What is an employee benefit plan?: ERISA preemption of "any willing provider" laws after Pegram

This note considers the implications of a recent Supreme Court decision, Pegram v. Herdrich, for preemption of state laws under the Employee Retirement Income Security Act (ERISA). Though Pegram dealt with a fiduciary liability question, and not preemption specifically, the Court in arriving at its decision laid out a definition of the word "loan"--a word that is used in both the fiduciary liability section of ERISA and the preemption section. The Court's definition focuses upon the relationship between the managed care organization and the employer that hires it. The definition, however, excludes from the meaning of "plan" the relationship between the managed care organization and the health care providers it hires. Thus, this Note argues that according to Pegram, state laws that regulate the relationship between managed care organizations and health care providers, such as "any willing provider" laws, should not be preempted by ERISA.     

Will the Supreme Court finally eliminate ERISA preemption?

David Trueman's article reviews the history of ERISA preemption by analyzing seminal Supreme Court cases and predicts the future of ERISA preemption in his analysis of recent federal case law. Traditionally, the ability to hold a managed care entity responsible for its actions has been hampered by a strict interpretation of the preemption clauses of ERISA but as the Supreme Court's jurisprudence has evolved and loosened, several federal courts have allowed suits against managed care companies to go forward. Conflict among the federal circuits has arisen and the Supreme Court has granted certiorari to two cases from Texas in order to clarify ERISA preemption. Mr. Trueman discusses the future of ERISA preemption in light of these decisions.     

The impact of the recent Supreme Court rulings in Pegram and Rush Prudential on state regulation of managed care organizations

Over the past two decades, the Employee Retirement Income Security Act of 1974 (ERISA) has shielded managed care organizations (MCOs) from liability for negligent treatment or coverage decisions. This Article examines the Supreme Court jurisprudence in the area of ERISA preemption, and assesses the impact of these recent decisions on state regulation of MCOs. The author concludes that recent decisions in Pegram v. Herdrich and Rush Prudential HMO, Inc. v. Moran have broadened the states' power to regulate MCOs and enhance the ability of injured plaintiffs to sue such organizations under state tort law.     

Independent medical review: expanding legal remedies to achieve managed care accountability

Author Leatrice Berman-Sandler reports on independent medical review (IMR), a state-based statutory remedy used to resolve disputes over coverage between patients and their health plans. Ms. Berman-Sandler explores the connection between ERISA preemption and IMR, and opines that in light of recent Supreme Court decisions, the stage has been set for expansion of IMR. Accordingly, Ms. Berman-Sandler concludes that there are strong legal and policy reasons for state legislatures to broaden the application of IMR and for the Court to continue to narrow ERISA preemption in order to increase accountability in the managed care arena.     

Directors' duty of care to monitor information systems in HMOs: some lessons from the Oxford Health Plan

This paper examines the legal and strategic issues raised by the use of information systems in health maintenance organizations (HMOs) and other managed care organizations. Given the critical nature of information systems to an HMO's business success and regulatory compliance, the large financial investment HMOs make in their systems, and the widely publicized concerns over the year 2000 "millennium bug" problem, information systems are appropriately a matter of concern to an HMO's board of directors. The recent experience of Oxford Health Plans, Inc. offers a case study in the apparent failure of the directors to monitor adequately the in-house development of an information system. The systems disaster which this corporation suffered in 1997 led to a dramatic drop in stock price, from which the company has yet to recover, as well as intense scrutiny by state and federal regulators and countless shareholder derivative actions against the directors. Corporate directors are subject to the fiduciary duty of care. Despite statutes in some states requiring directors to act prudently, state courts almost always apply the standard of gross negligence. As a result, even when directors act without due deliberation in their decision, it is rare that a court will find them to have failed in their duty of care. The business and regulatory community may find otherwise, however, when directors fail to evaluate information systems options carefully and the business suffers as a result.     

Managed care liability today: laws, cases, theories, and current issues

Managed care entities face numerous liability issues in today's changing healthcare environment. This Article provides the plaintiff with a comprehensive road map for navigating the many avenues of managed care liability. The author describes ERISA pre-emption provisions and suggests ways plaintiffs' attorneys can strive to narrow the pre-emption. The Article also provides in-depth analysis of each theory of managed care liability that has been litigated against managed care entities to date, and then goes on to explore state laws imposing liability on managed care entities, and how HMO liability is being reformed through legislative action. For plaintiffs' attorneys seeking the full spectrum of theories of managed care liability, or for defendants' attorneys wanting to remain updated on all potential claims to defend, this Article constitutes an extensive primer on the current issues.     

