ERISA Preemption Forum

[TTH]

Oh Jesus Fuck.

Does anyone know a good supplement for either health law or supplement law that provides a flowchart or guide for analyzing a state law for ERISA preemption?

[goodolgil]

Did not use a supplement, but Health Law in a Nutshell is by Hall who wrote my casebook, which was very good.

Here's the section from my outline, it may not be very useful.

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f. ERISA and the Preemption of Tort Claims

○ ERISA -- interpretation has had quite serious consequences. Originally designed to help employees; two purposes:
1. Protect pensions.
◊ Minimum funding requirements. Federal guarantee--not our concern
2. Imposition of fiduciary obligation on plan administrators.
◊ Must act as employee's trustee--cannot put own interests ahead
◊ Must be careful in managing its assets
◊ Demands payment of benefits if court if not given voluntarily and "appropriate equitable relief." -- § 502
□ As part of the political deal, employer's want state law preemption.
® § 514 -- state laws that relate to matters of ERISA are preempted.
◊ These two sections interact in confusing ways
○ So what does this have to do with health care?
§ Applies to employee benefit plans generally, of which health insurance is a common fringe benefit.
§ If you have an employer-sponsored plan, you cannot sue under state tort law for benefit payment claims. Any statelaws that relate to employer-sponsored plans are preempted.
§ Supreme Court has ruled that the remedies laid out in ERISA are exclusive. § 502 authorizes 2 remedies:
1. Enjoinment/injunction
2. Other appropriate equitable relief--court order to stop violating ERISA.
□ Supreme Court says this excludes consequential damages.
® This doesn't matter much in the pension context, but denials of medical care can have massive consequential damages!
® Florence (pregnant woman denied treatment that led to son's death) wants damages as a result--but ERISA held not allow for consequential damages.
§ If Congress really wanted to replace tort law, it would have at least would have come up with some scheme to protect consumers.
§ The big question now is "Does ERISA apply?" Considerations:
□ Must be employer-sponsored plan.
□ If it is, and an employee suffers negligent injury--does ERISA apply?
○ Peagram v. Herdrich, 530 U.S. 211 (2000)
§ Question: are decisions made by an HMO fiduciary acts within ERISA? Alleged that HMO rewarding doctors for limiting care was an anticipatory breach of fiduciary duty.
§ Shows up with groin pain. Peagram finds an inflamed mass--forces her to wait 8 days for an ultrasound--had to find an HMO facility to do it. Had authority to do out-of-network ultrasound, but it would have cost more. Doctor was also part-owner of HMO
□ HMO plan: distributed money saved from HMO to doctors at the end of the year--creates incentive to spend as little money as possible.
§ What role should the doctor be playing in this situation? Has to put on both a treatment hat and an eligibility hat.
□ Financial incentive seems to be inconsistent with the fiduciary obligation of ERISA.
® If financial obligations were disallowed under ERISA, it would effectively destroy managed care.
§ The court sees a distinction between treatment and eligibility decisions
□ Treatment--can't pay attention to costs
□ Eligibility--is this covered under the costs of the plan?
® Eligibility is sort of a contract decisions
◊ Everyone agrees that doctors' treatment decisions fall outside the scope of ERISA
◊ Likewise everyone agrees that pure eligibility decisions fall within ERISA
® Court holds the D was acting as a "mixed treatment eligibility," and thus not a fiduciary under ERISA
□ Doctor must determine necessity--treatment hat. But this decision determines the eligibility question--eligibility hat.
§ 3 reasons for no fiduciary duty according to court:
1. Nature of the decision is sufficiently distinct from that of a trustee to not impose duty
2. Congress wants HMOs, thus would not pass legislation purposely crippling them
3. Anamoly: fight in this case would turn into whether the doctor was negligent--Congress did not intend ERISA to replicate state tort law
§ Medical Necessity -- not always crisp. If one options is so preferable to the next best, it can meet the necessity requirement.
§ When a doctor makes a treatment decision, he is acting as a trustee.
§ Decision is based mostly on policy--no statutory interpretation.
§ But if P had won, her medical negligence claim would have disppeared--ERISA would be the exclusive remedy. Future P's in mixed-treatment cases would this have to proceed under ERISA instead of state med-mal law.
□ Thus, in general this case is good for P's. If denied coverage under mixed treatment-eligibility, they can sue under state tort law.
○ Aetna Health Inc. v. Davila, 543 U.S. 200 (2004)
§ P's sue HMOs for coverage decisions--lack of ordinary care in violation of state law (Texas Act). Preempted by ERISA? P's claim they are not seeking reimbursement for benefits, but tort damages from a violation of ordinary care. Supreme Court is unpersuaded and rules ERISA preempts
□ A determination is made that Vioxx and hospital stay are not necessary. Claim is that they are.
® Court sees this as an eligibility question. When making this decision, insurer is acting as a fiduciary under ERISA.
◊ Fact that question is infused with medical question does not alter is fundamental eligibility nature
□ How does the court deal with Peagram?
® When treatment blends with eligibility, it is not fiduciary. No ERISA.
® But when HMO makes the decision, it is a fiduciary decision under ERISA
§ In Dukes, the 3rd circuit said ERISA preempted state court challenges to the quantity of care delivered, while quality was covered by state medical malpractice.
□ Court draws a formal line in Davila
® If doctor makes decision, it is not fiduciary
® If HMO does, then it is
○ We probably wouldn't care about all of this if it wasn't for the huge difference in remedies between ERISA and the preempted state laws
§ If you're an HMO practicing utilization review, what incentives exactly do you have to provide best coverage?
□ Since you're making an eligibility decision, it can only be challenged under ERISA
□ Gives blanket immunity to HMOs for their own negligence
□ Prevents states from regulating their own HMOs
§ Why Florence got sued:
□ Could she sue her doctor? He wanted to give care, can't put him on the hook.
□ Sue HMO? Not under state law. Under ERISA? Recovery would be nothing because consequential damages are not allowed.
® These are the reasons for Ginsburg's concurrence--the remedies section of ERISA is in need of reevaluation.

