ERISA and Medical Malpractice Litigation
27 Jul 2007
In order to properly answer this question it is helpful to use the extended analysis of a state supreme court opinion which carefully reviewed the ERISA law and the "preemption" question. 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.
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.
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."
"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.
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.
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. We can hope that the unintended protections afforded to HMOs from patient claims will be restricted or eliminated.
