Cicio v. Vytra Healthcare (2d Cir.)
The primary issue in this case is whether ERISA preemption should immunize HMOs against tort litigation when the HMOs make improper coverage decisions based on “mixed” criteria of legal and medical analysis. If such immunity is denied to HMOs, a major bite will be taken out of ERISA preemption.
Carmine Cicio received employer-sponsored health insurance coverage through Vytra Health Care, an HMO. In March 1997, Mr. Cicio was diagnosed with multiple myeloma, a form of blood cancer. On January 28, 1998, his treating physician, Dr. Edward Samuel, asked Vytra to approve a double stem cell transplant for Mr. Cicio. Dr. Samuel described this treatment as medically necessary and possibly life saving. In a letter dated February 23, 1998, from its medical director, Vytra denied the request, stating that a double stem cell transplant was an “experimental/investigational” procedure and thus not covered under Mr. Cicio’s policy. Mr. Cicio, through Dr. Samuel, appealed Vytra’s decision, and, on March 25, 1998, Vytra approved a single stem cell transplant. However, by that time the window of opportunity for an effective treatment had passed. Mr. Cicio died approximately 6 weeks later.
Bonnie Cicio, Mr. Cicio’s widow, sued Vytra and its medical director in the New York Supreme Court. She alleged 18 causes of action, mostly based in tort, under New York state law. Defendants removed the case to the United States District Court for the Eastern District of New York, contending that Mrs. Cicio’s claims were covered under ERISA.
The defendants moved to dismiss, based on ERISA preemption. Both the magistrate judge, to whom the case had been assigned for evaluation, and the presiding judge granted the motion and dismissed the case. Mrs. Cicio appealed to the United States Court of Appeals for the Second Circuit.
On January 29, 2002, the Litigation Center filed an amicus curiae brief to support Mrs. Cicio. We argued that both Vytra Health Care and its medical director had made a medical decision when they denied the double stem cell transplant. We contended that ERISA was not intended to
preempt the state laws that regulate such decision making.
On February 11, 2003, the Court of Appeals, by a two to one decision, reversed the dismissal of the medical malpractice claim, holding that Mrs. Cicio could potentially sue the HMO and its medical director. The court did not rule on whether New York law actually recognizes a cause of action for medical malpractice in this situation but only that ERISA does not preempt such cause of action if it does exist. It found that ERISA does not apply to and therefore does not preempt determinations of medical necessity or utilization review.
The Court of Appeals also affirmed the dismissal of all counts in the complaint other than the medical malpractice claims. It remanded those claims to the District Court for further determination. The defendants’ attorneys sought en banc review of the panel decision, but the Second Circuit denied that request.
The defendants asked the United States Supreme Court to hear the case. On June 28, 2004, following its ruling in the Aetna v. Davila and CIGNA v. Calad cases, the Supreme Court vacated the Second Circuit judgment and remanded for further consideration.
On August 31, 2004, the AMA and the Medical Society of the State of New York submitted a letter brief to the Second Circuit, urging that, notwithstanding the Supreme Court decision, it should uphold its earlier ruling against the HMO medical director. Unfortunately, on September 23, 2004 the Second Circuit vacated its prior decision and affirmed the district court's dismissal of Mrs. Cicio's lawsuit. This matter is now concluded.
Corporate Health Insurance, Inc. v. Texas Department of Insurance (5th Cir.)
The Litigation Center opposed an argument by insurance companies that ERISA preempts the Texas “Patients’ Bill of Rights” law.
Several insurance companies, most notably Aetna Life Insurance Company, sued the Texas Department of Insurance for a declaration that the Texas Health Care Liability Act is preempted by ERISA and is therefore invalid. In a widely reported decision by Judge Vanessa Gilmore, the lower court held that certain portions of the statute were preempted while other portions were not. Both sides have appealed. The Litigation Center and the Texas Medical Association filed an amicus brief to support the validity of the statute.
Amici’s brief focused on the Insurance Savings Clause, a proviso to the general ERISA preemption statute. The brief argued that Judge Gilmore correctly interpreted the controlling precedents from the Fifth Circuit, but those precedents themselves were in error. Amici made a frontal attack on numerous Fifth Circuit decisions as misunderstandings of congressional intent and Supreme Court rulings.
