, as happened with some frequency when
firms closed shop. ERISA contained a raft of provisions
designed to protect plan participants against negligent or
malfeasant plan managers. For example, it created the
Pension Benefit Guarantee Corporation (“PBGC”), an
insurer akin to the Federal Deposit Insurance Corporation,
to protect against employer insolvency.
The “benefit plans” in need of protection, however, were
of two distinct types — pension and welfare — and
substantially different policy concerns animated Congress’s
reform in each area. Pension plans, to which employees
contribute over the course of their careers and rely upon to
provide retirement income, were thought to present far
greater opportunity for mismanagement and underfunding.
Unlike welfare benefit plans, pension plans accrue
substantial funds that must be invested with prudence,
and they must be able to survive continuously changing
circumstances. Title 1 of ERISA therefore imposed on
pension plan managers comprehensive reporting,
disclosure, vesting, minimum funding, and fiduciary duty
requirements.
21
Welfare benefit plans, which include medical, surgical,
sickness, accident, disability, death, unemployment, and
similar programs, posed a very different set of challenges.
Unlike pension plans, welfare benefit plans operate on a
“pay as you go” basis, and generally do not entail long-term
financial commitments. See John H. Langbein and Bruce A.
Wolk, Pension and Employee Benefit Law at 176 (3d ed.
2000). ERISA’s framers therefore saw no need to impose
vesting requirements on such plans. Similarly, minimum
funding requirements are intended to guard against plan
default by the plan sponsor on its long-term commitments
to plan beneficiaries, a minor concern where no substantial
funds accrue. The framers thus exempted welfare benefit
plans from ERISA’s funding requirements as well.
The result is that welfare benefit plans are far less
regulated than pension plans. They are subject to ERISA’s
reporting, disclosure, fiduciary, and remedial rules — those
that govern procedure — but exempt from the substantive
vesting and funding requirements, which are meant to
guarantee a certain level of expected benefits. Congress’s
relative lack of concern with substantive regulation of
welfare plans is clear from the Supreme Court’s statement
that “ERISA does not mandate that employers provide any
particular benefits, and does not itself proscribe
discrimination in the provision of employee benefits.” Shaw,
463 U.S. at 91. Indeed, courts have held that the absence
of a vesting provision allows employers to amend their
plans virtually at will, even in discriminatory fashion. See,
e.g., Confer v. Custom Engine Co., 952 F.2d 41, 43 (3d Cir.
1991) (noting a plan sponsor may change benefits
prospectively by formal written notice); McGann v. H & H
Music Co., 946 F.2d 401 (5th Cir. 1991) (upholding an
employer’s amendment of its plan to exclude coverage for
AIDS treatment).
Despite ERISA’s relatively light regulation of welfare
benefit plans, it is clear that the legislation provided
substantially greater safeguards for both pension and
welfare plan beneficiaries than had previously existed. But
ERISA also contained a crucial concession to plan sponsors
in the form of § 514(a), an express preemption provision
mandating that Titles I and IV of ERISA, which impose the
22
regulations discussed above, “shall supersede any and all
State laws insofar as they may now or hereafter relate to
any employee benefit plan.” Although this section is subject
to an important exception that allows states to impose laws
regulating insurance, see § 514(b)(2)(A), its breadth is
striking. The Supreme Court explains that Congress
intended
to ensure that plans and plan sponsors would be
subject to a uniform body of benefits law; the goal was
to minimize the administrative and financial burden of
complying with conflicting directives among States or
between States and the Federal Government . . . , [and
to prevent] the potential for conflict in substantive law
. . . requiring the tailoring of plans and employer
conduct to the peculiarities of the law of each
jurisdiction.
Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142 (1990).
This view is premised on the statement of Rep. John Dent,
a sponsor of the Act in the House of Representatives, who
declared that its purpose was to “eliminat[e] the threat of
conflicting and inconsistent State and local regulation.” 120
Cong. Reg. 29197 (1974).
B.
In a meaningful sense, Congress’s decision to federalize
pension and employee benefit law appear to have assisted
plan beneficiaries as much as plan sponsors. No employer
is required to offer a pension or welfare benefit plan to its
employees, and were Congress to have established ERISA’s
regulations as merely a federal baseline and allowed states
to supplement it as they saw fit, i.e., had ERISA not
preempted state law, some employers might have declined
to offer such plans rather than deal with the compliance
costs of tailoring them to individual jurisdictions. At a
minimum, it is likely that any compliance costs would have
been reflected in a lower level of benefits for plan
participants, which of course would undermine the purpose
of ERISA. From an ex ante perspective, therefore, it might
have been reasonable to view even § 514(a) as furthering
the interests of plan beneficiaries.
23
In practice, however, nothing has been further from the
truth — ERISA generally, and § 514(a) particularly, have
become virtually impenetrable shields that insulate plan
sponsors from any meaningful liability for negligent or
malfeasant acts committed against plan beneficiaries in all
too many cases. This has unfolded in a line of Supreme
Court cases that have created a “regulatory vacuum” in
which virtually all state law remedies are preempted but
very few federal substitutes are provided. In these cases,
which began with Alessi v. Raybestos-Manhattan, Inc., 451
U.S. 504 (1981), the Court initially employed textualist
interpretations of § 514(a) to give ERISA a staggeringly
broad preemptive scope. Alessi itself was a relatively
straightforward case in which a unanimous Court held
preempted a New Jersey law that eliminated one method for
calculating pension benefits, reasoning that, whatever the
law’s purpose, it clearly related to pension plans. Id. at 524.
Although Alessi itself was innocuous enough, it established
a precedent of determining ERISA’s preemptive scope by
searching the phrase “relates to” for concrete meaning, an
approach that would eventually be chimerical.
