Amicus Curiae Brief — Aetna Health Inc. v. Davila

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Supreme Court, U.S

FILED

JAN 2 2 2004

“tn Ohe E OF THE CLERK

Supreme Court of the United State

AETNA HEALTH, INC.,

Petitioner,

Vv.

JUAN DAVILA,

Respondent, No. 02-1845.

CIGNA HEALTHCARE OF TEXAS, INC.,

and CIGNA CORPORATION,

Petitioners,

Vv.

RUBY CALAD,

Respondent, No. 03-83.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

BRIEF AMICUS CURIAE OF

CALIFORNIA CONSUMER HEALTH CARE COUNCIL,

CONGRESS OF CALIFORNIA SENIORS

AND CALIFORNIA COALITION FOR

ETHICAL MENTAL HEALTH CARE

IN SUPPORT OF THE RESPONDENTS.

Of Counsel Eugene R. Anderson

David Trueman Counsel of Record

18 East 50" Street Rhonda D. Orin

7 Floor Daniel J. Healy

New York, New York 10022 ANDERSON KILL &

(242) 758-0093 OLICK, LLP

: 2100 M Street, NW

Suite 650

Washington, DC 20037

(202) 218-0040

Counsel for Amici Curtae

California Consumer Health Care Council, Congress of California Seniors

And California Coalition for Ethical Mental Health Care

THE LEX GROUP®© ¢ One Massachusetts Ave., NW ¢ Suite 670 ¢ Washington, DC 20001

(202) 789-2400 ¢ Fax: (202) 789-1911 « www.thelexgroupdc.com

QUESTION PRESENTED

Can ERISA, a statute enacted to protect employees,

be used by health insurers and health plans, such as HMOs,

MCOs and other health insurance companies, to deny those

employees the right to recover against those companies if

those companies wrongfully deny employees the medical

treatment to which those employees are entitled?

Sette cee a eed

ee oe

- oe

TABLE OF CONTENTS

Page

QUESTION PRESENTED ........+--s-++ssssssssssessssnsesnnensnnsssnnnnsnnnnnsns i

TABLE OF CONTENTS .....-.-s:s:sssesesessssssssnensensnsnsnsnnenenannanensnsnses ii

TABLE OF AUTHORITIEG..........--::0-s:sssssnesesnsesssesenenenennanenensnns Vv

STATEMENT OF STANDING. ........0--s-s-ssesnssessssesnssneneensnnensnnenens 1

INTEREST OF AMICUS.........:::s:sssssssssssesssnsensnsensnsnnensnsanansnannenens 1

SUMMARY OF ARGUMENT ..........:+--:ss:+ssesnssssssnsnsnnenennensnsnnenns 3

LEGAL ARGUMENT .........:-:s:ssssssssssssssessnsnsenensnnsnensnnenensnnsnsnsenenes 5

HEALTH INSURERS AND HEALTH

PLANS SHOULD BE HELD

ACCOUNTABLE UNDER STATE TORT

LAW WHEN THEY CAUSE HARM BY

WRONGFULLY DENYING MEDICAL

TREATMENT. ......-.:-:0s:sssesesesensenensnensnnenanannnnsnenes 5

A. Improper Denials Cause Harm to

Enrollees By Adversely Affecting

Their Health And Also By

Denying Them The Value of the

Enrollee’s Premium Payments..........--

1. Aetna Denied the

Medicine Recommended

by Mr. Davila’s Treating

Physician and Prescribed

An Ill-Fated Alternative..........

ees :

lll

1 It Is Not A Defense That

2. CIGNA Denied the

Aetna or CIGNA Claims

Hospitalization They Were Only

Recommended by Ms. Performing Utilization

Calad’s Treating Physician, REVIEW ..nnsscecoescsesnvssvesnsesesonensees 15

and She Promptly Suffered

Medical Complications... 7 3 Traditional State Tort Claims Are

Not Preempted By ERISA, But

B. ERISA Plan Enrollees Need A Compliment ERISA .........-.-0---s+00* 16

Remedy That Correctly Addresses

The Harms that They Suffer As A This Court's Reasoning Has

Result of Wrongful Denials... 8 m= - Assumed The Availability To

Enrollees Of State Law Leas

1. ERISA Does Not Permit yw 19

Tort Claims Or

Compensatory Damages ........ 9 D State Legislatures Across The

, | Nation Also Have Recognized The

od Tort Claims Provide Much More | Inherent Need For Tort Law

Protection for Enrollees Than Protection Of ERISA Enrollees........-- 20

i Remedies _ Provide ARE

nder ERISA - Especially When CLAIMS

Consideration is Given j the ul. ae > oan WRONGFUL

_ Deterrent Effect .........cccecccccccssecs..... 11 aaa ALS OF MEDICAL TREATMENT -

IF RESPONDENTS’ STATE LAW TORT a

CLAIMS ARE HELD PREEMPTED, Insurers and Health Plans

ENROLLEES WILL BE SUBJECT TO - Fr The Same Payment For

DENIALS OF TREATMENT WITHOUT hele Product Whether Or Not

RECOURSE. .....csssccssestsssssestseeteteeeocscn... 12 They Deny Treatment.......--esrsne 26

A. As Treatment "Decisions, Or Mixed Insurers and Health Plans

Decisions Of Eligibility And a Use “Opportunistic

Treatment, The Petitioners’ Breaches” To Their Advantage,

Decisions Are Not Preempted .......... 12

Without A State Law Remedy .......-.- 28

— 29

CONCLUSION .......-:+:+seeeessensnsssnenenensnencnnenenenenens

TABLE OF AUTHORITIES

Page(s)

Cases:

Cicio v. John Does 1-8

321 F.3d 83 (2d Cir. 2003)

pain for cert. filed, ;

SLW 3093 (July 11, 2003)(No. 03-69) ....... passim

DeBuono v. NYSA-ILSA Medical &

Clinical Services Fund,

520 U.S. 806 EE

Snail 16

Firestone Tire & Rubber Co. v. Bruch

489 U.S. 101, 109S. Ct. 948 (1989)....... 19

Eranchies Tax Board v.

onstruction Laborers Vacati

tion T

463 U.S. 1, 25 Se o .

Se Nene a 17

Humana v. Forsyth,

525 U.S. 299, 1195S. Ct. 710 ee 28

Ingersoll-Rand Co, v. M endon

498 U.S. 133, 111 S. Ct. 478 (1990)........ 19

h t. Life Ins

473 US. 134 (1985)... _ae

es OE 19

Murphy v. Board of Medical i

949 P.2d 530 (Ariz. App. a 23

N.Y. State erence of Blue Cross &

Blue Shield Plans v. Trave .Co

514 U.S. 645 (1995)... | 16

puumemuntitdanadnesiaasmesen: , 17,18

Pappas v. Asbel

768 A.2d 1089 (Pa. 2001), cert. denied,

US. Healthcare Sys. of PA v.

Pennsylvania Hosp. Ins. Co.

536 US. 938, 122 S. Ct. 2618 (2002) ....--------000

Pegram v. Herdrich

530 US. 211, 120S. Ct. 2143 (2000) .......00ece-eeee0es

State Board v. Fallon,

41 S.W.3d 474 (2001) ..-----eeseesesneeernnessnnssnnnnensnssnnnncnnsseses 23

Statutes:

emma

15 US.C. § 1012(b%......:

29 U.S.C. § 1001b(b)(1)

oO enna

29 US.C. § 1132

17,18

29 US.C. § 1132(a)

ERISA § 502(a)

emmanuel

29 US.C. § 1132(a)(1)(b)

ERISA § 502(a)(1)(D)ocvsecvvecesceeeereeneenernenaseneennennene 8

29 US.C. § 1144(a)

17,18

Rules:

Supreme Court Rule 37

Supreme Court Reushe 37D .o..ceccercsoveosenssnsensennsnssensenssnsenensssensenseors

_—

Vii

Other Authorities:

2001 Minn. Laws 147.091, Subd. 1D............cscccseessessesoessesoes..... 22

Allen, Elizabeth, P., Long Term Care Insurance Litigation,

FOR THE DEFENSE (February 2003)...0.......cccsccssssessssvees 4

AMA Policy H-285.939, Managed Care Medical Director

Liability.