The United States Court of Appeals for the Fifth Circuit delivered its decision on June 20, 2000. To a large degree, the Court found that ERISA did not preempt the Texas statute. The Court held that the following statutory provisions were not preempted because they implicate quality of medical practice, not coverage: (1) permitting suits against entities that fail to meet an ordinary care standard for treatment decisions; (2) barring retaliation against physicians for advocating medically necessary care for patients; and (3) proscribing indemnity clauses that would hold HMOs harmless for their own acts. However, the Court found that ERISA preempted certain provisions for independent review of determinations by managed care entities. The Court also determined that the review provisions were severable from the remainder of the statute.
The State of Texas petitioned the Fifth Circuit for rehearing en banc and for a panel rehearing. Those petitions were denied. On October 24, 2000, the Texas Attorney General filed a petition for certiorari, seeking to challenge that portion of the ruling that struck down the independent review provisions of the Texas statute. The Litigation Center and TMA filed an amicus brief in support of the State of Texas.
On June 24, 2002, in a two sentence order, the Supreme Court granted certiorari, reversed the Fifth Circuit judgment, and remanded for further consideration in light of its decision in Moran v. Rush-Prudential HMO, which addressed the Illinois independent review law. The Fifth Circuit asked for further briefing on how Moran should apply to the Texas independent review law, and it invited briefs from amicus curiae. The Litigation Center, on behalf of the AMA and the Texas Medical Association, filed a supplemental amicus brief on August 27, 2002.
On December 16, 2002, the Fifth Circuit, modifying its earlier decision, held that ERISA does not preempt the Texas independent review law as it applies to employees covered under insurance-funded employee benefit plans, because the independent review law falls within the ERISA saving clause. However, ERISA does preempt the independent review law for self-insured plans, because of ERISA’s “deemer” clause. The Fifth Circuit also held that the independent review law is preempted for employees of the federal government, who are covered by a federal statute similar in its scope to ERISA, but without a saving clause.
Moran v. Rush Prudential HMO, Inc. (S.Ct.)
Moran, a patient, sought reimbursement for the expense she incurred for microneurolysis surgery. Rush, her HMO, denied the claim because in its opinion the surgery was not medically necessary. The Illinois HMO Act requires that, in such disputes, the matter be submitted to an independent reviewer for a binding determination. Rush refused to provide the independent reviewer, so Moran obtained a court order compelling the independent review. The court denied Rush’s objection that ERISA preempted the provision of the Illinois HMO Act requiring independent review.
The independent reviewer found that the microneurolysis surgery was medically necessary, but Rush still refused to pay. It relied on its own panel of physicians, who contended that the surgery was medically unnecessary. Moran now sought a court order requiring Rush to pay in accordance with the decision of the independent reviewer. This time, the court found for Rush. It held that, although ERISA did not preempt that portion of the HMO Act, which required independent review, it did preempt that portion which required the HMO to comply with the findings of the independent reviewer. The court further found that, under ERISA, Rush was entitled to rely on the opinions of the physicians in its panel.
Moran appealed to the Seventh Circuit. Because the validity of a state statute was at issue, the State of Illinois intervened in the Court of Appeals as an additional plaintiff. On October 8, 1999, the Litigation Center and the Illinois State Medical Society (ISMS) filed a friend of the court brief on the plaintiffs’ behalf. The Litigation Center and ISMS maintained that the Illinois law addressed matters of health care regulation, which the federal government never intended to be governed by the ERISA statute.
On October 19, 2000, the Seventh Circuit reversed the district court’s decision. The court held that the independent review provisions of the Illinois HMO Act fall within ERISA’s “savings clause” and thus are not preempted by ERISA. The court further held that Moran’s insurance contract incorporated the independent review provisions of the state statute. A suit by Moran to enforce the independent review provisions is, therefore, merely a suit to enforce the terms of her benefit plan. The Moran court noted that its decision probably contradicted the Fifth Circuit holding in Corporate Health v. Texas Dept. of Insurance. (See C-2 above).
Rush Prudential asked the United States Supreme Court to hear the case, and on June 29, 2001, the Court issued an order of certiorari. On November 7, 2001, the Litigation Center and ISMS (along with the American Psychiatric Association) filed an amicus curiae brief on behalf of Moran and the Illinois HMO Act.
On June 20, 2002, by a five to four decision, the Supreme Court affirmed, holding in favor of Moran. The case will be remanded to the trial court to ascertain whether the HMO should be held liable for Moran’s attorneys fees and, if so, for how much.
Kentucky Association of Health Plans v. Miller (S.Ct.)
This is the most recent in a long series of Supreme Court cases, testing the scope of ERISA preemption. Here, the Litigation Center joined the Kentucky Medical Association, the American College of Obstetricians and Gynecologists, the American Psychiatric Association, and the National Medical Association in an amicus curiae brief which argued that the Kentucky any willing provider (AWP) laws are valid.