In Shaw v. Delta Air Lines, 463 U.S. 85 (1993), another
unanimous decision, two New York statutes required health
and disability plans to treat pregnancy the same as other
nonoccupational disabilities at a time when federal
employment discrimination statutes did not. In a landmark
passage, the Court stated:
We have no difficulty in concluding that the [New York
laws] “relate to” employee benefit plans. The breadth of
§ 514(a)’s pre-emptive reach is apparent from that
section’s language. A law “relates to” an employee
benefit plan, in the normal sense of the phrase, if it has
a connection with or reference to such a plan.
Id. at 96-97 (emphasis added). Although the Court left the
door ajar by cautioning that “[s]ome state actions may
affect employee benefit plans in too tenuous, remote, or
peripheral a manner to warrant a finding that the law
‘relates to’ the plan,” id. at 100, n.21, the “connection with
or reference to” language became the test for future cases.
The Court applied the passage in unanimous holdings in
Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 72424
(1985) (holding that a state statute mandating mental
health coverage in group health insurance policies fell
within § 514(a)’s preemptive scope, but was saved by
ERISA’s insurance exception), and Pilot Life Ins. Co. v.
Dedeaux, 481 U.S. 41 (1987) (holding preempted a state
cause of action against an insurer for bad-faith denial of a
claim). By the mid-1990s, however, it had become clear
that the “relates to” standard was one without conceptual
limits, and given the Court’s general “assumption that the
historic police powers of the States were not to be
superseded by the Federal Act unless that was the clear
and manifest purpose of Congress,” Rice v. Santa Fe
Elevator Corp., 331 U.S. 218, 230 (1947), it balked at the
specter of a preemptive vortex that could swallow virtually
any state remedial law. It abruptly reversed course in New
York State Conference of Blue Cross & Blue Shield Plans v.
Travelers Ins. Co., 514 U.S. 645 (1995), where it
unanimously noted that, “[i]f ‘relate to’ were taken to extend
to the furthest stretch of its indeterminacy, then for all
practical purposes pre-emption would never run its course,
for really, universally, relations stop nowhere.” Id. at 655(internal citation omitted). It recognized that it “simply must
go beyond the unhelpful text . . . and look instead to the
objectives of the ERISA statute as a guide to the scope of
the state law that Congress understood would survive.” Id.
at 656.
C.
As discussed above, Congress’s intent behind § 514(a)
preemption was to ensure that plan sponsors would be
subject to uniform law. See Ingersoll-Rand, 498 U.S. at 142.
One critical aspect of this uniformity concerns § 502,
ERISA’s civil enforcement provision. In Pilot Life, the Court
concluded that Congress intended the remedies in § 502 to
be the exclusive remedies for violations of rights guaranteed
under ERISA. It explained that “the pre-emptive force of
§ 502(a) was modeled on the exclusive remedy provided by
§ 301 of the Labor Management Relations Act. . . . Congress
was well aware that the powerful pre-emptive force of § 401
of the LMRA displaced” all state law claims, “even when the
state action purported to authorize a remedy unavailable
25
under the federal provision.” 481 U.S. at 52 53. In other
words, § 514(a) preempts state causes of action to enforce
ERISA-guaranteed rights even when § 502 provides no
substitute federal cause of action. This “regulatory vacuum”
creates situations in which plan beneficiaries have little or
no recourse for even the most egregious violations of their
rights, for the remedies contained in § 502 are incapable of
making victims whole; indeed, in many cases they actually
create incentives for HMOs to mistreat their plan
participants.
Section 502 contains two subsections that address a
participant’s right to recover for wrongs committed against
the participant personally (as opposed to those committed
against the plan itself, which are considered violations of
the sponsor’s fiduciary duty). The first, § 502(a)(1)(B),
authorizes the participant or beneficiary to bring a civil
action “to recover benefits due to him under the terms of
his plan, to enforce his rights under the terms of the plan,
or to clarify his rights to future benefits under the terms of
the plan.” It is through this provision that DiFelice might
have sought an injunction to compel Aetna to cover the
specialized tracheostomy tube. The second, § 502(a)(3),
authorizes a participant, beneficiary, or fiduciary to seek
equitable remedies — injunctive relief against “any act or
practice which violates” ERISA or the plan terms, or “other
appropriate equitable relief (i) to redress such violations or
(ii) to enforce any provisions” of ERISA or the plan.
Although these provisions seem comprehensive at first
glance — they allow recovery of “benefits due” and empower
a participant to “enforce his rights” and seek “appropriate
equitable relief ” — they in fact operate to leave participants
almost completely at the mercy of HMOs. The first section,
502(a)(1)(B), by its plain language only allows plan
participants to seek the benefits to which they are
contractually entitled, even when those benefits have been
denied in bad faith and despite the fact that the
participants most in need of this section are often the ones
least able to take advantage of it. A plan participant whose
claim is denied by an HMO’s utilization review board — Mr.
DiFelice, for example, see infra — is often in the throes of
a life-or-death medical crisis, hardly a feasible time to
26
retain counsel and prosecute an injunctive lawsuit. The
costs of such suits are likely to be immense, and ERISA
provides for attorney fees, if at all, only after the action
concludes. See § 502(g)(1). Even if a participant ultimately
prevails against his insurer, it will frequently be the
participant’s estate that reaps the meager reward.