(Available online at http:/ / www.ama-

assn.org/apps/pf_new/pf_online?f_n=resultLin

k&doc=policyfiles/ HnE/H-

285.939. HTMé&s_t=H-

285.939&catg=AMA / HnE&catg=AMA/BnGnC

&catg=AMA/DIR&&nth=1 &&st_p=0é&nth=1&) .... 20

Barry Gold, Vulnerability of HMO Physicians Who Make

Medical Necessity Decisions to Professional Misconduct

Proceedings by State Licensing Agencies,

Presentation at New York State Bar Assn. Annual

Convention (Jan. 26, Snir iimnintt eee 22

Billie Elliott McAuliffe, The Changing World of HMO

Liability Under ERISA,

22 J. LEGAL MED. 77, 86 (March Ne cccesvictinitinaniietics 18

Bogan, Donald, T., Fifteen Reasons Why ERISA Does Not

Preempt State Law Bad Faith Claims,

ATLA TRIAL MAGAZINE, XXXIV ,4

NTIS EOL 17, 18, 28

DeBofsky, Mark, D., Op-Ed Article,

30 THE INSURANCE FORUM Po ecrecnsssisienainnietidataaiasnin 10

viii

Employer Health Plan Accountability: Hearing

cae ants Have Adequate Protections?: or wt

Particip Subcomm. on Employer-Emp

Before the House Educ. and the Workforce,

ions, House Comm. on “arin

vera 127 (1999) (Statement of Timothy T. F ty

M._D., American Medical Association).

ilable at |

oosary commdocs.house.gov/ committees /edu/

— 16

hedcew6-24.000/ hedcew6-24.htm.) .....--

Florida Agency for Health Care ee ee

In re Unlicensed Practice of Med: RogerH.Stube

, No. 9420668 (filed Feb. 24, 1995) ....----------

| tracts:

ffrey W. Stempel, Interpretation of — Con

Land Steyr sures on Pa 26

§ 19.3 (1994) --nneeccveeernsersnesrenssernnsennns

n. No. 98-491, *

eeeerere

eeeeeeeesereererrrrere

eee

Op. Att'y Ge

a 1999 WL 288869 (Apr 27, 1999)

eeeeeeere

eeeeeeeee

eeeeeeseneeeerrrrrr®

eeeeeere

eeeeerre

McCarran-Ferguson Act

f New York (MSSNY),

ical Society of the State OS rn cum

woe of New York, Oct. 1998 .....--++-++

MSSNY Position Statement § 165.969,

ilable at 7 wo

nt ~~ sonnnet et vecaduaiueal 24

(Jan. 21, 2004) ..nsscseessecennsrnseensensnssnnssensees

Conference of State Legislatures,

National 2001 (Jar. 2002) ......++-2se000+

Care Policies: 50 State Profiles,

Pennington, Punitive Damages for a = rm

Core Sample from the Decisions of the

42 Ark. L. Rev. 31,54 (1989)..-.sesccvssersnseernsersnsssnnsssenesses

Phyllis C. Borzoi, Erisa and Managed Care Plans: Key

Preemption and Fiduciary Issues,

SF28 ALI-ABA 371 (Oct. a Wccvitntsneisentaisaiptissaiessa 25

Policy Statement approved at February 5-7, 2001 Board

Meeting,

(available at

www llr.state.sc.us / POL/ Medical / Medical%20

PNM sccosivenitaasdaianigidiissii ics. 21

Rapoport, Simeon, D. and Somervell, Katherine, S.,

ERISA Trials Demystified,

FOR THE DEFENSE (February 2003)..0..0....ccccccsecsescoses.... 9

Report of the Special Committee on Managed Care (May

1998)

(available at WWW.FSMD.OTQ) 00.0... cccccccececeseceseeceeeee..... 22

Sharon J. Arkin, Memorandum Re: California Bill SB21

(2001),

(available at http://www. harp.org/arkin.htm) sites 18

Silicon Valley San Jose Business Journal, June 5, 1998... 21

Tanya Albert, “Higher Accountability for HMO Medical

Directors,” amednews.com (May 14, 2001)

(available at

http:// www.ama-

assn.org/amednews/ 2001/05/14/ prl20514.htm)... 24

Texas State Board of Medical Examiners,

Medical Board Report, Vol. 18, No. 2 (Spring 1997),

(available at

http:// www.tsbme.state.tx.us / news/Spring97/

RD sreisiriicscescinisninriinstiitsinictesse cca 21

Org,,

Limited Liability of Corp. Health Maintenance ™™ 8 #

- 39 Dec. TNBJ 27, 35 (Dec. 2003)...-+---+-rsse0-

STATEMENT OF STANDING

Pursuant to Rule 37, a blanket letter of consent from

the parties to this appeal has been filed with the Clerk of the

Court permitting this brief on behalf of amict.!

INTEREST OF AMICUS

Founded in April 1995 and incorporated as a

California non-profit public benefit corporation in April

1996, the California Consumer Healthcare Council

(“CCHCC”) is a grassroots, volunteer-governed and

operated public benefit corporation concerned with

protecting the interests of health care consumers throughout

California and the United States. The CCHCC is committed

to establishing and enhancing health care systems that work

well for all Americans. CCHCC advocates, in all available

forums, to protect of health care consumers from dangerous,

deceptive, dishonest, unlawful or unfair practices. Ensuring

that laws designed to protect consumers from improper acts

and practices of health insurers and health plans are fully

enforced is central to CCHCC’s purpose. It is dedicated to

preserving and obtaining, through the courts, the power to

hold MCOs, HMOs and other insurers accountable for their

conduct.

CCHCC has among its constituents, health care

consumers affected by limitations on available redress. A

diverse range of policyholders from across the United States

regularly communicate with CCHCC regarding health

insurance claims. Because CCHCC monitors both

marketplace developments and _ policyholders’ real life

experiences, the organization provides topical information

to courts throughout the country via the submission of

amicus curiae briefs in cases involving insurance principles

| Pursuant to Rule 37.6, no counsel for either party has authored this brief

in whole or in part and no person or entity has made a monetary

contribution to the preparation or submission of this brief.

relating to health care that are likely to impact large

segments of the public.

The issues addressed in this case impact health care

regulation in California and across the United States and are

of immediate and substantial concern to this organization

and its constituency.

Congress of California Seniors (“CCS”) is a

statewide non-profit education and advocacy organization

dedicated to improving the life of seniors and their families.

CCS devotes its efforts to legislative and consumer affairs

that deal primarily with issues concerning older adults.

CCS conducts research, analyzes issues and provides voter

and consumer education to its members. Through an

effective legislative committee, CCS initiates and monitors

legislation, testifies at hearings and takes appropriate grass-

roots action on pending and proposed legislation. When

necessary, CCS initiates or joins in lawsuits to protect

consumers and submits amicus curiae briefs to provide

courts with insights it has learned from its members because

of the vast body of real life experience they have acquired.