In 1994, Kentucky passed the Kentucky Health Care Reform Act, which included an AWP provision to prohibit discrimination against physicians and other health care providers. The law requires that health insurers accept participation by any providers willing and qualified to participate on the insurers’ managed care panels. Plaintiffs, a trade association of health care plans and several managed care organizations, sued in 1997 to have the Kentucky AWP laws declared invalid, as preempted by ERISA.
After the trial court ruled in favor of the defendants, the plaintiffs appealed. The Sixth Circuit affirmed, by a split decision. The majority held that the AWP laws relate to employee benefit plans under ERISA § 514(a), but ERISA § 514(b) saves the law from preemption, as it applies to directly insured plans. The dissent argued that § 514(b) does not apply, because the AWP laws are not directed against “insurance,” in the everyday sense of that term. Furthermore, under the more technical criteria of the McCarran-Ferguson Act, the laws do not regulate insurance. Following this ruling, the plaintiffs again appealed, this time to the Supreme Court. On June 27, 2002, the Supreme Court granted certiorari.
The Litigation Center filed its brief on October 31, 2002. The brief argued that the Kentucky AWP laws do not “relate to” employee benefit plans under ERISA § 514(a). We formulated a comprehensive analysis of ERISA § 514(a), which, if adopted, would allow the courts to make a more reasoned analysis of ERISA preemption, so they would no longer have to struggle with the various, conflicting Supreme Court precedents. In essence, we argued that ERISA preemption should be measured by the scope of ERISA’s substantive provisions.
Surprisingly, the Kentucky Insurance Commissioner stated in her brief that the Kentucky AWP laws do relate to employee benefit plans under ERISA § 514(a). Thus, the Insurance Commissioner conceded, at the outset, what the AMA considers the most important issue in the case. The United States Department of Justice filed an amicus curiae brief in support of the Insurance Commissioner and also conceded the ERISA § 514(a) issue. The Department of Justice will share the oral argument with the Insurance Commissioner.
Because the AMA felt that the Kentucky Insurance Commissioner and the United States Department of Justice both missed this critical issue, it (but not the Litigation Center) asked the Supreme Court to require the Kentucky Insurance Commissioner to allow it to participate in the oral argument. That motion was denied.
On April 2, 2003, the Supreme Court upheld the Kentucky AWP laws, stating that it was making a “clean break” from earlier cases that analyzed whether state laws are saved from preemption because they “regulate insurance.” Under the Court’s holding, a state law is deemed to regulate insurance under ERISA § 514(b) if it (1) is specifically directed toward entities engaged in insurance and (2) substantially affects the risk pooling arrangement between the insured and the insurer.
This case, which consists of four consolidated lawsuits, considers whether ERISA preempts a claim under the Texas Health Care Liability Act (THCLA) for negligence against a health maintenance organization. In each of the separate lawsuits, the plaintiffs alleged that their physicians had recommended necessary medical treatment, but the HMOs had negligently refused to cover them. They claimed damages in tort.
The plaintiffs originally filed their lawsuits in state court, but the HMOs removed those cases to federal court. The HMOs pointed out that each plaintiff received HMO coverage through an employer-sponsored plan. Therefore, they argued, the federal courts had jurisdiction to hear these cases by virtue of “complete preemption” under ERISA § 502. They further argued that, due to “conflict preemption” under ERISA § 514, the THCLA liability provisions were invalid and the cases should be dismissed.
After various rulings in the lower courts, all four cases were appealed to the Fifth Circuit. A panel of the Fifth Circuit ruled that ERISA § 502 did not completely preempt three of the four lawsuits. The federal courts therefore lacked jurisdiction to hear those cases, and the panel did not reach the ERISA § 514 conflict preemption issue in those suits.
As to the fourth case, brought by Mrs. Roark and then, after she died, by her estate, the panel noted that the pleadings had raised legal theories different from those of the other three cases. Accordingly, the panel held that the federal courts did have jurisdiction over the fourth suit by virtue of complete preemption under ERISA § 502. The panel further held that ERISA § 514 conflicted with and therefore preempted the THCLA liability provisions. Ultimately, it ruled, the case had been properly dismissed.
To complicate matters further, the panel stated that it based its ERISA conflict preemption decision on an old Fifth Circuit case, which, under recent Supreme Court rulings, was of doubtful validity. The old Fifth Circuit case had never been explicitly overruled, and so, despite its doubts, the panel felt bound to follow it.