In many areas of law contingency fee structures are used
to overcome a litigant’s initial impecuniosity. But any
possibility of using contingency fees in this context is
undermined by ERISA preemption, for a string of Supreme
Court cases has interpreted ERISA to disallow any recovery
of compensatory or punitive damages. See Langbein &
Wolk, Pension and Employee Benefit Law at 770-75. In
Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134(1985), the plaintiff sued under § 502(a)(2), alleging that the
improper processing of her benefit claim exacerbated her
condition and entitled her to compensatory and punitive
damages under § 409(a), which, inter alia, authorizes “such
. . . equitable or remedial relief as the court may deem
appropriate.” The Court, however, concluded that any
recovery under § 409 must inure to the plan rather than
the beneficiary. The Court then explained in dictum that
§ 502(a)(1)(B), the analogous section allowing for a
participant’s recovery, says “nothing about the recovery of
extra-contractual damages.” Id. at 144. In an oft-cited
passage, it explained:
The six carefully integrated civil enforcement provisions
found in § 502(a) of the statute as finally enacted [ ]
provide strong evidence that Congress did not intend to
authorize other remedies that it simply forgot to
incorporate expressly. The assumption of inadvertent
admission is rendered especially suspect upon close
consideration of ERISA’s interlocking, interrelated, and
interdependent remedial scheme, which is in turn part
of a comprehensive and reticulated statute.
Id. at 146 (internal citation omitted).
Although Russell’s narrow holding left open the
possibility that extracontractual damages are recoverable
under § 502(a)(3)’s “appropriate equitable relief ” provision,
the Court’s subsequent decision in Mertens v. Hewitt
27
Associates, 508 U.S. 248 (1993), foreclosed any such
hopes. In Mertens, participants sued the fiduciaries of a
failed plan, alleging breach of fiduciary duty and seeking
monetary relief, which they characterized as equitable.
Petitioners argued that, “[a]lthough a beneficiary’s action to
recover losses resulting from a breach of duty superficially
resembles an action at law for damages, . . . such relief
traditionally has been obtained in the courts of equity and
therefore is, by definition, equitable relief.” Id. at 255-56.
The Supreme Court acknowledged that ERISA’s roots lie
in the common law of trusts, see Firestone Tire & Rubber
Co. v. Bruch, 489 U.S. 101, 110-11 (1989), that courts of
equity had jurisdiction over trust law, and that monetary
damages were available in those courts against the trustee.
It concluded, however, that “[s]ince all relief available for
breach of trust could be obtained from a court of equity,
limiting the sort of relief available under § 502(a)(3) to
‘equitable relief ’ in the sense of ‘whatever relief a common-
law court of equity could provide in such a case’ would
limit the relief not at all.” Mertens, 508 U.S. at 257. Put
another way, interpreting “equitable relief ” to mean “any
relief ” would render superfluous the word “equitable.” The
Court’s solution was to interpret “equitable” as referring to
types of relief traditionally available in pre-merger courts of
equity, that is, injunctions, mandamus, and restitution, but
not monetary damages.
The unavailability of extracontractual damages has
effects that are perverse. First, as stated above, contingency
fees are rendered entirely impractical — precious few
lawyers would be willing to undertake a horrendously
complex case of uncertain outcome when the greatest
potential reward is merely provision of the care that had
been contractually promised. Without contingency fees,
participants in the midst of medical crises are completely at
the mercy of HMOs unless they are fortunate enough to
have the financial means to bring a suit for an injunction,
a circumstance which is no doubt exceptional. Although it
might seem a simple matter to seek an injunction
compelling contractually-guaranteed coverage of a
procedure, nothing is further from the truth where — as
with Mr. DiFelice — the contractual availability of coverage
28
hinges on a highly fact-intensive determination of medical
necessity involving accepted standards of care and tolerable
levels of risk for the participant’s malady. To the extent that
participants are unable to seek an injunction compelling
coverage, ERISA’s remedial scheme is almost entirely
illusory.
The second perverse effect is that, at the same time as
ERISA makes it inordinately difficult to bring an injunction
to enforce a participant’s rights, it creates strong incentives
for HMOs to deny claims in bad faith or otherwise “stiff ”
participants. ERISA preempts the state tort of bad-faith
claim denial, see Pilot Life, 481 U.S. at 54-56, so that if an
HMO wrongly denies a participant’s claim even in bad faith,
the greatest cost it could face is being compelled to cover
the procedure, the very cost it would have faced had it
acted in good faith. Any rational HMO will recognize that if
it acts in good faith, it will pay for far more procedures than
if it acts otherwise, and punitive damages, which might
otherwise guard against such profiteering, are no obstacle
at all. Not only is there an incentive for an HMO to deny
any particular claim, but to the extent that this practice
becomes widespread, it creates a “race to the bottom” in
which, all else being equal, the most profitable HMOs will
be those that deny claims most frequently.
In sum, ERISA’s remedial scheme gives HMOs every
incentive to act in their own and not in their beneficiaries
best interest while simultaneously making it incredibly
difficult for plan participants to pursue what meager
remedies they possess, a confounding result for a statute
whose original purpose was to protect employees.
II
A.
Given that ERISA’s remedial scheme often provides no
remedies, litigants have gone to great lengths to identify
state causes of action that are not preempted by ERISA,
and courts have generally been sympathetic to their efforts
even when ultimately finding their claims preempted. For
example, in Andrews-Clarke v. Travelers Ins. Co., 984 F.
29Supp. 49 (D. Mass. 1997), a clearly frustrated court
inveighed:
Under traditional notions of justice, the harms
alleged — if true — should entitle [plaintiff] to some
legal remedy on behalf of herself and her children
against Travelers and Greenspring. Consider just one
of her claims — breach of contract. This cause of
action — that contractual promises can be enforced in
the courts — pre-dates Magna Carta. It is the very
bedrock of our notion of individual autonomy and
property rights. It was among the first precepts of the
common law to be recognized in the courts of the
Commonwealth and has been zealously guarded by the
state judiciary from that day to this. Our entire
capitalist structure depends on it.