Recent developments in employee benefits law

The first part of this article highlights important judicial developments involving employee benefits and the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, during the latter part of 2003 and the first part of 2004, including the most significant U.S. Supreme Court and federal circuit court decisions. The second part covers recent legislative and regulatory developments in employee benefits law. This article is not meant to be exhaustive, but discusses the more important developments during 2003-2004, with particular focus on issues of concern to the insurance industry.     

Fiduciary disclosure of medical mistakes: the duty to promptly notify patients of adverse health care events

Fiduciary obligations are imposed by the common law to ensure that a person occupying a societal role with a high potential for the manipulation of vulnerable persons exercises utmost good faith. Australian law has recognised that the doctor-patient relationship, while not wholly fiduciary, has fiduciary aspects. Amongst such duties are those prohibiting sexual or financial abuse of patients or disclosure without express authority of confidential information. One important consequence of attaching such fiduciary duties to the doctor-patient relationship is that the onus of proof falls not upon the vulnerable party (the patient), but upon the doctor (to disprove the allegation). Another is that consent cannot be pleaded as an absolute defence. In this article the authors advocate that the law should now accept that the fiduciary obligations of the doctor-patient relationship extend to creating a legal duty that any adverse health care event be promptly reported to the patient involved. The reasons for creating such a presumption, as well as its elements and exceptions, are explained.     

In Search of the Nature and Function of Fiduciary Loyalty: Some Observations on Conaglen's Analysis

Fiduciary law is in a state of flux. We know that the core obligationof a fiduciary is an obligation of loyalty, but we are lesssure what ‘fiduciary loyalty’ encompasses. We knowa fiduciary has duties not to profit or put himself in positionsof conflict, but how these duties interact with other non-fiduciaryduties (whether tortious or contractual or otherwise) is moredifficult to discern. Against this background, Conaglen hasmade a recent contribution to our understanding of the fiduciarydoctrine. He suggests that fiduciary loyalty offers a subsidiaryand prophylactic form of protection for non-fiduciary duties.This article considers his analysis, and argues that it is notsupported by case law and creates a number of inexplicable implicationsfor the fiduciary doctrine. In view of these difficulties, Conaglen'sanalysis should be rejected.     

Crisis of conscience: reconciling religious health care providers' beliefs and patients' rights

In this note, Katherine A. White explores the conflict between religious health care providers who provide care in accordance with their religious beliefs and the patients who want access to medical care that these religious providers find objectionable. Specifically, she examines Roman Catholic health care institutions and HMOs that follow the Ethical and Religious Directives for Catholic Health Care Services and considers other religious providers with similar beliefs. In accordance with the Directives, these institutions maintain policies that restrict access to "sensitive" services like abortion, family planning, HIV counseling, infertility treatment, and termination of life-support. White explains how most state laws protecting providers' right to refuse treatments in conflict with religious principles do not cover this wide range of services. Furthermore, many state and federal laws and some court decisions guarantee patients the right to receive this care. The constitutional complication inherent in this provider-patient conflict emerges in White's analysis of the interaction of the Free Exercise and Establishment Clauses of the First Amendment and patients' right to privacy. White concludes her note by exploring the success of both provider-initiated and legislatively mandated compromise strategies. She first describes the strategies adopted by four different religious HMOs which vary in how they increase or restrict access to sensitive services. She then turns her focus to state and federal "bypass" legislation, ultimately concluding that increased state supervision might help these laws become more viable solutions to provider-patient conflicts.     

Policing Medicaid and Medicare managed care: the role of courts and administrative agencies

The much-publicized 2000 case of Frew v. Gilbert, in which a federal judge castigated the State of Texas for deficiencies in its Medicaid program, brought renewed attention to the issue of regulating the quality of care in Medicaid and Medicare HMOs. Frew and other recent cases highlight both the promise and the pitfalls of relying on courts to correct deficiencies in public managed care programs. This article argues that while litigation over inadequacies in Medicare and Medicaid managed care can serve an important signaling function in alerting agencies and legislatures about the need for reform, the role of the courts in policing public managed care is circumscribed by several constraints. Barriers to class action litigation and differences in the institutional capacities of courts and administrative agencies mean that litigation is best viewed as a supplement, not an alternative, to a renewed commitment to strong quality monitoring on the part of Centers for Medicare and Medicaid Services and state Medicaid agencies.     

Does the federal Family and Medical Leave Act of 1993 create a hole in ERISA preemption?

ERISA's board preemption provision has survived many challenges to its scope and effect. Now it may have succumbed in the face of a few statements tucked into the legislative history of the federal Family and Medical Leave Act (FMLA). Language in the legislative history presents the view that the Act was meant to overturn ERISA preemption of state family and medical leave laws. The text of the FMLA contains no corroborating language to support that view. However, at least one court found the statements in the legislative history to be persuasive and ruled that under the FMLA, ERISA does not preempt state family and medical leave laws that regulate ERISA plans. If other courts follow that decision, there will be great implications to employee benefit plan regulation and administration. This article explores the court's decision and the relationship between the FMLA and ERISA preemption.     