Following the Fifth Circuit panel decision, Mrs. Roark's estate petitioned for en banc review by the entire Fifth Circuit. So did the HMO defendants in the first three cases, which had been consolidated with her appeal. On October 7, 2002, the Litigation Center, acting on behalf of the AMA and the Texas Medical Association, filed an amicus curiae brief to support the Roark petition. On April 18, 2003, the Fifth Circuit denied the petition for reconsideration.
Mrs. Roark's estate petitioned the United States Supreme Court for further review. On August 18, 2003, the Litigation Center, acting through the AMA and the Texas Medical Association, filed an amicus curiae brief to support the estate's certiorari petition.
Subsequently, the Roark case settled. Accordingly, on September 18, 2003, the Supreme Court dismissed the petition for certiorari. The insurance company petitions, in the three cases that had been consolidated with Roark, remain pending.
Aetna v. Davila; CIGNA v. Calad (S. Ct.)
The issue in these consolidated cases involved the proper interpretation of the "complete preemption" doctrine under ERISA § 502. The specific question before the Supreme Court was whether these lawsuits, originally filed in the Texas state courts, were properly removed to federal court. The Litigation Center brief opposed the preemption, "complete" or otherwise, of patients' right to sue health maintenance organizations ("HMOs") in tort under the Texas Health Care Liability Act ("THCLA").
Through her husband’s employer, Ruby Calad received medical care from CIGNA Healthcare of Texas, Inc., a Texas HMO. Calad underwent a hysterectomy, performed by a CIGNA physician, with rectal, bladder, and vaginal repair. Although her doctor recommended a longer stay, a CIGNA nurse decided that the longer stay was medically unnecessary under CIGNA's standard procedures and that Calad should be discharged after one day in the hospital. Calad suffered complications from the early discharge, as a result of which she had to return to the emergency room a few days later. She contended that CIGNA had failed to use ordinary care in determining that she should be discharged from the hospital.
Juan Davila is a post-polio patient suffering from diabetes and arthritis. He received Aetna HMO coverage through his employer's health plan. His primary care physician prescribed Vioxx, a medication for arthritic pain. Before it would pay for the prescription, however, Aetna required Davila to enter its “step program.” Under this program, Davila first had to try two different medications, which were less expensive than Vioxx. Only if he suffered a detrimental reaction to the medications or failed to improve would Aetna evaluate him for Vioxx use.
After three weeks on the cheaper medication, Davila was rushed to the emergency room. He suffered from bleeding ulcers, which caused a near heart attack. The doctors had to give him seven units of blood and keep him in critical care for five days. Davila contended that, by requiring its step program protocol, Aetna failed to use ordinary care in making a medical necessity decision.
Calad and Davila each sued in Texas state court, claiming violations of THCLA. Under THCLA, HMOs are liable to their beneficiaries in tort if they fail to use ordinary care when making health care treatment decisions.
The HMOs removed their respective cases to federal court. Calad and Davila then moved to remand. However, the district courts denied the remand motions and dismissed the plaintiffs’ claims for failure to state a cause of action, citing ERISA preemption.
Calad and Davila appealed the refusals to remand and, in the alternative, the dismissals. The Fifth Circuit consolidated these cases on appeal and then reversed the trial courts. It held that, because the HMOs had denied coverage based on determinations that the prescribed treatments were medically unnecessary, they had employed "mixed eligibility and treatment decisions," which fall outside the scope of ERISA and should not be preempted. The HMOs have appealed that determination to the United States Supreme Court.
In the Supreme Court, the HMOs relied primarily on older cases, which suggest that the remedies set forth in ERISA are intended to preclude all other possible remedies against an HMO for violation of its obligation to provide and pay for medically necessary treatment. The Litigation Center brief argued that the explicit language of ERISA § 514 (b) contradicts the HMOs' position, that recent Supreme Court decisions have indicated that issues involving healthcare should be left to the separate states, and that the HMOs' line of cases dealt with different questions than those before the Court.
The Litigation Center brief was filed on January 22, 2004, through the AMA and the Texas Medical Association. The American Psychiatric Association also joined the brief. Oral argument was heard on March 23, 2004.
On June 21, 2004, the Supreme Court, by a unanimous decision, held in favor of the HMOs, reversing the Fifth Circuit. It relied on its earlier decisions, which had found that ERISA was intended to preclude state legislation that might provide additional monetary compensation to injured patients. Two of the justices wrote a concurring opinion, in which they joined "the rising chorus urging that Congress and [the Supreme] Court revisit what is an unjust and increasingly tangled ERISA regime."
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