Nevertheless, this Court had no choice but to pluck
[plaintiff ’s] case out of the state court in which she
sought redress (and where relief to other litigants is
available) and then, at the behest of Travelers and
Greenspring, to slam the courthouse doors in her face
and leave her without any remedy.
Id. at 52-53.
It is no exaggeration to say that the federal courts have
struggled mightily to maintain fidelity to ERISA’s expansive
“relates to” preemption clause while avoiding the wholesale
foreclosure of participants’ causes of action against their
HMOs. But our search for a middle ground has proved to
be a judicial snipe hunt, and we are no closer to success
today than we were a decade ago. This Court’s own
decisions illustrate the quagmire in which courts find
themselves. In Dukes v. U.S. Healthcare, 57 F.3d 350 (3d
Cir. 1995), a participant sued his HMO alleging medical
malpractice, a state-law tort, and the HMO argued that the
claim was preempted by ERISA. We held that the claim was
not preempted, reasoning that ERISA draws a distinction
between actions challenging the quality of care provided
and those claiming that the HMO provided an inadequate
quantity of benefits under its plan. As we explained, actions
challenging the quantity of benefits received are actions
that could be brought under ERISA § 502(a)(1)(B) to
30
“recover benefits due . . . under the terms of the plan,” and
any state law duplicating that remedy is preempted by
ERISA § 514(a). Regulation of quality of care, conversely,
was found to be “a field traditionally occupied by state
regulation,” id. at 357, and we did not find “anything in the
legislative history, structure, or purpose of ERISA
suggest[ing] that Congress viewed § 502(a)(1)(B) as creating
a remedy for a participant injured by medical malpractice.”
Id.
We further explicated this quantity-quality distinction in
In re U.S. Healthcare, 193 F.3d 151 (3d Cir. 1999), which
concerned, inter alia, a plan participant’s claim that her
HMO was negligent in adopting a policy of presumptively
discharging newborn infants within 24 hours. We
“recognize[d] that the distinction between the quantity of
benefits due under a welfare plan and the quality of those
benefits will not always be clear,” id. at 162, and explained
that the line-drawing difficulty arises in part “because the
same HMO may have assumed both the role as a plan
administrator and the separate role as a provider of medical
services.” Id. The policy of discharging newborns after 24
hours was, however, determined to be a function of the
“role as provider of medical services” because it was an
“essentially medical determination of the appropriate level
of care . . ., not a claim that a certain benefit was requested
and denied.” Id. at 162-63. We therefore held that the plan
participant’s claim “fit[ ] squarely within the class of claims
that we identified in Dukes as involving the quality of care”
and was not preempted. Id. at 163.
Finally, in our most recent and important ERISA
preemption decision, Pryzbowski v. U.S. Healthcare, Inc.,
245 F.3d 266 (3d Cir. 2001), harm was allegedly caused by
an HMO’s delay in approving a procedure to be performed
by off-network physicians. There was no question whether
the treatment itself was covered — the issue was merely
one of eligibility, namely whether an off-network physician
could perform the procedure. We took note of the Supreme
Court’s recent decision in Pegram v. Herdrich, 530 U.S. 211(2000), where the Court distinguished between an HMO’s
eligibility decisions and treatment decisions. Although
Pegram directly concerned fiduciary duty rather than
31
preemption, we held that its eligibility-treatment dichotomy
was equally applicable in the preemption context; indeed,
we considered it another way of viewing the quantity-
quality distinction. We concluded that an eligibility decision
is an administrative decision, and that any state-law action
challenging it is preempted because a participant could
instead bring suit under ERISA § 502(a)(1)(B) “to recover
benefits due to him under the terms of his plan, to enforce
his rights under the terms of the plan, or to clarify his right
to future benefits under the terms of the plan.” Conversely,
a treatment decision is a medical decision that requires no
interpretation of the plan itself, and it is not preempted by
ERISA since § 502(a)(1)(B) offers a plaintiff no avenue of
relief.
B.
I believe that Dukes, In re U.S. Healthcare, and
Pryzbowski were all rightly decided, and that our opinion
today reaches the correct conclusion based on those
precedents. I write separately, however, to make clear my
concern that the opinion masks extraordinary subtleties
and complexities of this area of the law that cry out for
clarification by the Congress, or, failing that, by the
Supreme Court. In fact, I believe that the fundamental
distinction upon which federal caselaw currently relies —
between quantity and quality decisions, or between
eligibility and treatment decisions — is untenable, and that
the blurring is becoming more severe, not less. To the
extent we insist on categorizing every HMO decision as
either an eligibility or a treatment decision, we contort
ourselves into parsing terms that are conceptually
indistinguishable, and we fail to come to terms with the
realities of modern health coverage.
This problem is evident even among relatively “easy”
cases. Pryzbowski is perhaps one of the clearest-cut
examples of an eligibility decision, for the HMO’s only
action was designing its plan to utilize network doctors, a
clear matter of plan administration. Conversely, when one
thinks of “treatment” or “medical” decisions, one envisions
a physician and an examination table, a world seemingly
far removed from the HMO’s administrative offices. Yet even
32
in Pryzbowski, it takes little creativity to recast the
“administrative” matter of plan design as a “treatment” or
“medical” decision, for the HMO implicitly determined that
requiring plan participants to see network physicians would
not expose them to any undue health risks. It is impossible
to characterize that decision as anything other than
partially medical, for it directly affected participants’ health.
Indeed, the delay occasioned by the HMO’s so-called
“administrative decision” quite literally caused Ms.