The issues in this case impact, directly and indirectly, its

entire constituency. Therefore, CCS is vitally concerned that

the Court takes into account the effect its decision will have

upon seniors in California and elsewhere across the United

States.

California Coalition for Ethical Mental Health Care

(“CCEMHC”) is a non-profit group composed of mental

health clients, family members, advocates, mental health

professionals from all the disciplines licensed in California,

and other interested members. The organization's mission is

to advance access to quality, affordable mental health care

through the coordinated efforts of mental health consumers

and professionals. It promotes continuity of care, the

patients' right to make informed choices when selecting

treatment, and elimination of the use of pernicious financial

incentives that limit access t

abiding interest in the issue pr

believes that health insurers an ays

accountable for their treatmen

plan enrollees need unfettere

1974 (“ERISA”) was designe

employees, ra |

re This Act, therefore, is turn

o needed care. CCEMHC has an

esented in this case because it

d health plans should be held

isions and that health

d access to the legal system.

SUMMARY OF ARGUMENT

rement Income Security Act 7

d as a shield to protec

inst

that to be used agains

ag teh vaned on its head when health

managed care

The Employee Reti

and health plans, such as

| intenance

insurers ions (“MCOs”) and __sihealth yee ond

Oo F

ee ("HMOs") use the Acts P their

organizations id accountable for

ee oid being he aieatiions

Sar idee, tal denials of coverage. This situatio

wrong,

i t has

ince, as this Cour

i o frequently since, : nis Bg

per "ae br Ree plans have a financial roan =

" : . . E

prea 7 denying expensive medical wie a

~ = ny oom demonstrate the harmful conseq

instan

ion.

can result from the misuse of preempt

Inc.

The activities of Petitioners Aetna ne enae

(“ Aetna”) and CIGNA Healthcare of Texas, — i re

i : ° “a ” a very |

tively “CIGNA”) may oa

poe eet ra The U.S. Court of — “ oe oo

Clecudt } Davila and Ku

ircul held that Juan a

po pont state claims for malpractice and to

; il in their claims.

; if they prevail in _

compensated nye nag ol wh not preempted is in

pcre por dire onan and CIGNA recognize as the

t even )

eo avpose of ERISA: the protection of employees.

very

at Aetna and CIGNA, along

industry, argue for a

ane ye the ERISA.

It is not —— th

Ith ins

‘th the rest of the hea : ne .

a reading of the preemption provisions

A broad reading enables health insurers and health plans to

insulate themselves from state tort law claims that could

otherwise deter them from delaying or denying treatment

incorrectly. Petitioners would have this Court determine

that the only consequences they could suffer from a

wrongful delay or denial of treatment would be the benefits

denied, i.e. the difference in value between the cost of the

treatment eventually approved and the cost of the treatment

that should have been approved. In other words, the only

risk that health insurers and health plans would take, when

they delay or deny treatment, is the risk that they would

have to pay for it later on.

Such a structure has the inevitable effect of

encouraging health insurers and health plans to delay or

deny treatment. And that is a serious problem since the

profit structure of such organizations provides an incentive

to delay or deny treatment in the first place.

Petitioners contend that they are not denying

“treatment,” but merely are denying “coverage.” From the

employee’s perspective, that is a distinction without a

difference. No matter what words are used to couch the

denial, the effect is the same: the treatment does not take

place.

In fact, the fallacy in this argument is neatly

illustrated by the facts of the cases at hand. In each case, the

health plan did not merely deny treatment; it proposed an

alternative. This Court has already recognized that when a

health insurer or health plan denies one kind of treatment

‘ard requires a different one instead, it clearly is making

treatment - not coverage - decisions.

All treatment decisions should be subject to state tort

laws, whether those laws are statutory or at common law.

Nothing in ERISA precludes this determination. To the

ERISA plan enrollees should

‘sht to pursue legal claims that

yon My apart art health —, “e ro

staan tied medical treatment. |

aa vom ap Ay dar not be allowed to xp

canteen from liability for any injuries that nd =

mong ‘ld be allowed to consider whet apron

per won titute medical malpractice, bad fai oe

dine oe other tort. There should be ar -

eee ven built-in financial incentive that hea mem

parypery surers have to delay or expensive — -

er : aceon treatments - or no treatments at all.

and to

contrary, ERISA compels it.

oO he

ici tfully submit that t

these reasons, Amuci respec oo ;

Fifth Cunt peoperty held that ERISA does not preemp

I -

n law,

aims, whether statutory or commo

Se es 1132(a) and that this Court

under Section 502(a), 29 USC. ° :

should affirm that court s decision.

LEGAL ARGUMENT

TH PLANS

RS AND HEAL

—" ACCOUNTABLE UNDER

WHEN THEY CAUSE HARM

DENYING MEDICAL

INSU

L. HEALTH

SHOULD BE HEL

STATE TORT LAW

BY WRONGFULLY

TREATMENT

th insurers and health — ,

to administer health plans for the — Jive

poser DT ically, they have the authority to oP ——

yeep “re treatments that are recommen ~ —

oan sot tenting physicians. This is the poin Aye

escent decisions and treatment decisions converge:

cover

Under ERISA, heal

insurance are, as beneficiaries of

2 Enrollees of an ERISA = vee es Y= the peyote ma

ee nap ena conte. ‘As such, the enrollee, like — - “om

oso Angpnann a of a denied claim. Further, enro

vat ike traditional premiums, for the health insurance.

practical matter, from an enrollee’s perspective, a denial of

“coverage” means that the enrollee does not receive the

recommended treatment.

The essential issue here is whe

health insurer or health plan should be

law remedies, both Statutory and comm

along with the health insurance indu

premise that a-denial of coverage is a

decision that falls within the pree

ERISA. They say that the only recourse is the ERISA

equivalent of breach of contract and the only remedy that

should be allowed is payment for the treatment that was

denied. Enrollees like Mr. Davila and Ms. Calad say yes, on

the ground that such denials are medical, not

administrative, decisions. They say that they should have

recourse under state tort law for wrongful denials that cause

them harm, and that they are entitled to all remedies that

State tort law allows.

ther a denial by a

subject to state tort

on law. Petitioners,

stry, say no, on the

purely administrative

mption provisions of

A. Improper Denials Cause Harm to Enrollees

By Adversely Affecting Their Health And

Also By Denying Them The Value of the

Enrollee’s Premium Payments

1. Aetna Denied the Medicine

Recommended by Mr. Davila’s

Treating Physician and Prescribed

An Ill-Fated Alternative

It is undisputed, in the case of Mr. Davila, that Mr.

Davila’s treating physician had prescribed Vioxx for Mr.

Davila, that Aetna refused to pay for it, and that Aetna

provided a generic painkiller instead. Aetna has admitted

all of these essential facts. Mr. Davila took the

generic drug

prescribed by Aetna and suffered bleeding ulce

rs as a result.

* See Brief for Petitioner Aetna Health, Inc. (Dec. 18, 2003) at 8-10

(characterizing the allegations in Mr. Davila’s complaint).

al bsorption

he cannot take any painkillers — te resting

Now, he c - Vioxx, the drug tin

- not even V10Xx, ?

aeons gente ‘Thus, Aetna’s so-called

aoe ecnan” poet failed to treat Mr. Davila’s hea

“coverag

it instead.

problem and may have worsened it inste

takes the position that, due to the np

hag ERISA, Mr. Davila would not be a rem

ane ad denied treatment to

ven if Aetna h ila’s onl

sue Aetna e ly. Aetna contends that Mr. Davi ~ ad

error and tortuously. t of the price of the Vio

dy is reimbursement 0! oy

mane soon puascstoadl less the price _" a | on -

- a drug. As noted by Aetna, this

the g

remedy that ERISA would allow.

