See also
ERISA IS BREACHED
From kana@fcol.com Tue Dec 29 17:51:39 1998
Date: Tue, 29 Dec 1998 11:07:00 -0500
From: kana@fcol.com
To: The Insurer Crime Outline
Subject: ERISA on the ropes
We cover P&C mostly, and although they destroy lives, most of the time
they don't actually kill people. HMOs do, so it's good to hear that
ERISA is on the ropes in Pennsylvania. Of course, the Supreme Court
still has to make the right decision. Now if only they could dump
McCarran-Ferguson.
We normally don't send out this many posts at once, but everything seems
to be breaking loose as we approach the New Year. The ERISA battle
should be a big story come 1999 if the media can get out of Clinton's
underdrawers.
Jim and Paula
From the PA law network at http://www.palawnet.com/
===============
Pa. High Court: No ERISA Preemption of MedMal Case
By Michael A Riccardi
The Legal Intelligener
Monday, December 28, 1998
In a decision that may have a long-term impact on medical malpractice
litigation in Pennsylvania, the state Supreme Court handed down its
long-awaited ruling on ERISA preemption just before Christmas.
Under the Court's broadly worded decision, claims of medical negligence
against health maintenance organizations are not preempted by ERISA.
The Court based its ruling on recent decisions in the U.S. Supreme Court
which have significantly narrowed that Court's reading of the ERISA
preemption provision, although not in the context of a medical
malpractice claim.
The Pennsylvania Court acknowledged that the U.S. Supreme Court has yet
to squarely address the issue of whether a negligence claim against a
health maintenance organization "relates to" an ERISA plan.
The Court's ruling in Pappas v. Asbel, PICS Case No. 98-2701 (Pa. Dec.
23, 1998) Cappy, J.; Nigro, J. concurring (16 pages), means that the
third-party claim against U.S. Healthcare brought by defendant Haverford
Hospital can go forward. The claim was dismissed on summary judgment.
The majority's finding against preemption in the medical malpractice
context is broader than the Third Circuit's formulation of the issue in
Dukes v. U.S. Healthcare, Inc., 57 F.3d 350 (3d Cir. 1995).
In that case, the court distinguished between claims challenging the
denial of benefits as opposed to the quality of care provided. Under
Dukes, the former type of claim is preempted, while claims challenging
the quality of health care are not.
DELAY IN TRANSFERRING PATIENT ALLEGEDLY CAUSED INJURIES Plaintiff Basile
Pappas presented at the emergency room of Haverford Community Hospital at
11:00 a.m. on May 21, 1991 with complaints of paralysis and numbness in
his extremities. The physician on duty, Stephen Dickter, determined that
an epidural abscess was pressing on the spine and that immediate
transfer to a university hospital was required.
Dickter quickly arranged for transfer to Thomas Jefferson University
Hospital in Philadelphia, but when the ambulance arrived Dickter was
informed that Pappas' HMO, U.S. Healthcare, wouldn't authorize the
transfer.
Although the HMO subsequently approved transfer to another hospital, the
delay of several hours allegedly caused Pappas to suffer permanent
quadriplegia.
Pappas sued his primary physician and Haverford for malpractice. The
claim against Haverford centered on the inordinate delay in transferring
him to an appropriate hospital. Haverford then filed a third party
complaint against U.S. Healthcare for its refusal to authorize the
transfer.
U.S. Healthcare moved for summary judgment asserting that the claim
against it was preempted by ERISA. The trial court granted the motion,
dismissing all claims against the HMO.
The Superior Court reversed, finding that ERISA did not preempt the
claim. It concluded that the decision by U.S. Healthcare was in essence a
business decision. The court found that the cost- containment mechanisms
in HMOs did not exist when ERISA was enacted, and therefore Congress
could not have intended to preempt state law claims on that basis.
In its December 23rd opinion, the Pennsylvania Supreme Court affirmed the
Superior Court, but on different grounds, finding ERISA preemption
unjustified in any medical negligence action against an HMO.
TREND AGAINST PREEMPTION IN ERISA CASES Justice Cappy summarized the
issue as whether negligence claims such as those against U.S. Healthcare
in this case are expressly preempted by the Section 1144(a) of ERISA.