Pryzbowski’s condition seriously to worsen.
The Supreme Court itself recognized this false dichotomy
problem in Pegram, where it observed that many (and
possibly most) HMO decisions contain elements of both
eligibility and treatment considerations:
[A] great many and possibly most coverage questions
are not simple yes-or-no questions, like whether
appendicitis is a covered condition (when there is no
dispute that a patient has appendicitis), or whether
acupuncture is a covered procedure for pain relief
(when the claim of pain is unchallenged). The more
common coverage question is a when-and-how
question. Although coverage for many conditions will
be clear and various treatment options will be
indisputably compensable, physicians still must decide
what to do in particular cases. The issue may be, say,
whether one treatment option is so superior to another
under the circumstances, and needed so promptly, that
a decision to proceed with it would meet the medical
necessity requirement. . . . In practical terms, these
eligibility decisions cannot be untangled from
physicians’ judgments about reasonable medical
treatment.
530 U.S. at 228-29.
Some courts have attempted to explain away the evident
problems in the “eligibility versus treatment” dichotomy by
holding that only HMOs which employ their own physicians
can make medical decisions. See, e.g., Rubin-Schneiderman
v. Merit Behavioral Care Corp., 163 F.Supp. 2d 227(S.D.N.Y. 2001). Such courts suggest that HMOs which do
not directly employ physicians cannot engage in “mixed”
33
decisions because they do not actually treat patients. The
Supreme Court itself has cast doubt upon this explanation,
stating that decisions are considered “mixed” “not merely
because . . . treatment and eligibility are made by the same
person, the treating physician.” Pegram, 530 U.S. at 228.
But this distinction is logically tenuous even absent that
precedent, for an HMO that employs no physicians must
nevertheless review the independent physicians’
recommendations to determine whether they comport with
the health plan’s requirements.
The case at bar makes evident the impossibility that any
such simple rule can adequately reflect the Byzantine
complexities of modern-day health care. AETNA’s policy
explicitly equated its coverage (i.e., eligibility) on an
assessment of medical necessity. But the medical necessity
clause, which attempts to convert medical decisions into
eligibility decisions, compounds the problem I address
herein. Indeed, Aetna denied coverage even though Dr.
Picariello insisted the specialized tracheostomy tube was
critical to DiFelice’s health. Tracheotomy is an extremely
serious procedure, and the tracheostomy tube, whose uses
are described in the margin, is an integral part of the
procedure.1 As two prominent medical school professors
explain, tracheotomy “is associated with multiple and
potentially life-threatening complications even under
elective conditions.” Eugene N. Myers and Ricardo L.
Carrau, Early Complications of Tracheotomy: Incidence and
Management, 12 Clinics in Chest Medicine No. 3 at 589
(September 1991). Indeed, “[e]ven with the use of optimal
surgical techniques, complications of tracheotomy may
occur during the procedure, in the immediate postoperative
period, or long after the surgery.” Eugene N. Myers and
Sylvan E. Stool, Complications of Tracheotomy, Tracheotomy
147 (Churchill Livingstone 1985). They counsel that “[t]he
best means of preventing complications whenever they
1. The purposes of a tracheotomy tube are: (1) to provide secure
continuation of the airway through the passage of the soft tissues of the
neck; (2) to offer a possibility of artificial pressure ventilation if needed;
and (3) to seal the trachea to prevent aspiration of material above the
tube or in the hypopharynx. See Carl-Eric Lindholm, Choice of
Tracheostomy Tube, Tracheotomy 125 (Churchill Livingstone 1985).
34
occur [ ] are paying meticulous attention to detail in the
performance of the surgery and performing the tracheotomy
as soon as it becomes obvious that the procedure is
necessary.” Id.This assessment is borne out by the history of DiFelice’s
condition. In March of 2001, DiFelice was diagnosed with
sleep and upper airway obstruction. His otolaryngologist,
Dr. Michael Picariello, attempted several unsuccessful
treatments before determining that DiFelice needed a
tracheostomy tube. Dr. Picariello surgically placed a
tracheostomy tube in July of 2001, but it continually
extubated from DiFelice’s neck. It was only then that Dr.
Picariello determined that DiFelice needed a specially-
designed tube to remedy a potentially life-threatening
condition.
Aetna, however, overruled Dr. Picariello’s expert medical
judgment and determined that the tube was in fact not
medically necessary, leaving DiFelice with the option of
bringing an injunctive suit under ERISA § 502, paying out-
of-pocket for the specially-designed tube, or receiving a
second standard-shaped tube that Aetna agreed to cover.
He opted for the covered tube, but after it was placed, he
developed a serious and progressive soft tissue and bone
infection that caused him to be admitted to Chester County
hospital in October of 2001, following which he was
referred to the Hospital at the University of Pennsylvania.
There, doctors removed “significant portions” of his bone
and tissue to treat the infection, and his pectoral muscle
was surgically reconfigured.
Aetna claims that its decision was not medical merely
because it was made with an eye to plan language. To me
this makes no sense, for Aetna made precisely the same
individualized determination of medical necessity as Dr.
Picariello. The fact that Aetna is an HMO and Dr. Picariello
is an independent physician is entirely irrelevant to the
fundamental character of their assessments. My conclusion
that Aetna’s decision may have been largely medical
suggests that perhaps DiFelice’s claim should not be
preempted. Such a result would follow comfortably under
Dukes and In re U.S. Healthcare. I agree with Judge
Rendell, however, that Supreme Court precedent compels
35
the conclusion that the proper test is whether a suit is
theoretically possible under § 502(a), an approach which
leads to preemption under the facts of this case.