' ously

tive, such relief obvious

an enrollee’s perspec 7

d be ineufficient. It certainly would —~ yoo >

ar It also would not deter wrong na

oot > snr contrary, it would affirmatively encourag

the future; \

. il

health insurers like

eby to prevent ,

preemption ansing ERISA as a sword against their

Aetna fr

policyholders.

CIGNA Denied the er

* Recommended by ed a =

i Physician,

coumaale Suffered Medical

Complications.

refused to

h a discharge nurse,

aa —y Ms. Calad’s treating surgeon to

mt hospitalized after antengeng -.

epair.

t involving, rectal, bladder and oo . pair

cond, Geaune prescribed, or ordered, a — re ~

on ben CIGNA’s nurse 0

hortly after , _

oa ae — ae Ms. Calad was readmitted un

ala

approve the req

permut her to re

1 ERISA Does Not Permit Tort Claims

emergency conditions to treat complications from her ;

surgery.‘

Or Compensatory Damages

CIGNA, like Aetna, now contends that the

narrowly

Statutory remedies under aed eg Bw sal

only Ot -laims nor com '

remedy that can be sought by Ms. Calad is reimbursement — het pr phere

of the cost of the hospitalization time that was denied. But, within the ‘cht to

like Mr. Davila, Ms. Calad would not be made whole by U]nder ERISA, there is no rig sive

such reimbursement. The injury to Ms. Calad goes beyond tracontractual damages OF oon ‘i.

the cost of the denied hospital time. It includes the adverse r. mages .... The law is also clear that the

health consequences that she suffered as a result of —

CIGNA’s refusal to pay

for it, and its provision of a wholly

unacceptable alternative. As with Mr. Davila’s case, this

aie health plans

kes economic sense for health insurers and P

' ces

case illustrates why CIGNA should not be allowed to use It make

preemption as a sword.

ible

d a scope as possib!

ERISA has as broa en

he jo aie relief available to an ew my

iii jury xists.

nitable relief, for which no right to jury triaie

eq d P

ara

no right to a jury trial.

B. ERISA Plan Enrollees Need A Remedy That

Correctly Addresses The Harms that They

‘hen an enrollee’s complaints fall under the scop

Suffer As A Result of Wrongful Denials. en

: ticipate the

health plan can an =

_a health insurer or ; “me the claim is

et value of its denial of a og a — ay compiauly

otential remedy

improper treatment decisions, they should be subject to denied. The pec

liability for the harm that they cause. The only way to hold

atment that

he value of the tre

bursement of t — pe

confined to reim € the treatmen ;

. , value o

; - denied, reduced by the

them fully accountable is to subject them to state tort law was denie

claims, file

tu w h may have

that actually was provided.® Such an approac \

a #

When health insurers and health plans make

d by the enrollees who allege that they were

harmed. Administrative remedies under ERISA simply are

not enough.

Allen be I ) OR THE DEFENSE

. h, P., Long Term Care Insurance a F “ ws

« a a t 25 FOR THE DEFENSE 1s a publication by and

; ’ a :

: ' companies

ae who regularly represent insurance P

a \

, , ,

,; . ’

* See Brief for Petitioners CIGNA Healthcar

tential

side, and many poten

8 In effect, there would be — oan gen to delay or expensive

e of Texas, Inc. and CIGNA , ith insurer © e between

os, for a hea , the differenc

Corporation (Dec. 18, 2003) at 3-4 (characterizing the allegations in Ms. peer cd At worst, the damages = 7 and the cost of the

Calad's complaint), + mapper of the treatment approved or eo which would be nothing

the co by the enro ” d refused

t originally sought by} health plan ha

> If no tort claim may be brought, then no extra-contractual damages may pean. nr that the health health plans - when

be sought or recovered. Under ERISA’s remedies, an enrollee seeking nongpeanti in the first place. Many health insure y-later-(maybe) - simply

relief after a treatment denial by bringing an action for benefits due under - 7 with a choice between pay-now-or-Ppa) .

the plan or for “appropriate equitable relief” and attorneys’ fees. See 29 face

U.S.C. § 1132(a)(1)(b).

would opt for the latter.

served valuable purposes in connection with the drafting of

ERISA in 1974, especially considering that the statute's

initial focus involved financial matters, such as the

management of retirement benefit plans. Yet it is

completely inappropriate in the context of health care,

especially when the wrongful decisions for

is being sought concern vital and some

medical treatment.

which a remedy

times lifesaving

Additionally, applying such an approach to the

denial of medical treatment and health care runs counter to

the overall intent and purpose of ERISA.’ The beneficiaries

* The use of ERISA preem

have

ption to deny claims brought by empioyees who

been denied medical treatment achieves the opposite affect intended

by Congress when it enacted ERISA. See DeBofsky, Mark, D,, Op-Ed

Article, 30 THE INSURANCE FORUM 176. With regard to health care denials,

the article states:

° Health Insurance. The ERISA law is cited on a nearly daily basis

to shield insurance companies from liability for de

saving medical treatment. So long as the insurer writes language

into its policy stating that the insurer has discretion to decide

who qualifies for benefits and under what circumstances, life

and death decisions are insulated from meaningful judicial

review. Even if the insurer is later found wrong, the absence of a

damages remedy prevents lawsuits to redress the harm

committed when a claimant dies as a result of being denied a

prescribed life-saving treatment or a mother ex

wrongful death of a prematurely born ne

the insurer denies prenatal hospitalization.

nying life-

periences the

wborn infant because

DeBofsky goes on to point out that:

Claimants are denied the right to trial by jury, a basic

right afforded in insurance cases and virtually all other

civil litigation. In most cases, claimants cannot even

secure a trial before a judge since the case is decided

based solely on the claim record applying procedures

that favor the insurers both as to the interpretation of

policy provisions as well as the manner in which

evidence is reviewed. Employees also have no claim to

any damages; no matter how egregious the insurer's or

employer's conduct, the maximum recovery available is

who are suppose

the employees, not the a

approach, however, principals

than the former.

d to benefit from ERISA are the —

health insurance industry.

benefits the latter, rather

rt Claims Provide Much More —

' on Enrollees Than Statutory Reme

a ide Under ERISA - Especially sno

Pear tee is Given to the Deterr

Effect

this Court has recognized a

business model of most healt

' ict 1 he business

i ; and health plans. The conflict is a t aor

par stabli hes a financial disincentive 9 PP ne

nad and perha

ici 7 t.10 One way, hape |

nensive medical treatmen a- ’ Se to

eo geen to balance out this financial disince rater

only way, to bé jal disincentive for delaying or Geny" g

‘lly hat is created by the er

e their health insurers an

d under state tort law, for

As explained above,

inherent conflict within the

model est

-reate another fin er

pre wrongfully. That is W

to allow ERISA enrollees to su

health plans in state court, an

wrongful coverage denials.

- sie ys’ fees

he benefit sought plus the eng | “ poe that

rded in the court's discretion. T potent benefit

prin h n to an insurer that wi Gane

oe = eien for years after they a ~ damages

ese a ‘require the benefits to be paid. aa on On

amen are available for the ~~ -~. se ye

" al of wrongful withholding of ben death if

ru ;

scenes medical treatment is denied.

| 2143, 2157 (2000)

11, 234, 120 S. Ct. bout

drich, 530 US. 211, J ) determine abou

10 Pegram_v._Listene MO or HMO physician rer probit oe

(recognizing a beneficiary must consider ——

, a neric ; ' J, resen

— nena treatment and that such a situation p

of sparingly

conflict for the HMO or its physician).

