Rush prudential v Moran and erisa preemption and federal preemption and state remedies and medically necessary

You know that an appellate attorney has reached the pinnacle of his/her career if s/he briefs and argues a case relating to ERISA Preemption. Even pronouncing the phrase sounds as if you are claming rare Western land under a mid-nineteenth century statute. But you are not. It relates to an arcane area of federal pension benefit and insurance law known as the Employment Retirement and Income Security Act of 1974. Congress passed it in the wake of pension scandals of the 1960s and 1970s, where, for example, people would "mysteriously" get cut off from their benefits in the 9th year of a 10-year vesting period. The purspose of the law was not to insure pensions, as if to provide an FDIC-like remedy for workers, but to require private employers who offered pension and insurance plans to follow certain rules about offering and communicating these plans to their workers.

Two of the controverted provisions of that statute related to remedies available under the statute if the company didn't properly administer the plan (the "502" or "1132" problem--denoting, respectively, the sections of the original and codified act) and whether the aggrieved party had a federal or state remedy (the "1144" problem or the preemption or savings clause problems, with a slight concern for the "deemer" clause, too). Cutting through all the hundreds of decisions under ERISA, the major point to note is that the remedies contemplated in 1132 are very minimal: if your insurer or pension provider violates the act, your only remedy is to ask them please to obey the law. You have no remedies in tort or under any other theory.

HMO's and the Patients Bills of Rights (PBR)

HMOs, a major vehicle for delivering medical services today, existed only in rudimentary form, if at all, in 1974. Thus, as HMOs grew and dominated the medical scene, there was no agreement in the courts regarding remedies for a person who was denied medical services from their HMO, if these services were offered through an employer (and thus "covered" under ERISA). For example, what would be a person's remedy if s/he went to their HMO, their doctor recommended an expensive treatment but the doctor was overruled by the HMO board? As the medical establishment hastened to control costs in the 1980s, services were denied and courts upheld the HMO denial of services under 1132. The patient's only remedy was to ask the HMO to obey the law and since the HMO had "considered" the patient's request for additional treatment and refused it, courts would defer to the HMO. As a result, more than 35 states passed "Patients Bills of Rights" ("PBR") laws in the 1990s, the central provision of which was to provide independent outside review, either by one physician or a board of people, when a person was turned down by his/her local HMO for a medical procedure. If the outside professional decided that such a procedure was medically necessary, this decision would override the HMO's decision, and the procedure would have to be done at HMO's expense. As you can easily divine, this provoked all kinds of controversy in HMO circles. The big question, then, was whether the HMO's had to conform their practices to the PBR laws.

The Rush Case (2002)

The vehicle by which the issue reached the US Supreme Court in 2001 was the Rush Prudential v. Moran case (536 US 355, decided in 2002), briefed for the petitioner by John Roberts. Moran had sought an expensive medical procedure which her HMO denied (even though they approved a less substantial procedure) but which an outside practitioner had approved. Rush denied that the remedy under the Illinois PBR applied to them. Indeed, they argued that under ERISA the 1132 remedy was exclusive. This remedy provided that if a person was aggrieved, they could bring a suit in federal court to get the HMO to obey the contract of insurance. Since the PBR law was not part of that contract of insurance, it would have no effect, and Moran would only be afforded the lesser surgical remedy approved by Rush. Since courts used an "abuse of discretion standard" to interpret Sec. 1132, it would defer to Rush's decision. The District Court did so.

But then the 7th Circuit unexpectedly reversed, arguing that the PBR was, as it were, incorporated into the very insurance contract between Rush Prudential and the individual, and thus the utilization review procedure envisioned in the PBR had to be followed by Rush. Roberts argued on behalf of Rush Prudential that such a requirement was not envisioned by ERISA and really made a giant contradiction out of ERISA. His brief is, again, a model of clarity and conciseness.

Can't Win 'Em All

Even though Roberts argued that it was absurd to conclude that the Ill PBR was actually "incorporated" into the insurance contract that would be enforced under Sec. 502 of ERISA, the Supreme Court disagreed, but only by a 5-4 margin. We should pause to consider, however, that the victory for the PBR-folks was a razor-thin victory. And, in the context of where American medicine is now, the victory seemed long-overdue. That is, in the context where many news stories told of the frightening way that medical establishments were cutting costs in the 1990s by denying seemingly necessary procedures to people, it would have been natural for the Court to agree, by a much larger margin, that PBR's had to be observed by HMO's. That it was only a 5-4 margin owes a great deal, I believe, to the way Roberts framed the central point of his brief: the absurdity of thinking that a state statute providing state rights could be engrafted into an already-existing insurance contract where only federal rights were at stake.

If I covered this ground too quickly, I apologize. After all, this is the Slough of Despond of appellate litigation today...

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