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As 3rd Circuit Judge Edward R. Becker sees it, perfectly valid lawsuits against HMOs are routinely being tossed out of court due to the unfairness of the pre-emption provisions in ERISA, and either Congress or the U.S. Supreme Court had better do something about it soon. In his opening paragraph of a lengthy and powerfully worded concurring opinion in DiFelice v. Aetna, Becker said he wanted “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.” Speaking directly to Congress and the justices, Becker complained that “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.” The case law of the federal courts, Becker said, has grown “massively inconsistent due to the sheer complexities of the subject and lack of any meaningful guidance.” Since HMOs didn’t even exist when ERISA was passed in 1974, Becker said, Congress could not have foreseen how a law designed to protect workers would now work against them in myriad cases. Becker outlined a series of possible solutions to the problem, including a rewriting of ERISA by Congress or a rethinking by the Supreme Court of its interpretation of ERISA’s pre-emption provisions. “The vital thing, however, is that either Congress or the court act quickly, because the current situation is plainly untenable,” Becker wrote. In his final paragraph, Becker ordered the clerk of the 3rd U.S. Circuit Court of Appeals to send a copy of his opinion to the Solicitor of the Department of Labor and to the chairs, ranking members, chief majority counsel and minority counsel of both the Senate Committee on Health, Education, Labor, and Pensions and the House Committee on Education and the Workforce. Becker said he joined the majority opinion, authored by 3rd Circuit Judge Marjorie O. Rendell, even though he disagreed with the result, because Rendell was correct in her analysis that Supreme Court precedent called for pre-empting one of the plaintiff’s main claims. But for Becker, the lawsuit filed by Joseph DiFelice pointed up the serious flaws in the approach courts have taken when deciding whether a worker has the right to sue an HMO. “I believe that the fundamental distinction upon which federal case law 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,” Becker wrote. “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.” In the suit, plaintiff Joseph DiFelice claims he was diagnosed with an upper-airway obstruction, and that his doctor, an ear-nose-and-throat specialist, ultimately decided that he needed a tracheostomy tube. In July 2001, the same doctor decided that DiFelice needed a specially designed tube because the first tube was not working. But the suit alleged that Aetna overruled the doctor’s decision and said it had determined that the specially designed tube was in fact not medically necessary. Becker found that Aetna’s decision left DiFelice with three options — bringing an injunctive suit under ERISA, paying out-of-pocket for the specially designed tube, or receiving a second standard-shaped tube that Aetna agreed to cover. DiFelice opted for the covered tube, but after it was placed, the suit alleged that he developed a serious and progressive soft-tissue and bone infection. Doctors were forced to remove “significant portions” of his bone and tissue to treat the infection, the suit alleged, and his pectoral muscle was surgically reconfigured. Aetna lawyers argued that the insurer’s decision was not a “medical” one because it was made on the basis of plan language. “To me this makes no sense,” Becker wrote, “for Aetna made precisely the same individualized determination of medical necessity as [the doctor].” Becker said Rendell’s majority opinion recognized that Aetna’s decision “had a medical component.” But under Supreme Court case law, Becker said, such “mixed situations” require courts to decide the pre-emption question by asking whether the plaintiff could have filed an injunctive suit under ERISA Section 502(a) to challenge the insurer’s decision. “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,” Becker wrote. “But while this rule is relatively easy to apply, that ease comes at the direct expense of plan participants’ welfare.” The premise of the rule, Becker said, “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.” Rendell found that “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.” Becker said Rendell’s ruling was legally correct under controlling Supreme Court law, but that it was nonetheless wrong. Instead, Becker said, the ruling showed “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.” In his concurring opinion, Becker set out to explain how the problem began — and how it might be fixed. ERISA, the Employee Retirement Income Security Act, was enacted in 1974, Becker noted, “to address the increasingly apparent insecurity of workers’ vested pension funds.” Before ERISA, workers were entitled only to the assets in the pension plan or to nominal pension benefits, whichever was lower. As a result, some workers were left with nothing when companies closed shop. ERISA was designed, Becker found, to protect workers against negligent or malfeasant pension plan managers. But Becker found that while ERISA included a sound design for protecting pension plans, it fell short in its protection of workers’ right to welfare plans, such as health insurance. “Welfare benefit plans are far less regulated than pension plans,” Becker wrote. “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.” But despite that lack of regulation, Becker found that ERISA’s pre-emption provisions apply equally to both pension and welfare plans, effectively barring workers from bringing most claims under state law. With the advent of HMOs, Becker found that ERISA’s pre-emption provisions “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.” Becker found that a recent line of Supreme Court cases has “created a ‘regulatory vacuum’ in which virtually all state law remedies are pre-empted but very few federal substitutes are provided.” In those decisions, Becker said, the justices have given ERISA “a staggeringly broad pre-emptive scope.” Becker urged that “there must be a better way.” But the only hope, Becker said, is “intervention by Congress or the Supreme Court.” In 1999, Becker said, Congress seemed to be on to a workable solution when the House of Representatives passed the Managed Care Improvement Act, a law that would have added a savings clause to ERISA that would save from pre-emption any state law claim relating to personal injury or death “in connection with the provision of insurance, administrative services, or medical services.” But the law was “watered down” by the Senate, Becker said, which passed a version of health care reform that contained no right to sue. If the law had passed, Becker said, Aetna, in DiFelice’s case, “would now face possible compensatory damages but not punitive damages, and its determination of medical necessity would be externally appealable.” Becker said the version of the law passed by the House was one possible solution Congress might consider, and “there are doubtless others.” But even if Congress does nothing, Becker said, “the Supreme Court, in its interpretive capacity, is capable of effecting salutary change in many ways.” When the justices first began considering ERISA’s pre-emption provisions 20 years ago, Becker said, the Court “could not have foreseen the radical changes that have overtaken the health care system, and the difficulties that its pre-emption decisions would create.” But now, Becker said, “the time might be right to reconsider the string of holdings … that rule out the possibility of recovering compensatory damages.” Another possibility, Becker said, would be for the Supreme Court to re-examine whether Congress truly intended the pre-emption provisions to apply to welfare benefit plans. “Many scholars have noted that Congress did not carefully consider the scope of pre-emption when it drafted ERISA,” Becker wrote. “In my view, Section 514(a)’s broad pre-emptive 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,” Becker wrote. “However, to me, it makes much less sense with respect to welfare plans. … 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.”

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