Petitioners, Aetna and CIGNA, fall into either category. The

simple answer is that they do.

rs , p

of Omaha Insur

ance Co., acknowl

, e .

industry works hard to avoid bein dged that the insurance

verdicts and judicial decisions: iia

Treatment decisions answer the question: “given a

patient's constellation of symptoms, what is the appropriate

medical response?”'? Here, Aetna refused to approve the

practicing, defers a. - we're medicine prescribed by Mr. Davila’s treating physician and

cola provided an alternative instead.14 Likewise, CIGNA,

and large settlem

ents simply be ;

fear of punitive -damage i ro of their through a discharge nurse, refused to approve the treatment

decision of Ms. Calad’s treating surgeon and instead

prescribed a discharge from the hospital.'®

Were there t

o be no opportu :

. nity for en ] >

compensat rollees even

wen ze ; yan damages when a health insurer or h heim

. gly denied medical treatment. tho r health plan These factual scenarios are analogous to another case

, those companies would involving a mixed decision of treatment and eligibility that

ave every incenti

J tive to delay or claims and there would be

no true check on th o

at abili

state tort law is nece ty. The threat of liabili

| ty under

ssary to provide that check and to

ensure that

enrollees have a way to deter health insure

and health plans from engagin

treatment determinations :

Il.

decisions or (2) mixed eli

the

in wrongful medical

SUBJECT TO

DENIALS

WITHOUT RECOURSE sl eee

A. A

s Treatment Decisions, Or Mixed

Decis; nas

ecisions Of Eligibility And Treatment

cause ERISA does not preempt either (1) treatment

| ibili

simple issue here is pore baad > eee sprog

r the decisions mad

e by

11 sseece LAs

Business Week, August 15, 1983, pp. 118, 119

Pegram, 530 U.S. 211, 1205S. Ct. 2143

was held not preempted.'® The HMO there, Vytra, and the

HMO physician, Dr. Spears, examined an enrollee’s

“constellation of symptoms” and determined, ultimately,

that the appropriate medical response was a single stem-cell

transplant, not the double stem-cell transplant selected by

Carmine Cicio’s treating oncologist... This decision was held

to constitute a mixed eligibility and treatment decision

within the meaning of Pegram. It was found necessarily to

require medical decision-making, as Vytra and Dr. Spears

13 Pegram, 530 US. at 228, 1205S. Ct. at 2154.

\4 See Brief for Petitioner Aetna Health, Inc., at 8-10.

iS See Brief for Petitioners CIGNA Healthcare of Texas, Inc. and CIGNA

Corporation, at 3-4.

16 See Cicio v. John Does 1-8, 321 F.3d 83 (2d Cir. 2003), petition for cert.

filed, 72 USLW 3093 (July 11, 2003)(No. 03-69)(refusing to hold that

common law medical malpractice claims based on an HMOs refusal of a

double stem-cell transplant and the HMOs prescription of a single stem-

cell transplant were preempted by ERISA). “Pegram demonstrates that

the mere presence of an administrative component in a health care

decision no longer has determinative significance for purposes of

preemption analysis when the decision also has a medical component”. .

Id. at 103.

decided on, then approved, a treatment that the treating

physician had not recommended in the first place.

Aetna and CIGNA, in each respective instance, made

an entirely separate “mixed eligibility and treatment

decision” when they decided that Mr. Davila and Ms. Calad,

respectively, should not receive the treatment that was

recommended by their respective treating physicians. Each

decision clearly incorporated treatment issues.’ Just as in

Cicio, the health insurers and health plans in these cases not

only denied a particular treatment, but provided a patient-

specific prescription by authorizing another treatment that

had not been requested.18

These decisions also are comparable to decisions that

were made by U.S Healthcare in another case, in connection

with the treatment of Basile Pappas.'® U.S. Healthcare, as

plan administrator of Mr. Pappas’ health plan

rejected a treatment recommendation mad

physicians:

, initially

e by the treating

transfer to, and perform surgery at, a hospital

that specialized in spinal cord injuries. After some delay, a

transfer to a different hospital was approved instead. The

Pennsylvania Supreme Court held that U.S Healthcare's

'7 See Pegram, 530 US. at 230, 120 S. Ct. at 2155.

'8 See Cicio, 321 F.3d at 104-05

specific prescription of a

and authorizing ano

requested....we

decision as disti

(“Dr. Spears apparently made a patient-

ppropriate treatment by denying one treatment

ther that [the treating oncologist] had not

cannot identify distinct moments at which treatment

nct from eligibility decisions were made”).

'? See Pappas v. Asbel, 768 A.2d 1089 (Pa. 2001), cert. denied, US.

Healthcare Sys. of PA v. Pennsylvania Hosp. Ins. Co., 536 U.S. 938, 122 S.

Ct. 2618 (2002).

decisions. 7°

i with

Thus, the plain language of Pegram sp oooaget “

-milarities between the decision-making, Ni" aay bo

rodhge ri ppas makes clear that the decisio Pron

nor agree ¢ decisions. For these reasons, ope

neon paper that the Fifth Circuit gr ee ee

d w tort claims,

coed San bee <4 ~<a 502(a), 29 yom :

ae and that this Court should affirm that cou

decision.

respectfull

1 It Is Not A Defense That “yy “a

. CIGNA Claims They Were nly

Performing Utilization Review

d CIGNA both argue that their a a

etna an _ np 0

1 ae regarding Mr. Davila’s and as — a - ve a

ah ly, as they w

involve coverage omy, § oe

po ornate review.2!_ This argument Is — wn

pons i hort, whenever physicians or — ae

obs isi “al eatmen

rganizations make decisions guid vo atau

soihiate should receive, they 7 ra aera

isi insurers and hea eis

decisions. Health rer: Saami

lity for the ces Ol

evade responsibility — e cl caries tes

rae “ by engaging in an exercise in seman

ecisi

wrong.

- in the Supreme

2d at 1096. “[T]he treating physician rs noeapi to = ovens

m Id. 768 ™- ly make a “simply yes or no 0 ther [he] also

Court's words, sso covered; it clearly was. a } epidural

Pappas’ condition d. under the circumstances, when niga anal

determined oye rime tis was @ suined any _ aa

abscess wou : <es of which, , al p

mer ma yes ressamn woches, rough state medical malpractice law. Id.

redressed, és

CIGNA Healthcare of Texas, Inc. and CIG

2! See Brief for Petitioners aor teamiaae aie Health, Inc., at 8-10.

Corporation, at 3-4, and Brie

simply saying these decisi

J e deci

raat an, sions regard coverage rather than

Preempted By E

ERISA y ERISA, But Compliment

Pegram makes clear that “

4 . . . “¥. : treatm | | j

—_,. a ent decision

Paresh —— and treatment decisions” are aioe te

sc = re not preempted by ERISA.2 This l s

po Be prior holdings that the ~~ se

S Of the state includ

ae a e the regulation of mat

safety,”*4 and that “the historic police tne ;

the states were n

ot to be su

[ERISA] unless th perseded by the federal act

Congress.”25 at was the clear and m wee

historic police

anifest purpose of

* In a hearing before Con

se “ae gress in 1999, the American Medi lati

eM teh Meese sa medical necessity decisions prtyprmn _—e

saya . sr continue to be treated as such IThe rye

Me to ls aa rdance with these generally accepted a ds of

pain” teams rege physician would follow when tr in m4

ceca Ts: see ea . Plan Accountability: Do Plan Pa icon “

eaten mr ections?: Hearing Before the House S bee a a

age . " Relations, House Comm. on E ; ae oe

; Cong. 127 (1999) (Statement of org a

M.D., paar |

matt / / comandons oe Association). p heey

. Lo .