The ERISA preemption clause states that "the provisions of this title ...
shall supersede any and all State laws insofar as they may now or
hereafter relate to any employee benefit plan ...."
Cappy noted that the U.S. Supreme Court has never squarely addressed
whether a medical negligence claim against an HMO "relates to" an ERISA
plan.
In the absence of a ruling directly on point, U.S. Healthcare argued that
the high court's interpretation of the ERISA preemption clause has been
"deliberately expansive," and should be found to include state law
negligence claims such as those in this case.
Cappy agreed that the high court's interpretation of the preemption
clause was extremely broad in the 1980s and early 1990s, but was
persuaded that recent cases marked a deliberate retreat from that
expansive view.
Cappy pointed to New York State Conference of Blue Cross & Blue Shield
Plans v. Travelers Ins. Co., 514 U.S. 645 (1995), saying that the court
"noticeably changed tack" in that decision.
According to Cappy, the Travelers court unanimously determined that a New
York statute requiring hospitals to collect surcharges from patients
covered by insurance companies other than Blue Cross was not preempted by
ERISA.
In Travelers, Cappy said, the high court finally acknowledged that the
"relates to" language of the ERISA preemption provision was unclear.
"After years of striving to make sense of the plain language of the
preemption provision, the Court frankly admitted that the text is
'unhelpful.'"
Cappy said the high court recognized that if taken to its logical
extreme, the phrase "relates to" would allow unlimited preemption of
state laws.
Changing course, the U.S. Supreme Court in Travelers said that there
should be no preemption where the state law "has only a tenuous, remote,
or peripheral connection with covered plans," Cappy noted.
Cappy further noted that the Travelers court specifically acknowledged
that "nothing in the language of [ERISA] or in the context of its passage
indicates that Congress chose to displace general health care regulation,
which historically has been a matter of local concern."
Cases since Travelers have continued the trend, according to Cappy:
In California Division of Labor Standards Enforcement v. Dillingham
Construction, NA., Inc., 117 S.Ct. 832 (1997), the Court held that a
California prevailing wage law was not preempted by ERISA.
In DeBuono v. NYSA-ILA Medical and Clinical Services Fund, 117 S.Ct. 1747
(1997) the Court held that a New York gross receipts tax could be applied
to hospitals operated by ERISA plans.
Taking these cases together, Cappy found that a recent trend has emerged
in the U.S. Supreme Court away from an expansive reading of the ERISA
preemption provision.
Relying on this trend, Cappy rejected U.S. Healthcare's argument that the
preemption clause should be read expansively to include the negligence
claims in this case.
"Based upon our interpretation of the Travelers line of cases, we
conclude that negligence claims against a health maintenance organization
do not 'relate to' an ERISA plan. As noted by Travelers, Congress did not
intend to preempt state laws which govern the provision of safe medical
care."
"Based upon our interpretation of the Travelers line of cases, we
conclude that negligence claims against a health maintenance organization
do not 'relate to' an ERISA plan. As noted by Travelers, Congress did not
intend to preempt state laws which govern the provision of safe medical
care."
"Claims that an HMO was negligent when it provided contractually-
guaranteed medical benefits in such a dilatory fashion that the patient
was injured indisputably are intertwined with the provision of safe
medical care.
"We believe that it would be highly questionable for us to find that
these claims were preempted when the United States Supreme Court has
stated that there was no intent on the part of Congress to preempt state
laws concerning the regulation of the provision of safe medical care,"
Cappy said.
FEDERAL COURTS STILL GUIDED BY DUKES
Interestingly, the majority opinion authored by Justice Cappy made no
mention at all of the Third Circuit's decision in Dukes v. U.S.
Healthcare, Inc., 57 F.3d 350 (3d Cir. 1995), which sets the standard for
the majority of cases in which the preemption issue arises.
Typically, the preemption issue comes up after a plaintiff in a state
court medical malpractice case includes an HMO or other health insurer as
a defendant. In numerous such cases, the HMO removes the case to federal
court under federal question jurisdiction. It is on the plaintiff's
petition for remand that the preemption issue is examined.