g. ERISA and the Preemption of State Regulation

○ In the 1970s New York State orders that employers can’t discriminate against pregnant women.
§ Supreme Court reverses based on ERISA preemption
§ If states are disabled, then all that is left is for Congress to step in, but they won't--no one is regulating employee benefit plans.
§ The effect of ERISA is really one big accident
○ § 514(c)--preempts state law.
§ A state law falls under ERISA if it "relates to" an employer benefit plan
□ What about indirect effects? "Relate to" has been interpreted very broadly.
□ Conundrum: states are the ones left to regulate insurance, but most employee benefit plans involve insurance
® Exception: § 514(b)(2)(c)--Leaves states with their historic authority to regulation insurance (also banking, securities)
§ Many large employers self-insure--they pay their own insurance and pool all of their workers into a risk-pool. They then hire a TPA and a Pharmacy Benefits Manager (PBM)
□ Party actually paying medical losses is the employer
§ If employers are self-insuring, then they are acting as insurers. State officials want to make sure they have enough capital on hand.
□ 514(b)(2)(b)--exception to exception. A self-funded plan is not an "insurance plan" and cannot be treated as such
§ § 514 in plain English
1) Does law relate to employee benefit plan?
2) If so, does it regulate insurance?
3) If so, is the law nonetheless directed at a self-funded plan?
□ If so, preempted by ERISA
§ What does a law regulating insurance look like?
1) Might say on its face it is regulating insurance
2) Might have characteristics of a quintessential insurance law
○ Does ERISA preempt "Any Willing Provider" statutes? Kentucky passed one, and it was litigated in 2003.
§ Is this a law regulating insurance? Yes because
□ Substantially affected the risk pooling
□ Requires insurers to allow certain providers to practice
§ Holding narrowed the scope of ERISA.
□ This motivated employers to self-insure where ERISA preemption applies and thus avoid state regulation.
□ The more regulation, the more employers begin to self-insure
§ Since the state governments can't regulate self-insured plans, what has federal legislation done in response? Almost nothing
□ Must keep women who just delivered a full 48
□ For mastectomy, must provide reconstructive surgery.
□ Parity in mental health care with rest of health care
○ "Relates to" -- when does a state statute relate to an ERISA plan?
§ Shaw v. Delta Air Lines -- "a law relates to an employee benefit plan in the normal sense of the phrase if it has a connection with reference to the plan."
□ NY law in this case would have required employers to rewire their plans--it required providing same benefits for pregnancy related disabilities as other disabilities. ERISA preempts
□ State laws do not relate to ERISA when they change incentives--Travelers Insurance would charge Blues hospitals substantially less.
® Made it much more expensive for to insure without Blue Cross
◊ Had a direct effect on employer's ability to choose plans
○ Retail Industry Leaders Ass'n v. Fiedler, 475 F. 3d 180 (4th Cir. 2007)
§ Law regulated large employers, mostly targeted at Wal-Mart. Required employers with 10,000 or more employees to spend at least 8% of their total payrolls on employee HI or to pay the difference to the state.
□ Court views it as a regulation of benefits, and thus preempted by ERISA.
§ Under Shaw, offering incentives is OK, but to Wal Mart this was not really a choice. Obviously they would spend the money on their employees instead of paying it to the state.
□ Any sort of mandate clearly relates to ERISA.
□ The state was clearly mad at Wal-Mart for sending its employees to state-run Medicaid
○ Golden Gate Restaurants (9th Cir. 2007)
§ San Francisco's effort to provide universal insurance. Health Access Plan -- gives those lacking insurance access to it. Employees whose employers don’t provide enough insurance get a cut.
□ Employers have a choice: pay $1.17 per hour for insurance under 100 employees, or $1.74 an hour for 100+. If they don't they can pay the balance into the HAP
® Court distinguishes Fielder because in this case it sees a real choice.
® Does not require employers to change plans themselves--only dollar amounts.
□ Will employers really perceive this as a meaningful choice? Is there a difference between a tax and a mandate?
□ Both statutes impose record keeping standards--4th Cir. saw this as enough to preempt.
○ Universal health care at the state level
§ Massachusetts avoided ERISA because
□ Not a lot of uninsured
□ Got lots of money from feds.
□ For the above two reasons, they did not have to impose a large tax to implement the plan.

There is a small fee, but no one has challenged it. It still probably violates ERISA