Judge Rendell’s opinion recognizes that Aetna’s decision
had a medical component. It declines to characterize it as
either eligibility or treatment, and concludes that in such
mixed situations, preemption turns on the availability relief
under ERISA § 502(a). This resolution at least has the
salutary effect of creating a bright-line rule, perhaps the
best we can hope for absent intervention from a higher
authority that would enable a truly principled
jurisprudence. But while this rule is relatively easy to
apply, that ease comes at the direct expense of plan
participants’ welfare. The rule’s premise is that HMOs that
do not employ their own physicians are solely in the
insurance business, that is, they do not provide care and
cannot be medically negligent. In the opinion’s words,
“because there is no allegation that Aetna actually provided
the medical care, Aetna’s use of medical judgment could
only have led to an eligibility, not a treatment, decision.” I
believe that this statement (with which I do not agree)
encapsulates precisely why ERISA’s failure to change with
the times has rendered it incapable of protecting
employees, and why Congress must act to prevent further
injustice.
C.
As discussed above, existing Supreme Court precedent
holds that ERISA disallows extracontractual damages even
in instances of bad faith, an interpretation that gives safe
harbor to HMOs that deny claims while also destroying any
possibility of participants bringing § 502 actions under
contingency fee arrangements. The result is that, in many
cases, participants must take HMOs’ decisions as law — for
example, when Aetna’s utilization review board denied
coverage for DiFelice’s specialized tracheostomy tube, he
faced the decision whether to pay for the specialized tube
out-of-pocket, whereas appealing the HMO’s decision was
simply impractical in the face of a medical emergency. In
such cases, the critical insight is that the HMO de facto
determines a patient’s actual treatment along with his
36
eligibility for benefits, for it will be a relatively rare person
who is able to pay for invasive procedures out-of-pocket.
Because ERISA creates a system in which an HMO’s
benefit determination frequently determines the actual
treatment a participant receives, it follows directly that
HMOs determine quality of care — and make treatment
decisions — regardless of whether they actually employ
physicians. Put differently, the root of courts’ ERISA
preemption nightmare is that ERISA forces them to
distinguish between eligibility and treatment decisions
while providing a remedial structure that makes the two
virtually synonymous. For participants, the torment is still
greater: ERISA de facto places the HMO in control of the
treatment a participant receives, yet it preempts any state-
law medical malpractice claim against that HMO and
provides that the participant can recover no compensatory,
punitive, or wrongful-death damages regardless of its
malfeasance.
This situation has arisen because ERISA has failed to
evolve to accommodate the rise of HMOs, which did not
even exist when ERISA was enacted in 1974. Back then,
fee-for-service insurers dominated the health care industry.
See Pegram, 530 U.S. at 218; see also Kent G. Rutter,
Democratizing HMO Regulation to Enforce the “Rule of
Rescue”, 30 U Mich. J. L. Ref. 147, 171 (1996). Insurers
had little role in a person’s treatment decisions; instead, a
participant would visit a doctor or hospital, receive
treatment, and the doctor or hospital would bill the insurer.
If an insurer refused to pay, the participant could bring suit
under ERISA § 502(a) to recover benefits due under the
terms of the plan. This was the role Congress envisioned for
§ 502, and it worked well, for any disagreement with an
insurer would occur only after the participant’s medical
crisis had abated, and in some ways the system created an
incentive to provide too much care rather than too little.
Times have changed. Today, approximately 75% of
insured American workers receive their heath care through
some type of “managed care” plan, a designation which
includes HMOs. See Andy Miller, Managed Care Savings
Noted, Atlanta J. & Const., June 5, 1997, at E3. One
hallmark of managed care systems is the utilization review
37
board, which approves or denies coverage for a procedure
before the procedure actually takes place. Although a
participant may appeal a utilization review board’s decision,
the prior-approval system is thought to reduce costs to
HMOs because participants are likely to choose an inferior
(but approved) procedure over a superior procedure for
which they might ultimately pay out-of-pocket following an
unsuccessful appeal. ERISA is often ill-equipped to deal
with the phenomenon of the utilization review board, for the
lack of remedies available under § 502, as discussed above,
actively encourages HMOs to deny claims. Because these
denials now take place before the treatment itself, the effect
is a systematic deterioration in the quality of treatment
participants receive, all oxymoronically occasioned by a
statute “designed to promote the interests of employees and
their beneficiaries in employee benefit plans.” Shaw, 463
U.S. at 90.
III.
What is to be done? Not much, absent intervention by
Congress or the Supreme Court, for lower courts are bound
to follow precedents that lead inexorably to the “availability
of § 502 relief ” preemption test set forth by the majority
opinion in this case. However, several promising avenues
exist. One is suggested by the Bipartisan Consensus
Managed Care Improvement Act of 1999, H.R. 2723, 106th
Cong., 1st Sess. (1999), which passed the House but was
watered down in the Senate. See Langbein & Wolk, Pension
and Employee Benefit Law at 561-62. That Act would have
amended ERISA § 514 by adding a new subsection (e)
providing that ERISA shall not:
be construed to invalidate, impair, or supercede any
cause of action brought by a participant or beneficiary
(or the estate of a participant or beneficiary) under
State law to recover damages resulting from personal
injury or for wrong death against any person —
(i) in connection with the provision of insurance,
administrative services, or medical services by such
person to or for a group health [plan], or
38
(ii) that arises out of the arrangement by such
person for the provision of such insurance,
administrative services, or medical services by other
persons.
The Act would have disallowed punitive damages when the
cause of action relates to an “externally appealable
decision.” It set up such external appeal procedures for
denials of benefit claims based on decisions that “the item
or service is not medically necessary or appropriate or is
investigational or experimental” or “in which the decision as
to whether a benefit is covered involves a medical
judgment.”