In Dukes, the Third Circuit distinguished between claims involving the
denial of benefits under an ERISA plan, and claims challenging the
quality of healthcare provided.
Under the decision in Dukes, cases involving a denial of benefits are
subject to preemption, while cases challenging the quality of medical
care provided under a plan are not subject to preemption.
In his concurring opinion in Pappas, Justice Nigro said he would adopt
the rationale of Dukes and find that the negligence claims against U.S.
Healthcare were typical claims covered by state law, and that such claims
should not be preempted by ERISA.
Cases removed to federal court will continue to be decided under the
Dukes standard since the question involves interpretation of a federal
statute. Not surprisingly, the Dukes standard itself has given rise to a
host of arguably conflicting decisions. Recent examples include the
following:
In Miller v. Riddle Memorial Hospital, PICS Case No. 98-1223 (E.D. Pa.
May 26, 1998), Judge John Padova remanded a case to state court despite
the assertion by defendant Aetna-US Healthcare that the case should be
seen as one centering on the denial of a benefit - the transfer to
another facility.
The plaintiffs in Miller alleged that following back surgery Diane Miller
was sent home despite the recommendations of her doctors that she be
transferred to a skilled nursing facility to monitor her elevated blood
pressure. She subsequently suffered a stroke.
Although Aetna-USHC argued that certain paragraphs of Miller's complaint
should be construed as allegations challenging a decision to deny a
benefit under the plan, Padova said the paragraphs simply described
plaintiff's "dissatisfaction with the conditions of her release." He
concluded that plaintiff was challenging "the soundness of a medical
decision made during the course of treatment, rather than the
administrative denial of a medical benefit due under a plan."
In Hoose v. Jefferson Home Healthcare Inc., PICS Case No. 98- 0312 (E.D.
Pa. Feb. 6, 1998), Judge Charles Weiner remanded a case involving the
alleged failure to transfer the plaintiff to a rehabilitation hospital
following surgery.
Hoose's leg had been amputated below the knee, but he claimed that he was
forced to undergo an additional amputation above the knee as a result of
complications resulting from post-surgical care provided by the
defendant.
As in Miller, the defendant wanted the court to construe the claim as one
involving the denial of a benefit - transfer to a rehabilitation hospital
- which would be preempted under section 502 of ERISA. But Weiner ruled
that the complaint went to the quality of the care received.
But not all cases evaluated under the Dukes standard have ruled against
preemption.
In Thomas-Wilson v. Keystone Health Plan East HMO, PICS Case No. 97-0304
(E.D. Pa. Jan. 23, 1997), Judge Joseph McGlynn agreed that the
plaintiff's claim, originally brought in state court after an HMO stopped
paying for treatment for plaintiff's Lyme Disease, was actually one
challenging the denial of benefits.
The plaintiff in Thomas-Wilson claimed that she couldn't afford to pay
for the expensive antibiotic treatments after Keystone cut off payment,
and that as a result she suffered both physical and emotional injuries.
McGlynn agreed with the defendant that even though plaintiffs made no
mention of ERISA in their complaint, the allegations fell within the
scope ERISA preemption because it involved a denial of benefits.
Whether the Pennsylvania Supreme Court's decision in Pappas will have any
effect at all on federal court decisions on the preemption issue is
unclear.
NEXT STEP U.S. SUPREME COURT? In a seminar given earlier this year, one
of the lawyers involved in the case, Stephen Ryan, said he thought it was
likely that the U.S. Supreme Court would take a case that would squarely
address the issue of whether medical negligence claims are preempted
under ERISA.
Although the Pappas case itself will be limited in its application to
Pennsylvania state court cases, the breadth of the Court's opinion on
preemption suggests that the HMO defendant may not want it on the books.
Also significant is the fact that many of the cases decided under Dukes
have been cases in which the same defendant - U.S. Healthcare - has
removed state court medical malpractice cases to federal court under the
claim of preemption.
Given U.S. Healthcare's aggressive posture in these cases, it would not
be surprising to see a petition for certiorari to the U.S. Supreme Court.
And if Stephen Ryan is right, the Court just might take it.
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Created: February 11, 1999
Last Updated: May 28, 2000