24.000/hedcew6-24.htm. & v/committees/edu/hedcew6- at

* Pegram, 530 U.S

5. at 235, 120 S. Ct. at 2157-58.

4 See DeBuono v. NY

“(1 _NYSA- ' 7

806 (1997). ILSA Medical & Clinical Services Fund 520 U.S

N.Y. State Conference of Blue Cross

Ins. Co., 514 U.S. 645, 653-655 “Blue Shield Plans v. Travelers

me 14 | (1995). Clippi

judiciary is inconsistent with the baat ry “> on

ct. e state

judicial system is i

n place to punish i

con punish insura

duct and provide relief for injured <a, companies for wrongful

The Savings Clause of the United States Constitution

itself protects the states’ historic powers and also applies to

the ERISA. The Savings Clause necessarily limits implied

preemption under ERISA § 502 and state law remedies

protected by the Savings Clause would defeat implied

preemption under § 502.”

ERISA does not ‘provide that Congress intended to

tate law in the traditionally state-regulated area of

preempt s

no provision in ERISA that

health and safety.2”7 There is

states that it preempts every state law claim relating to

ERISA plans. Professor Bogan further points out that both

§ 502(a) and § 514 are part of the same sub-section and that §

514 provides that “nothing in this sub-section of ERISA

shall be construed’ to preempt _ state insurance

regulations.” ”

2% Bogan, Donald, T., Fifteen Reasons Why ERISA Does Not Preempt State

Law Bad Faith Claims, ATLA TRIAL MAGAZINE, XXXIV, 4 (April 1, 2003) at 7

(citing, as part of reason 1, Franchise Tax Board v. Construction Laborers

Vacation Trust, 463 U.S. 1, 25 (1983) which states that “Congress did not

intend to preempt entirely every state cause of action relating to [ERISA]

plans” because it expressly does not exempt plans from any state laws

that regulate insurance). In the instant cases, the state law claims are

based on statutory causes of action specifically codified by the Texas

legislature.

that it “shall supersede any and all state laws

2” ERISA provides only

hereafter relate to any employee benefit

insofar as they may now OF

plan.” 29 U.S.C. § 1144(a).

Franchise Tax Bd., 463 U.S. at 25. Professor

Bogan also states that many district courts have recognized that express

preemption under ERISA § 514 does not preempt state tort claims. Id. at

3-4 and n.16 (citing this Court's decision in New York State Conf. of Blue

Cross & Blue Shield Plans v. Travelers Ins. Co., 514 US. 645 (1995)).

28 Bogan, at n.29 (again citing

2% See id, at 11 (explaining this language as reason no. 10 of his “fifteen

incontrovertible reasons”).

Notably, in the text of the statute, “hospital” appears

only once and “physician” not at all.° This Court has stated

that “[nJothing 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.”3!

The absence of language specifically preempting

state law claims in § 502 is in contrast to the clear language

of the McCarran-Ferguson Act. That act specifically states

that “No act of Congress shall be construed to invalidate ...

any laws enacted by any State for the purpose of regulating

the business of insurance.”22 Further, § 514 expressly states

that it shall not be construed to supersede any other federal

law.33

Moreover, the very preamble of ERISA provides that

it is intended to protect employees.*4 Petitioners’

* Billie Elliott McAuliffe, The Changing World of HMO Liability Under

ERISA, 22 J. LEGAL MED. 77, 86 (March 2001).

*! Travelers, 514 U.S. 645, 661, 115 S. Ct. 1671, 1679-80. See also Pegram,

530 U.S. at 235, 120S. Ct. at 2157-58. Amicus believes that this necessarily

includes both sections 902(a) and 514, as argued by the Respondents in

these consolidated appeals.

15 U.S.C.A. § 1012(b) (West 2003). See Sharon J. Arkin, Memorandum Re:

Culifornia Bill SB21 (2001), available at http:// www.harp.org/arkin.htm,

(stating that ERISA health plan administrators, such as MCOs and HMOs,

already are subject to numerous state law regulations despite ERISA’s

preemption provisions).

3 Bogan, at 11 (explaining as reason 11 that ERISA does not and cannot

supersede the McCarran-Ferguson Act that specifically reserves state law

tort claims, such as the ones at issue in this case, to the powers of the

various states).

4 Bogan, at 12-13 (stating that ERISA’s preamble, and its legislative

history, confirm that it is intended to help assure plan participants

actually received the benefits they were led to believe they would

receive).

—_ -_

re that intention. The limited protect

is based on

i s and health plans is bas

- gly and that protection is not

ditional tort-based duties oT

arguments igno

provided to hea a

contractual, not tort, du

intended to supplant tra

standards of care.»

Has Assumed The

Cc. This Court’s Reasoning ee te

Availability To Enrollees

Claims

odel of

ized that the business m

tee om creates an incentive to deny

est inno oe and prescribe the least expensive

treatments | ay soemat

a eatieas % This Court has described how hea

alterna

. } | | ° 37 F | ; } .

as the first priority.

obligated to act

f the beneficiary,

o rule readily

The fiduciary is, of course,

into n

t this translates into —

soplicable to HMO decisions .... While

incentive of the HMO physician , | nd =

bligation upon him would not lea

simple default rule.. 38

) |, 473 US.

fe Ins. Co. v. Russel

% Cicio, at 99 (citing Massachusetts Mut. Li's Bruch, 489 US. 101, 113,

47-48 (1985); Firestone Tire & Rubber Co. Mel eee US 138.

ds Ct. 948 (1989) and Ingersoll-Rand Co. v.

109 S. Ct. g cC ‘

138, 111 S. Ct. 478 (1990)).

at 223, 120S. Ct. at 2151.

ibi HMOs are designed to

149 (describing how ms

y As providing less treatment and

% See Pegram, 530 US.

‘7 See id. at 219, 120 S. Ct. at -

ward physict financia

reward physicians 1 :

providing less expensive treatment)

%8 Id. at 234, 120S. Ct. at 2157.

This Court went on to state that that ERISA does not

create for enrollees a fiduciary claim against HMOs since,

“for all practical purposes, every claim of fiduciary breach

by an HMO physician making a mixed [eligibility and

treatment] decision would boil down to a malpractice

claim.” That explanation assumes the availability >f state

tort claims that may be used to make whole an enrollee who

was improperly denied medical treatment.

Having closed the door on a federal, ERISA based

remedy that allows enrollees to recover the full value of

damages they suffered, this Court cannot adhere to its own

reasoning if it now decides to limit enrollees’ ability to bring

state tort claims, such as malpractice claims.

D. State Legislatures Across The Nation Also

Have Recognized The Inherent Need For

Tort Law Protection Of ERISA Enrollees

In recent years, policymakers and regulators across

the country have recognized, formally, that utilization

review constitutes medical decision-making. For example,

the AMA’s current policy on the topic is “that utilization

review decisions to deny payment for medically nec

essary

care constitute the practice of medicine.” #

State regulators are increasingly in accord. For

example, in 1997, the Texas State Board of Medical

* Id., at 235, 120 S. Ct. at 2157.

*” AMA Policy H-285.939,

Available online

at http:/ / www.ama-

assn.org/apps/ pf_new/ pf -online?f_n=resultLinkédoc=policyfiles / HnE

/H-285.939. HTMé&s_t=H-

285.939%&catg=AMA/ HnE&catg=AMA/ BnGnCé&catg=AMA/DIR&énth

=l&&st_p=O&nth=1&. The concept of “the practice of medicine” is

analogous to the concept in Pegram of “treatment decisions” and “mixed

treatment and eligibility decisions.” See Pegram, 530 U.S. at 235, 1205S. Ct.

at 2154.

