Law & Medicine

ERISA's Tangled Web

Can a managed care enrollee sue his plan if he is injured because of what he claims was the result of poor care and treatment by a plan physician? If he dies, can his estate sue the plan for damages?

Before 2004, the answers were uncertain. The legal cases that had been decided were definitely a mixed bag, depending upon whether the assertions against the managed care plan were found to involve strictly patient care, administrative decisions, or both.

Strict patient care would fall under state law governing medical negligence cases. If the allegations were solely administrative, the case would come under a federal statute known as the Employee Retirement Income Security Act, or ERISA.

ERISA was originally intended by Congress to govern the rights of pension plan beneficiaries. But legal cases morphed this legislation into protection for ERISA health plans against state-filed lawsuits based on medical malpractice.

When allegations involved both patient care and administrative decisions, some cases were not preempted by ERISA while others were—it depended on how the court interpreted what the injured party asserted. If the court decided that the lawsuit fell under ERISA, that party would be entitled only to the cost of the denied benefit (generally just the cost of the treatment or procedure in question). If ERISA did not preempt the lawsuit (or if the health plan was not governed by ERISA), the enrollee would be entitled to all remedies allowed under state law.

The landscape for these types of decisions changed in 2004, when the Supreme Court decided two cases—Aetna Health Inc. v. Davila and Cigna Corp. v. Calad—in which the patient sued for wrongful denial of coverage.

In the Calad case, Ruby Calad's physician recommended an extended hospital stay after Ms. Calad had a surgical procedure. The managed care plan, through its discharge nurse, thought the extension was unnecessary, and Ms. Calad was discharged from the hospital. Once home, she experienced postsurgical complications that required follow-up care.

In the Davila case, Juan Davila had various ailments, including diabetes, gastric ulcer disease, and arthritis. He was insured through Aetna's managed care plan. His physician, who was not in Aetna's network, recommended Vioxx (rofecoxib) for the treatment of his arthritis.

However, before allowing the use of Vioxx, Aetna required that Mr. Davila try two other medications, both less expensive than Vioxx. While on those “preferred” drugs, he experienced bleeding ulcers, internal bleeding, and a near heart attack. Because of the additional gastric impairment, he was no longer able to take medication absorbed through his stomach.

Both lawsuits eventually made their way to the Supreme Court, which decided that the lawsuits fell under ERISA and that both concerned benefits (coverage) promised to the plaintiffs. The suits were not interpreted as asserting inappropriate medical care and treatment. Therefore, the plaintiffs could seek only the benefits promised but not delivered and no other damages.

Justice Ruth Bader Ginsburg, citing the words of an appeals court judge in another case, said, “I also join 'the rising judicial chorus urging that Congress and [this] Court revisit what is an unjust and increasingly tangled ERISA regime.'” That is to say, ERISA has been interpreted to provide protections to managed care plans that were never intended.

This decision means that if a physician is named in a lawsuit together with a managed care plan, and the suit falls under the ERISA statute, the odds are great that the only exposure to both parties will be the cost of the benefit denied.

The physician might still be sued separately. But unless and until Congress revisits the ERISA statute, physicians might find that being part of an ERISA plan isn't such a bad position to be in.

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