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It has been said that the U.S. Supreme Court follows the election results. Aetna Health v. Davila, 124 S. Ct. 2488 (2004), is evidence that the court also reads the newspapers. For almost 25 years, the court protected Employee Retirement Income Security Act (ERISA) health plans from patients’ lawsuits claiming injuries based on the denial of benefits. This gave ERISA plans a significant advantage in the marketplace and they eventually displaced non-ERISA plans. It also left patients denied benefits little recourse. T.R. McLean and E.P. Richards, “Health Care’s ‘Thirty Years War’: The Origin and Dissolution of Managed Care,” 60 N.Y.U. Ann. Surv. Am. L. 283 (2004). In 2000, the court appeared to hold that plans that made decisions based on the patient’s medical condition, rather than just on the insurance contract, could be sued because mixing medical and contract decisions took the decision outside of the reach of ERISA pre-emption. See Pegram v. Herdrich, 530 U.S. 211 (2000). Most managed care plans responded to Pegram by reducing their review of medical decision-making, often advertising that they left medical decision-making to the physician. Coupled with class action settlements over reimbursement policies and increased provider consolidation, health plans lost much of their control over costs. By 2004, articles on health care costs routinely dominated the front pages of America’s best newspapers. In Aetna Health, the Supreme Court rolled back the clock and restored the ERISA shield for all managed care benefits decisions. Whether this will help put a brake on health care costs remains to be seen. But, as justices Ruth Bader Ginsburg and Stephen G. Breyer noted in their concurrence, the court’s construction of ERISA leaves injured patients with no recourse outside of ERISA and little inside it. Suits arose out of HMOs’ denial of medical benefits Aetna Health is a consolidation of two cases in which the plaintiffs sought to recover monetary damages under Texas’ Health Care Liability Act (Texas Civ. Prac. & Rem. Code Ann. �� 88.001-88.003) for the health maintenance organization’s denial of medical benefits. In one case, the HMO had refused to pay for the most expensive anti-inflammatory agent, and in the second, the HMO allegedly had the plaintiff discharged from the hospital prematurely. In both cases, the plaintiffs asserted that the HMO had not exercised ordinary care as required by the Texas statute. The HMOs removed the cases to federal court, where the plaintiffs “refused to amend their complaints to bring explicit ERISA claims.” Although the trial court dismissed the complaint, it was revived when the 5th U.S. Circuit Court of Appeals held that the HMOs had made a “mixed eligibility-treatments” decision to deny medical benefits. According to Pegram, such decisions occur outside the scope of ERISA, and thus are not protected by ERISA pre-emption. Moreover, noted the 5th Circuit, Rush Prudential HMO v. Moran, 536 U.S. 355 (2002), limited ERISA pre-emption to situations in which the states “duplicate the causes of action listed in ERISA.” Having decided that ERISA pre-emption was not applicable, the 5th Circuit remanded the cases for trial in state court. Justice Clarence Thomas wrote for a unanimous court. First finding that the case was properly removed to federal court, he reviewed whether ERISA pre-empted the state statute. The court found that in both cases the plaintiffs’ “only action complained of” was the HMO’s failure to pay for a benefit; that they had not attempted to mitigate their damages; and that while ERISA contained a mechanism by which the plaintiffs could have obtained relief, they had not sought such relief. Rather, the plaintiffs had bypassed ERISA to bring their action under the Texas statute. More specifically, the court noted that the plaintiffs had argued that because the statute requires HMOs to provide “ordinary care,” it imposed duties upon the HMO that were independent “of any duty imposed by ERISA or the plan terms.” While this might be true, “if a managed care entity correctly concluded that, under the terms of the relevant plan, a particular treatment was not covered, the managed care entity’s denial of coverage would not be a proximate cause of any injuries arising from the denial.” 124 S. Ct. at 2497. The court expounded on causation under the Texas law: “[I]f the terms of the . . . plan specifically exclude from coverage the cost of an appendectomy, then any injuries caused by the refusal to cover the appendectomy are properly attributed to the terms of the plan itself, not the managed care entity that applied those terms.” Id. at 2498, n.3. In essence, the court held that a decision is only a mixed decision when the decision-maker is both the plan fiduciary and the treating physician. The court stated: “Since administrators making benefits determinations, even determinations based extensively on medical judgments, are ordinarily acting as plan fiduciaries, it was essential to Pegram‘s conclusion that the decisions challenged there were truly ‘mixed eligibility and treatment decisions,’ . . . i.e., medical necessity decisions made by the plaintiff’s treating physician qua treating physician and qua benefits administrator. Put another way, the reasoning of Pegram ‘only makes sense where the underlying negligence also plausibly constitutes medical maltreatment by a party who can be deemed to be a treating physician or such a physician’s employer.’ ” Id. at 2502. While such a set of conditions was true in Pegram, it is very unusual. In almost all other cases, the plan’s decision-maker is not the treating physician. Thus a literal reading of Aetna Health leaves one with the inescapable conclusion that virtually all decisions made by plan decision-makers, irrespective of whether they involve evaluating the patient’s medical condition and prognosis, are pure eligibility decisions and are entitled to ERISA pre-emption. The court’s commentary on Pegram raises a question about whether state medical boards can regulate ERISA plan medical directors. Several state supreme courts have taken the view that a medical director’s evaluation of a patient’s condition to authorize benefits is a medical decision that is subject to board regulation. See State Bd. of Registration for the Healing Arts v. Fallon, 41 S.W.3d 474, 477 (Mo. 2001); Corporate Health Ins. v. Texas Dep’t. of Ins., 220 F.3d 641, 643 (5th Cir 2000); and Murphy v. Board of Medical Examiners, 949 P.2d 530, 536 (Ariz. Ct. App. 1997). The dicta in Aetna Health could be taken to mean that this is an improper attempt by the state to control ERISA benefits decisions. However, since it does not compensate the patient, such regulations would seem to be outside of ERISA entirely. The court also chided the 5th Circuit for its reliance on “one line” from Rush Prudential, a case that involves the ability to regulate a plan’s third-party administrators under the ERISA’s saving clause, which “saves” state laws that regulate insurance from ERISA pre-emption. The court found that the 5th Circuit’s reliance on Rush was misplaced because the point of the cited sentence was “to describe why the state cause of action in Ingersoll-Rand was pre-empted by ERISA: It was pre-empted because it attempted to convert an equitable remedy into a legal remedy.” 124 S. Ct. at 2499. According to the court, nowhere in Rush Prudential “did we suggest that the pre-emptive force of ERISA is limited to the situation in which a state cause of action precisely duplicates a cause of action under ERISA.” Id. No mention of previous term’s decision in ‘Miller’ Conspicuously absent from the discussion in Aetna Health is any reference to the previous term’s opinion in Kentucky Assn. of Health Plans v. Miller, 123 S. Ct. 1471 (2003), which concerned the savings clause. Miller held that a state could regulate a third-party administrator if the statute was placed in the insurance code and concerned the third-party administrator’s ability to spread risk. Thus, if an ERISA plan is run by a third-party administrator, which is usually the case, the state still will be able to regulate the third-party administrator’s decision-making, provided the statute is placed in the insurance code and involves risk spreading. Because a statute that affects medical decision-making will affect risk spreading, it is possible that a statute like the Texas law could be used to discipline the decision-making of ERISA plans. However, because the opinion did not address Miller (perhaps because the law at issue was not part of Texas’ insurance code), the extent of the state power to regulate ERISA plans run by third-party administrators remains in limbo. Ginsburg noted in her concurrence that while the court has chosen to read ERISA pre-emption broadly, it also reads ERISA remedies narrowly to exclude consequential damages claims. She also noted that this is a misreading of the traditional equitable remedies, which, as the government pointed out in its amicus brief, allowed for such damages claims. She suggested that this might be a way for the court to broaden the ERISA remedies for wrongful denial of medical care. However, what is really lacking for such a judicial interpretation is a clear indication of congressional intent. Aetna Health may make sense as a health policy choice, but that choice should be made by Congress and not the courts. Thomas R. McLean is CEO of Third Millennium Consultants in Shawnee, Kan.; clinical assistant professor of surgery at the University of Kansas; and attending surgeon at the Leavenworth, Kan., Veterans Administration Medical Center. Edward P. Richards ([email protected]) is the Harvey A. Peltier Professor of Law at Louisiana State University Hebert Law Center and director of its program in law, science and public health.

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