Managed Care Medical Director Liability.

SS EE OT

i oposed care so as to effect

oa ne pp remy . 4 patient is the oy .

a ae in 1998, the California State Medica =

posse lution that “the making of a decision —_ ne

gpa poet _. of any treatment constitu

— "42

practice of medicine.

ical

In 1999, the Louisiana State — fi a

Examiners held that “the agg heentrotion -

ini medical necessity OF Ape

cvaneand anette care so as to effect . Rp meen :

: ee of a patient in Louisiana 1s ig oer

medi ine.” Also, in 2001, the South -—r ies

Medical Examiners declared that the reed bs =

ical necessity or appropriateness OF Pp — - en

medica s to affect the diagnosis or treatmen teh

iocated in South Carolina, is the practice of medicine.

is li such

More regulation of this type tae Be =

ulation is expressly advocated by the nae era

Medical Boards of the United emer b esr Anne

advice i rnd the District of Columbia, that “stat

7 = 5 beneli through legislative or regulatory Pr —

yore) nd their medical practice acts oF — -

pon ager ore the determination of medical nec

i rd Vol. 18,

+) Texas State Board of Medical Examuners, Medical Board Report,

No. 2 (Spring 1997), available at

a Vv J J J J

_ . Op. y » ad 2 Apr. 27, 1999).

Board Meeting,

4 See Policy Statement approved at February 5-7, 2001

decisions affecting the diagnosis and/or treatment of a

patient as the practice of medicine.” 45

Many states have begun to regulate health insurers

and health plans, like MCOs and HMOs, more closely.

For example, Minnesota passed a law establishing that its

Board of Medical Practice has jurisdiction to take action

against utilization review physicians whose judgments

violate the standard of care.4 And, in 1995, the Florida

Agency for Health Care Administration issued a cease and

desist order against Roger Strube, a medical director of a

Florida-based managed care organization. It alleged that he

Practiced medicine without a license in Florida by making

utilization review decisions.*8 This agency decision appears

to turn on facts analogous to those here, where a nurse at

CIGNA refused to accept a treating physician's

recommendation and prescribed other treatment.

* Report of the Special Committee on Managed Care, S [ILC., (May 1998),

available at www.fsmb.org.

* Barry Gold, Vulnerability of HMO Physicians Who Make Medical Necessity

Dectstons to Professional Misconduct Proceedings by State Licensing Agencies,

Presentation at New York State Bar Assn. Annual Convention (Jan. 26,

2000); see also National Conference of State Legislatures, Major Health

Care Policies: 50 State Profiles, 2001 (Jan. 2002) at 4 (listing Colorado,

Florida, lowa, Illinois, Kansas, Louisiana, Maryland, Massachusetts,

Michigan Minnesota, Missouri, Montana, New Jersey, New York, North

Carolina, Rhode Island, Tennessee and West Virginia as states

considering statutory liability for health insurers and health plans).

During 2001 alone, New Jersey, North Carolina and West Virginia

adopted such laws. Id.

* 2001 Minn. Laws 147.091, Subd. 1b.

* See Agency for Health Care Administration, Notice to Cease and Desist,

at 1, In re Unlic Practice of Med.: Roger H. Strube, No. 9420668 (filed

Feb. 24, 1995). The Agency did so even though Dr. Strube was licensed in

two other states.

sl -

- _

Some courts also have addressed goers — .

: te laws, and allowed them to o sell

retary eme Court cited Murphy with app ag

or ie state medical board's yee =

ee aes who propounded oe so

peor 50 That court expressly found that ju i apie

omen oil: the medical director's decisions we

proper

administrative but medical:

The determinations at issue In ond = —~

outside the scope of plan rage age

Fallon did not simply an

redetermined list of covered er ee te

cadieen at his conclusions. He u

ion

j t to make a decisi

ining and judgmen nak —

shout ‘oe “medical necessity he surgi

treatment for a particular patient.

n to consider the passage of

irements placed

‘cslation that would increase the a oe sew Yaak

legislatio Os.2 For example, the State soa Sihadieal

psn ne nm 1998 that the Office of onen tee age

nein laints regarding enials

tigate comp

pom te : ty eadicel directors of managed care

care

organizations.»

Other states have begu

iners, 949 P.2d 530 (Ariz.

See eg. Mu

’ — ryote over a state-licensed

App. f Medical Examiners had ju ae ~~ ,

Board ° . ‘fication for gal bladder behal

physician w denied pre-certification Ber)

of a managed care organization.

50 State Board v. Fallon, 41 S.W 3d 474 (2001).

piate boats ee’

51 See 41 S.W.3d at 478.

Dec.

intenance Org., 39

82 See The Limited Liability of Corp. sonny mn oeainn

TNBJ 27, 35 (Dec. 2003)(listing Mme Texas and Washington).

Massachusetts, North Carolina, Oklahoma, gton

53 MSSNY, News of New York, Oct. 1998, p.5.

In addition, a majority of states, including New

York, have passed legislation requiring medical directors of

managed care organizations to be licensed as physicians.™

Such legislation is significant because it puts the lie to the

contention that utilization review regards coverage alone. If

that were true, then there would be no need for the

“utilization reviewers” to be licensed physicians. Thus, the

Medical Society of the State of New York (“MSSNY”) and

other organizations call for regulations that:

[w]i.. declare that any person making

decisions on the medical necessity or

appropriateness of care affecting the

diagnosis or treatment of a patient in New

York must have a license to practice medicine

in New York; and that a physician making

decisions on the medical necessity or

appropriateness of care affecting the

diagnosis or treatment of a patient in New

York without a valid New York license, as

well as the company that employs him/her,

will be subject to invéstigation, criminal

prosecution and possible fines.55

In addition to New York, states with such laws

include Alabama, Arizona, Arkansas, California, Colorado,

4 Tanya Albert, “Higher Accountability for HMO Medical Directors,”

amednews.com (May 14, 2001), available at http:/ / www.ama-

assn.org/amednews/2001/ 05/14/prl20514.htm (“In the past several

years, more than half of the nation’s state . have passed laws requiring

HMO medical directors to be licensed physicians. And medical directors

who are licensed physicians are increasingly being held responsible by

state medical boards.” In fact, the Federation of State Medical Boards

mandates the passage of such legislation. See n.14, supra, at III.D (“State

medical boards must, through legislative or regulatory process, require

that MCO medical directors hold current and unrestricted medical

licenses in the states in which the patients of the plan reside”).

55 MSSNY Position Statement § 165.969, available at

http:/ / www.mssny.org/ position/ managed.htm (Jan. 21, 2004).