Put more concretely, had the Act become law, Aetna
would now face possible compensatory damages but not
punitive damages, and its determination of medical
necessity would be externally appealable. Although the Act
passed the House, it did not survive in the Senate, which
passed a version of health care reform containing no right
to sue. See H.R. 2990, 106th Cong., 1st Sess. (1999). As
suggested, the legislation approved by the House is one
approach. There are doubtless others.
Even if Congress refuses to act, however, the Supreme
Court, in its interpretive capacity, is capable of effecting
salutary change in many ways. The Court has no crystal
ball, and twenty years ago it could not have foreseen the
radical changes that have overtaken the health care
system, and the difficulties that its preemption decisions
would create. The time might be right to reconsider the
string of holdings, epitomized by Russell and Mertens, that
rule out the possibility of recovering compensatory damages
under ERISA § 503(a)(3). See generally John H. Langbein,
What ERISA Means by “Equitable”: The Supreme Court’s
Trail of Error in Russell, Mertens, and Great-West, Yale Law
School Center for Law, Economics, and Public Policy,
Research Paper No. 269, available online at www.ssrn.com.
Professor Langbein persuasively argues: (1) that the
Supreme Court erred in interpreting ERISA’s language
providing for “other appropriate equitable relief ” to mean
only relief that was traditionally available in courts of
equity; and (2) that the better view is that Congress
intended “to remedy ERISA wrongs of the sort commonly
39
remedied under trust law,” and a core principal of trust
law, the “make-whole standard,” attempts to “restore[ ] the
victim to the position that he or she would have had had
there been no breach of trust.”
That is precisely what compensatory damages do, and
there is no reason to suspect that Congress intended to
base ERISA on the law of trusts while omitting the
predicate law’s core remedy. I note that I am not alone
among federal judges in urging the Supreme Court to
reconsider what has become a significant barrier to justice
and the realization of Congressional intent. See, e.g., Cicio
v. Does, 321 F.3d 83, 107 (2d Cir. 2003) (Calabresi, J.,
dissenting) (“[I]t is not too late for the Supreme Court to
retrace its Trail of Error and start over from the beginning,
or for Congress to wipe the slate clean.”). Cf. Corcoran v.
United Healthcare, 965 F.2d 1321, 1336 (5th Cir. 1992)
(“The characterization of equitable relief as encompassing
damages necessary to make the plaintiff whole may well be
consistent with the trust law principles that were
incorporated into ERISA and which guide its
interpretation.”).
Another possibility for the Supreme Court, especially
given its recent trend toward looking beyond the text of
§ 514(a) to determine ERISA’s preemptive scope, is to
rexamine Congress’s intent (or lack thereof) with respect to
preempting welfare benefit plans. Many scholars have noted
that Congress did not carefully consider the scope of
preemption when it drafted ERISA. See, e.g., Fick, The Last
Article about the Language of ERISA Preemption?, 33 Harv.
J. on Legis. 35, 53 (1996). The House bill would have
preempted state laws that “relate to the reporting and
disclosure responsibilities and fiduciary responsibilities of
persons acting on behalf of ” ERISA-covered plans, and
state laws that “relate to” funding and benefits-vesting
provisions of pension plans. H.R. 2, 93d Cong., 1st Sess.
(1973), 120 Cong. Rec. 4742 (1974). The Senate version, on
the other hand, would have preempted state laws that
“relate to the subject matters regulated by this Act.” S.
4200, 93d Cong., 1st Sess. (1973), 120 Cong. Rec. 5002
(1974).
40
In the final joint conference, the Committee adopted the
present language, but made it available to the full Congress
only ten days before the bill was enacted, and said little
about the change. See Metropolitan Life Ins. Co., 471 U.S.
at 745 n.23. There is scant reason to believe that the
resulting language was fully considered by the entire
deliberative body; indeed, those who paid attention to the
issue opined that § 514(a) was provisional. Section 3022
mandated the creation of a Joint Pension Task Force to
study the practical effect and desirability of preemption,
and Senator Jacob Javits, a sponsor of the legislation, said
that “the desirability of further regulation — at either the
State or Federal level — undoubtedly warrants further
attention.” 120 Cong. Rec. 29,942 (1974) (remarks of Sen.
Javits). Unfortunately, the Task Force never came into
existence, and no further regulation was forthcoming.
The evidence suggests that Congress did not carefully
consider whether the scope of preemption should reflect the
different degrees of federal regulation of pension plans and
welfare benefit plans. See Fisk, The Last Article about the
Language of ERISA Preemption?, 33 Harv. J. on Legis. at
56. In my view, section 514(a)’s broad preemptive scope is
sensible with regard to pension plans, for federal law fully
displaces state law and provides vesting, requirements,
minimum funding requirements, and a raft of other
employee safeguards. However, to me, it makes much less
sense with respect to welfare plans. As discussed supra,
Congress exempted welfare benefit plans from most of
ERISA’s substantive regulations, such as its vesting and
minimum funding requirements.
As I see it, it is unlikely that Congress intentionally
created this so-called “regulatory vacuum,” in which it
displaced state-law regulation of welfare benefit plans while
providing no federal substitute. The more likely explanation
is that Congress merely intended to create minimum
safeguards to protect the financial integrity of welfare
benefit plans while stopping short of federalizing the entire
remedial regime, especially in light of what was a workable
state-law remedial system. Congress’s failure to distinguish
explicitly between pension and welfare benefit plans in
§ 514(a) is understandable, for, as explained above, the
41
managed care plans that wreak havoc with § 514(a) as it
relates to welfare benefit plans did not exist when ERISA
was enacted. There is no evidence that Congress envisioned
the current situation.