Is medical care different? Old questions, new answers

This paper examines whether changes in medical markets may be making them more like other markets. The emergence of HMOs and other managed care systems appears to have increased the consumer's potential ability to make better comparative judgments about the price and quality of medical care, and also seems to have made medical care more like other goods. However, the evidence that medical care is a "reputation good" suggests that it is, in this respect, different from other goods. Finally, the social concerns about medical care use necessarily make medical care different.     

Referring Discovery Tasks to Special Masters: Is Rule 53 a Source of Authority and Restrictions?

The author concludes that federal judges who want to appoint special masters to perform duties related to civil discovery may not look to the Federal Rules of Civil Procedure for authority to do so. By examining the historical backdrop against which the original rules were written, as well as the minutes of the proceedings of the first Advisory Committee, Brazil demonstrates that neither Rule 53 nor any other rule was designed to grant federal trial courts power to assign pretrial discovery tasks to special masters. In fact, the evidence the author marshalls shows that the original Advisory Committee explicitly rejected the idea that the Federal Rules should authorize even a limited role for special masters in connection with discovery depositions.
Finding no authority for such appointments in the Federal Rules, the author turns to the judiciary's "inherent power." Drawing principles from the seminal Supreme Court opinion in this area, Brazil infers that in some circumstances the courts' inherent authority is a sufficient premise for delegating discovery tasks to special masters. Noting that the reported cases contain no clear guidelines about when or how federal judges should use this authority in making pretrial appointments, Brazil concludes by calling for a new federal rule covering this important subject.     

The political management of managed care: explaining variations in state health maintenance organization regulations

In the 1990s, strong incentives for managed care organizations to control costs, once regarded as a fortuitous confluence of interests, came to be seen as antithetical to consumers' interests in quality of care. In response to this change in political climate, many states have greatly increased their regulatory control of managed care organizations since the mid-1990s. This activity is surprising in an era when public policy on health care issues is usually described as frozen, gridlocked, and/or stalemated as a result of intense activity on the part of organized interests. We take advantage of the variation in state regulations of health maintenance organizations (HMOs) to discover why some governments are able to address policy problems that are often perceived as intractable in a political if not in a true policy sense. From the history of HMOs, the backlash against managed care, and state responses to that backlash, we first extract a number of hypotheses about state regulatory activity. We then test these hypotheses with data on regulatory adoptions by states during the late 1990s and the early 2000s. Last, we discuss the findings with special attention to the role of politics in health care.     

Fiduciary Duty under the Microscope: Stewardship and the Spectrum of Pension Fund Engagement

UK pension fund trustees’ interpretations of their fiduciary duties may shape pension fund approaches to corporate stewardship and engagement envisioned by the UK Stewardship Code. Data from interviews with pension fund trustees, executives, investment intermediaries and pensions experts reveals interpretive pluralism of the concept of fiduciary duty in the area of pension funds. This article develops a model identifying the spectrum of pension fund engagement, linking interpretations of fiduciary duty to intensity and methods of engagement in practice. The findings help disambiguate the concept of ‘Fiduciary Duty’, highlighting the practical challenges of Stewardship Code application. These insights are relevant to the ongoing revisions of the Stewardship Code and policy clarifications of the nature of fiduciary duty by the UK Financial Conduct Authority. The paper encourages trustees, regulators and others to consider what role pension fund trustees should have in stewardship, which may not be directly relevant to their fiduciary duties as trustees.     

Claims procedures for employee benefit plans--Pension and Welfare Benefits Administration, Department of Labor. Request for information

This document requests information from the public concerning the advisability of amending the existing regulation under the Employee Retirement Income Security Act of 1974 (ERISA) that establishes minimum requirements for employee benefit plan claims procedures. The term "claims procedure" refers to the process that employee benefit plans must provide for participants and beneficiaries who seek to obtain pension or welfare plan benefits, including requests for medical treatment or services, consideration of claims, and review of denials of claims by plans. The primary purpose of this notice is to obtain information to assist the Department of Labor (the Department) in evaluating (1) the extent to which the current claims procedure regulation assures that group health plan participants and beneficiaries are provided with effective and timely means to file and resolve claims for health care benefits, and (1) whether and in what way the existing minimum requirements should be amended with respect to group health plans covered by ERISA. The furnished information also will assist the Department in determining whether the regulation should be amended with respect to pension plans covered by ERISA and in developing legislative proposals to address any identified deficiencies relating to the claims procedures that cannot be addressed by amending the current regulation.