— , Kentucky,

: ii, Illinois, Indiana,

», Florida, Hawail, issouri, Montana,

er serviend, Minnesota, ag oy North

Louisia lata 200 pshire, New Jersey, Dakota, Texas,

ie Oklahoma, Rhode Island, South Dakota,

Carolina, ‘

; —

Vermont, Virginia and Wisconsin.

| in Pegram that a

t made clear in Fegram

Finally, thie “ous ractice actions against HMOs,

Ip :

f states permit ma , , oe

= ate at are consistent aaa ERIS tang

aa five states - Texas, Georgia, California,

are debating similar legislation.*

lici , gu ,

P j

. e ” . . ° |

outside the scope of preemption.

i ; Health Care Policies:

, Legislatures, Mayor eye eine

Jati nference of State i

5% See Jor “oa (Jan. 2002) at 28-31, Table 2, ry Lng ba omen

See ae iso Major Health Care Policies, Mg ie eriog 2001

ow y= West Virginia as having, oon aie he

repr ) direct liability against health insu

that affo

treatment decisions).

n the Court

2158. In fact, one reaso A

236, 120S. Ct. at 2158. In fa jon under ERIS

7 Pegram, yo enepeapranaer a breach of eer: Amey preemption of

offered for h neaien could be seen as 4 ener Vytra supra, such

was that suc ice law....” As shown by Pappas te and federal courts.

state pms agent or under state common law in sta

cases have proc

and Managed Care Plans: Key Preemption an

Fiduciary Issues, SF28 ALI-A

Ill. STATE LAW TORT CLA

Leet WRONGFUL DF

ATMENT AND HEAL? HN CARE

Health Insurers and Health Plans

Whether Or Not They Deny Treatment

Unli

ike most products, after health insurance polici

! ie

yer wants it to work, but the seller

ance policies and health plans are

performs first, b

, by payin

or health plan ponies

nt is made. The nature

and plans are sold, the bu

does not. Health insur

aleatory, meanin

ry, g that the enrollee

omg sey while the health insurer

er, but only if a claim for treatme

*® “Unlike most oth

er commercial ; :

world wh “agp actors fightin .

the Siisteiomeeme is nine-tenths of Py fae Supremacy in a

alwa . vantage: They hold the mo ‘ — alway s have

ys get to “play the float” ney. Consequently, insurers

Interpretation of |

: nsurance C “ts:

Policyholders, § 19,3, at 466-67 (1994), Law and Strategy for Insurers and

ne the insurance tra

ifference. When one contrac

IMS ARE NECESSARY

“TALS OF MEDICAL

Th Pood

e€ Same Payment For Their sa

in any dispute.” Jeffrey W. Stempel

Re ae tn =

eee _

of the contract provides the insurer or plan with a future

advantage, namely, economic leverage.*!

Prior to the time of treatment, it is difficult to

evaluate the quality of the health insurer or health plan. As

explained above, at the time of treatment, an enrollee is at a

distinct economic disadvantage already having “lost” the

premium, unable to independently afford the medical

treatment and already being ill. Time is often crucial to the

enrollee needing treatment, while the health insurer or

health plan may comfortably use time to its advantage.

As in the case of Mr. Cicio, the patient may not even

live to see the outcome of his lawsuit against his health

insurer and health plan.® If an enrollee’s potential

damages were capped at the cost of the treatment denied, it

could be pointless to file a lawsuit.

as it is applied to an HMO, rather than a

61 Pegram states this principle

traditional insurance company:

The defining feature of an HMO is receipt of a fixed fee

for each patient enrolled under the terms of a contract

to provide specified health care if needed. The HMO

thus assumes the financial risk of providing the benefits

promised: if a participant never gets sick, the HMO keeps

the money regardless,...cost-controlling measures are

commonly complemented — by specific financial

incentives to physicians, rewarding them for decreasing

utilization of health-care services, and penalizing them for

what may be found to be excessive treatment, ...

Pegram, 530 U.S. at 219, 120 S. Ct. at 2149 (citation omitted)(emphasis

added).

John Does 1-8, et _al., 321 F.3d 83, 87-88 (2d Cir.

lan enrollee’s missed opportunity to receive

particular treatment because the insurance company would only

communicate with the enrollee’s physician by letter and required three

weeks to a month to respond to each letter). In Cicio, the enrollee actually

passed away prior to the resolution of his lawsuit.

62 See Cicio Vv.

2003)(detailing the health p

63 Cicio, 321 F.3d at 88.

:; Ith

, ized that health insurers and hea

The heavily tilted playing field favoring health 7 a thas aoe delaying and denying ner =

insurers and health plans has not gone unnoticed by courts. plans nap erat and denying claims those gr = omrtioee

Even the dissent in Cicio recognized that inherent injustice that by de "7" :. portunistic breaches.” Oppo ae

that would result if enrollees had no ability to seek be exercising ocieely what enrollees would be ; eal

compensatory damages when health insurers or health besaches : apomre not bring tort claims agains medical

plans improperly denied treatment. “The conclusion that endure if Ys alth plans that wrongfully delay or

my colleagues have reached ... [that her tort claims are not insurers and he

preempted]. may provide justi

| i d health

ce to SA a th insurers an

Mr S Cicio and I'm glad treatment under ERI plans. He

for that....”64

1 g ith ,

The instant cases now provide this Court a valuable

CONCLUSION

opportunity to make clear to everyone who is enrolled in an trings, whether a

ERISA plan, along with the entire health insurance industry, The party that holds the purse s ~ iat ania

that state laws - including both statutory and common law - 7 ‘tional insurance company OF 7 be the ultimate

are available to protect enrollees under ERISA against tacit on n, should not be permitted - It is a poor idea,

wrongful actions by health insurers and health plans. yor ong “a own self-interested ee en aan

ar , to give su

B. Health Insurers and Health Plans Could Use and possibly a neg Snanciel incentive to delay or

“Opportunistic Breaches” To Their eenany, SN tock of financial exposure for any

Advantage, Without A State Law Remedy ; claims and a

and common

consequences. State tort laws - both statutory

, d the instant cases

h-needed antidote, an Il of

Without the threat of compensatory damages, health law , pooniees nn for this Court to apply it. a ; <i

insurers and health plans would be free to delay or provide an ty bal respectfully urge this Court to pro at

treatment and prescribe less expensive treatment without penning noe that state tort law claims

any consequences. In fact, a practice of institutionalizing decision es

the

8 tfully suggest that '

ERISA. Amici respec Fifth

wrongful denial would be a rational business plan, as it preempted by United States Court of Appeals for the

would maximize profits’ and minimize costs. Such a judgmer ner affirmed.

scenario would run completely counter to the intent of Circuit shou

Congress in creating ERISA: the protection of employees.5

have an incentive to force litigation to lower

4 Cicio, 321 F.3d at 106 (Calabresi, J. dissent).

, or

overall claim payments, “[olp

iciently deter them.”

traditional damage rules do pte A Sample from the

5 Cicio, 321 F.3d at 99 (stating that “Indeed, one of ERISA’s stated goals and ‘noton, Punitive Damages for ree | 31, 54 (1989).

involves increasing ‘the likelihood that full benefits will be paid to are. of the Last Ten Years, 42 Ark. L. Rev. 91,

beneficiaries. ..”)(citing 29 U.S.C. § 1001b(b)(1)); see also Bogan, at 7 n.31 Decist

(citing, as part of reason 2,

Humana v. Forsyth, 525 U.S. 299, 312, 119 S.

- Os make

laining that HM

S. Ct. at 2149 (explain Thus, any

530 US. at 219, 120 ing fixed fees). ,

Ct. 710, 718 (1999) for the Proposition that ERISA is intended to protect . a roviding less treatment and worn tied to profits has an

employees and, therefore, there can be no preemption of state law tort 7 a ba ” an HMO whose ee , patients.

claims that are (inherently) extra-contractual, because they supplement —— de the least expensive care

ERISA’s protection of employees rather than conflict with it).

incentive to provi

Dated: January 22, 2004

Respectfully submitted,

Eugene R. Anderson

Counsel of Record

Anderson Kill & Olick, P.C.

Rhonda D. Orin

Daniel J. Healy

Anderson Kill & Olick, LLP

2100 M Street, N.W., Suite 650

Washington, DC 20037

David L. Trueman

18 East 50* Street

7h Floor

New York, NY 10022

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.