Taking note of Congress’s understandable lack of
clairvoyance, the Supreme Court might embrace
pragmatism and limit § 514(a)’s preemptive scope regarding
welfare benefit plans. Although the distinction would find
little support in the text of ERISA itself, Justices Scalia and
Ginsburg recently admitted in a concurrence that:
[A]pplying the ‘relate to’ provision according to its
terms was a project doomed to failure, since, as many
a curbstone philosopher has observed, everything is
related to everything else. The statutory text provides
an illusory test, unless the Court is willing to decree a
degree of pre-emption that no sensible person could
have intended — which it is not.
California Division of Labor Standards Enforcement v.
Dillingham Construction, N.A., Inc., 519 U.S. at 335-36
(1997) (internal citation omitted). Absent textual guidance
or meaningful legislative history, there is little to prevent a
pragmatic solution to a problem Congress has not
confronted.
No doubt there are other possible solutions. The vital
thing, however, is that either Congress or the Court act
quickly, because the current situation is plainly untenable.
Lower courts are routinely forced to dismiss entirely
justified complaints by plan participants who have been
grievously injured by HMOs and plan sponsors, all because
of ERISA, the very purpose of which was to safeguard those
very participants. Our dockets grow increasingly crowded
with cases where participants offer myriad varieties of artful
pleadings in their desperate attempts to circumvent
ERISA’s procrustean reach, and our caselaw grows
massively inconsistent due to the sheer complexities of the
subject and lack of any meaningful guidance. There must
be a better way.
The Clerk of Court is directed to send a copy of this
opinion (with attention directed to the concurrence) to the
Solicitor of the Department of Labor; the Chair, Ranking
42
Member, Chief Majority Counsel, and Minority Counsel of
the Senate Committee on Health, Education, Labor, and
Pensions; and the Chair, Ranking Member, Chief Majority
Counsel, and Minority Counsel of the House Committee on
Education and the Workforce.
43
AMBRO, Circuit Judge, concurring:
Judge Rendell’s opinion is well-crafted, and I join it. In
many cases, however, the result underwhelms. Thus, like
Judge Becker, I implore for a better way to make these
kinds of decisions.
Congress in 1974 passed “a comprehensive statute
designed to promote the interests of employees and their
beneficiaries in employee benefit plans.” Shaw v. Delta
Airlines, Inc. 463 U.S. 85, 90 (1983). That statute — the
Employee Retirement Income Security Act of 1974
(“ERISA”), 29 U.S.C. § 1001 et seq. — made policy
compromises in order to combat exponentially rising health
care costs in a melange of state tort laws assessing
negligence after-the-fact. See generally Jonathan J.
Frankel, Medical Malpractice Law and Health Care Cost
Containment: Lessons for Reformers from the Clash of
Cultures, 103 Yale L.J. 1297 (1994). Among the newer
forms of managing the providing of healthcare services was
to “ ‘prospectively and concurrently assess the
appropriateness of care. . . .’ ” Id. at 1302 (quoting
Elizabeth W. Hoy et al., Change and Growth in Managed
Care, HEALTH AFF., Winter 1991, at 27).
Instead of healthcare insurers reimbursing insureds for
already-given medical care, health maintenance
organizations (“HMOs”) were created where, upon “receipt of
a fixed fee for each patient enrolled under the terms of a
contract [,] . . . specified health care [is provided] if needed.”
Pegram v. Herdrich, 530 U.S. 211, 218 (2000). Physicians
contract with HMOs to provide services to patients in the
HMO for set fees. HMOs, via a health plan purchased by
patients’ employers, set “[r]ules governing collection of
premiums, definition of benefits, submission of claims, and
resolution of disagreements over entitlement to services.
. . .” Id. at 223. The bottom line — non-routine medical
services are provided after they are approved.
This system, simple in concept, has sisyphean frustration
in application. At the forefront is preemption. To save costs
in a tort system where medical decisions by service
providers are second-guessed by non-medical persons,
ERISA preempts state law that conflicts with ERISA, 29
44
U.S.C. § 1144(a), and is a “cause of action within the scope
of the civil enforcement provisions of [ERISA] § 502(a) [29
U.S.C. § 1132(a)].” Cicio v. Does, 321 F.3d 83, 94 (2d Cir.
2003) (quoting from Metropolitan Life Ins. Co. v. Taylor, 481
U.S. 58, 66 (1987)). Included within this subsection is any
civil action brought “by a [plan] participant or beneficiary
. . . to recover benefits due to him under the terms of his
plan, to enforce his rights under the terms of the plan, or
to clarify his rights to future benefits under the terms of the
plan. . . .” 29 U.S.C. § 1132(a)(1)(B). Stated colloquially,
ERISA “federalizes” most employee benefit plan remedies.
Judges Rendell and Becker in this case, and Judge
Calabresi in his partial dissent in Cicio, 32 F.3d at 106 et
seq., point out poignantly the so-often unsatisfying
constructs we use to cipher meaning when cultures of cost
containment and tort responsibility clash over preemption.
“The litigants in these cases spar over the extent to which
a lay financing entity [the HMO] has appropriated to itself
distinctly medical authority by substituting its own
expertise for that of the treating physician.” Frankel, 103
Yale L.J. at 1303 (emphasis in text). I join the chorus
calling for a fresh look from higher authority to promote
better the primary Congressional purpose of ERISA —
protecting plan participants and their beneficiaries. “At
issue is nothing less than the definition of medical decision-
making itself,” id., and the lives that this affects.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit