legalstuff.kaiserpapers.info
In Copyright Since September 11, 2000 CAUSE NO. 96-5690-A
IRENE P. HENDERSON, Individually and on )
IN THE DISTRICT COURT
SECRETARY OF LABOR'S BRIEF AS AMICUS CURIAE WITH RESPECT TO DEFENDANTS KAISER FOUNDATION HEALTH PLAN OF TEXAS, KAISER FOUNDATION HEALTH PLAN, INC., AND KAISER FOUNDATION HOSPITAL'S MOTION FOR PARTIAL SUMMARY JUDGMENT
TABLE OF CONTENTS
TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . .iii INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . .1 STATEMENT OF INTEREST OF AMICUS CURIAE . . . . . . . . . . . . .1 ISSUES ADDRESSED . . . . . . . . . . . . . . . . . . . . . . . .2 STATEMENT OF FACTS AND PROCEEDINGS . . . . . . . . . . . . . . .2 ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 I. THE RECOGNITION PLAN IS AN ERISA PLAN AND KAISER IS A II. ERISA 514(a) DOES NOT PREEMPT STATE LAW IN FIELDS OF TRADITIONAL STATE REGULATION, SUCH AS THE COMMON LAW OF NEGLIGENCE AND WRONGFUL DEATH STATUTES, ABSENT A SHOWING THAT PREEMPTION WAS THE CLEAR AND MANIFEST PURPOSE OF ERISA. . 11 A. ANALYSIS OF WHETHER A STATE
LAW IS PREEMPTED BY ERISA
B. BECAUSE THE CLAIMS IN THIS CASE
ARE BASED UPON LAWS
C. ERISA 514(a) DOES NOT PREEMPT
THE STATE LAW CLAIMS
D. THE KAISER DEFENDANTS HAVE NOT
DEMONSTRATED THAT IT
CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . 28 APPENDIX A - Excerpt from Kaiser Permanente Member Handbook, Spring
1995
FEDERAL CASES Aetna
Insurance Co. v. Borges,
Altieri
v. Cigna Dental Health,
Anderson
v. Humana,
Burke
v. Smithkline Bio-Science Lab,
Butler
v. Wu,
California
Division of Labor Standards Enforcement v.
De
Buono v. NYSA-ILA Medical and Clinical Services Fund, U.S. ,
Chaghervand
v. CareFirst,
Corcoran
v. United Healthcare, Inc.,
Dearmas
v. Av-Med Inc.,
Donovan
v. Dillingham,
Dukes
v. U.S. Healthcare, Inc.,
Elsesser
v. Hospital of Phila. College of Osteopathic Medicine, Parkview Division,
Fort
Halifax Packing Co., Inc. v. Coyne,
Haas
v. Group Health Plan,
Independence
HMO v. Smith,
Jass
v. Prudential Health Care Plan Inc.,
Kearney
v. U.S. Healthcare, Inc.,
Kohn
v. Delaware Valley HMO, Inc.,
Lancaster
v. Kaiser Foundation Health Plan of Mid-Atlantic States, Inc.,
Memorial
Hospital System v. Northbrook Life Insurance Co.,
Meredith v. Time Insurance Co., 980 F.2d 352 (5th Cir. 1993) 7 New
York State Conference of Blue Cross and Blue Shield Plans v.
Pacificare
Inc. v. Burrage,
Paterno
v. Albuerne,
Pilot
Life Insurance Co. v. Dedeaux,
Prudential
Health Care Plan, Inc. v. Lewis,
Ricci
v. Gooberman,
Shaw
v. Delta Air Lines, Inc.,
Shea
v. Esenstein,
Smith
v. HMO Great Lakes,
Smith
v. Jefferson Pilot Life Insurance, Co.,
Stratton
v. Bryant,
Stroker
v. Rubin,
Taggert
Corp. v. Life & Health Benefits Administration, Inc.,
Tolton
v. American Biodyne, Inc.,
STATE CASES Dalton v. Peninsula Hospital Ctr,
De Genova v. Ansel,
In
re Estate of Frappier v. Wishnov,
Pappas
v. Asbel,
Raglin
v. HMO Illinois, Inc.,
Waddell
v. Kaiser Foundation Health Plan of Texas,
FEDERAL STATUTES 29 C.F.R. 2510.3-1(j) . . . . . . . .9 29 U.S.C. 1001 et seq . . . . . . . .1-2 29 U.S.C. 1002(1) . . . . . . . . . . .7 29 U.S.C. 1002(21)(A) . . . . . . . . 17 29 U.S.C. 1002(16)(A)(i) and (ii) . . 10 29 U.S.C. 1024 . . . . . . . . . . . 10 29 U.S.C. 1144(a) (emphasis added) . 11 INTRODUCTION Alexis S. Herman, Secretary of the United States Department of Labor ("the Secretary") respectfully submits her Brief as Amicus Curiae With Respect to Defendants Kaiser Foundation Health Plan of Texas, Kaiser Foundation Health Plan, Inc., and Kaiser Foundation Hospital's Motion for Partial Summary Judgment. STATEMENT OF INTEREST OF AMICUS CURIAE The Secretary has been charged with the mandate of interpreting and enforcing the provisions of Title I of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. 1001 et seq. The Department of Labor has a strong interest in ensuring that ERISA preemption principles are applied appropriately to ensure that participants of ERISA-covered employee benefit plans are not stripped of rights and remedies under state laws pertaining to the delivery of health care that do not relate to such plans. Currently, there are approximately 148 million
Americans, including approximately
9.6 million Texans, whose medical care is paid for through ERISA-covered
plans sponsored
by employers. The important issues before the Court are
whether ERISA deprives
participants of ERISA-covered employee health plans of the protections
afforded by the state
ISSUES ADDRESSED 1) What is the ERISA-covered plan in this case? 2) Does ERISA 514(a) preempt state common law claims
and state wrongful death
STATEMENT OF FACTS AND PROCEEDINGS For the purposes of this amicus brief, the Secretary has assumed the truth of all factual allegations and representations of the parties. The Secretary's legal arguments are based on that assumption. Recognition International ("Recognition")
sponsored an employee benefit plan ("the
Recognition Plan") that provided, among other benefits, for basic health
care services such
as medical, surgical, and hospital care for eligible employees of Recognition.
5, Affidavit
of Kate Manzone dated July 3, 1997 ("Manzone Affidavit") (attached
as Exhibit C to the
Kaiser Texas and Recognition entered into
a Group Medical and Hospital Service
Agreement effective January 1, 1995 ("Service Agreement"), whereby
Kaiser Texas agreed
to arrange for and provide certain medical and hospital services to
those employees and their
eligible dependent family members who enrolled with Kaiser Texas through
the Recognition
Appendix A. Kaiser, Inc., is the parent corporation of Kaiser Texas. 4, Affidavit
of Victoria Zatkin
dated July 3, 1997 (attached as Exhibit B to the Kaiser defendants'
Motion for Partial
Summary Judgment).
By January 1995, Ronald Henderson, an employee
of Recognition, had enrolled with
Kaiser Texas through the Recognition Plan. 5, 7, Manzone Affidavit.
During July and
August of 1995, Mr. Henderson received medical treatment and other
medical and hospital
services under the Service Agreement for chest pain and other cardiac
symptomatology.
The plaintiffs filed the current lawsuit in the 14th Judicial District, Dallas County, Texas, based on negligence and medical malpractice. Specifically, the plaintiffs' negligence claims that are at issue in this motion are based on the allegations that Kaiser, Inc., and Kaiser Hospitals breached their direct duties of due care in providing adequate and necessary medical treatment for, and Kaiser Texas is vicariously liable for the breach of the duties of due care of others for, failing to: provide adequately trained health care providers for Mr. Henderson, either through the HMO or through outside referrals; provide adequate training for its employees; establish adequate quality assurance and quality control programs, an adequate system of hiring and credentialing of physicians, and a medical care system with continuity of medical treatment for the subscribers under the Service Agreement; adequately supervise the quality of medical care and treatment provided to the subscribers under the Service Agreement; employ unimpaired and/or competent physicians; have adequate policies with respect to the treatment, testing, and/or referral of patients with symptoms and/or conditions like Mr. Henderson; and maintain continuity of care and adequate communication between the health care providers. Vif-m, o, t, v-w, IXf-n, p, and Xf-j, l-n, p, r, Complaint. The plaintiffs further allege in the claims that are at issue in this motion that Kaiser Hospitals directly breached its duties of due care in providing adequate and necessary medical treatment by entering into financial arrangements that discouraged adequate medical treatment and by creating and fostering an environment that perpetrated negligent conduct, including but not limited to adopting programs that created financial disincentives for adequate medical care. Xk, o, Complaint. The plaintiffs allege in the claims that are at issue in this motion that Kaiser, Inc., and Kaiser Hospitals directly breached their duties of due care in providing adequate and necessary medical treatment by failing to ensure that Kaiser Texas and the Medical Association had sufficient, adequately trained physicians. IXo, Xq, Complaint. The plaintiffs allege in the claims that are
at issue in this motion that Kaiser Texas
breached its duties of due care in providing adequate and necessary
medical treatment by
establishing, through its corporate structures and through its contractual
and financial
arrangements with the Medical Association and Kaiser, Inc., a medical
care/health care
The Complaint also contains allegations regarding the corporate status of each individual defendant and their vicarious liability and responsibility as agents and/or alter egos of each other. The plaintiffs contend in a claim that is at issue in this motion that Kaiser, Inc., and Kaiser Texas must be considered a single entity for the purposes of assessing liability and damages, and that Kaiser Texas and the Medical Association must also be considered a single entity for the purposes of assessing liability and damages. XIX, Complaint. Finally, the plaintiffs allege in a claim
that is at issue in this motion that Kaiser Texas
and Kaiser, Inc., engaged in fraud in that, while holding themselves
out as separate, non-profit corporations formed andoperated solely for
the purpose of providing health care for
their members, they were in fact conceived and operated in a manner
that provided financial
The Kaiser defendants' Motion for Partial Summary Judgment is currently before this honorable Court, with oral argument scheduled for August 7, 1997. On July 24, 1997, the Secretary filed a Motion for Leave to File Brief Amicus Curiae With Respect to [the Kaiser Defendants'] Motion for Partial Summary Judgment. ARGUMENT I. THE RECOGNITION PLAN IS AN ERISA PLAN AND KAISER IS A MEDICAL SERVICES PROVIDER TO THE PLAN The plaintiffs dispute whether the Kaiser defendants have made a sufficient factual showing that an ERISA plan exists in this case for summary judgment purposes. The Secretary, of course, takes no position as to any factual dispute or the sufficiency of the Kaiser defendants's showing. Based solely on the Secretary's review of the record and understanding of the facts, she believes that an ERISA plan exists, as discussed below. Under ERISA, a "welfare plan" includes a "plan,
fund, or program" established by
an employer to provide medical or health benefits to its employees
"through the purchase of
insurance or otherwise." ERISA 3(1), 29 U.S.C. 1002(1).
The Fifth Circuit has
adopted a three part test to determine whether a plan meets this statutory
definition and is,
therefore, an ERISA plan. Under this test the Court must determine
whether the plan: "(1)
exists; (2) falls within the safe-harbor provision established by the
Department of Labor; and
(3) satisfies the primary elements of an ERISA employee benefit
plan' -- establishment or
maintenance by an employer intending to benefit employees." Meredith
v. Time Ins. Co.,
The Secretary will address the related first
and third steps of the test before discussing
the safe-harbor regulation. Under the first step, the Court must
find that a plan exists "if
from the surrounding circumstances a reasonable person can ascertain
the intended benefits, a
class of beneficiaries, the source of financing, and procedures for
receiving benefits."
A formal document designated as "the Plan"
is not required to establish that an
Memorial Hospital System v. Northbrook Life Insurance Co., 904 F.2d 236, 241 (5th Cir. 1990) (footnote omitted). In Memorial Hospital, the employer established and maintained a plan (although not in a formal document) by purchasing health insurance for its employees and their dependents, paying premiums to the insurer, and collecting and forwarding employee contributions to the insurer. 904 F.2d at 241. The Fifth Circuit found that this evidence "clearly shows" the employer's "intent to provide its employees with a welfare benefit program through the purchase and maintenance of a group insurance policy." Id. The instant case appears to present virtually
identical facts. Here, there is no
document in the record designated "the Recognition Plan." Nevertheless,
the Recognition
Plan is the arrangement by which Recognition undertook to provide health
care to its
employees and their dependents by contracting with Kaiser Texas for
its employees, paying
In an early case concerning the definition
of an ERISA plan, the Fifth Circuit stated
that ERISA does not regulate "bare purchases of health insurance" where
the "purchasing
employer neither directly or indirectly owns, controls, administers
or assumes responsibility
for the policy or its benefits." Taggert Corp. v. Life &
Health Benefits Administration,
In Memorial Hospital, the Fifth Circuit sharply
distinguished Taggert and limited it to
its peculiar facts. Unlike Taggert, Memorial Hospital and the instant
case do not involve the
bare purchase of insurance by a lone employee through a MET.
Rather, as discussed above,
Memorial Hospital and the instant case involve employers that established
a plan to provide
Further, part two of the Fifth Circuit test,
the safe-harbor regulation, does not exclude
the Recognition Plan from ERISA coverage. The safe-harbor regulation
provides that the
term "employee welfare benefit plan" does not include a group insurance
program offered by
an insurer to employees under which: (1) the employer does not contribute
to the plan; (2)
Based on the present record, at least elements 1 and 3 cannot be satisfied because Recognition makes contributions in the form of premiums and performs functions beyond just allowing Kaiser Texas to publicize the program to employees and remitting employee contributions from payroll deduction. See Manzone Affidavit Ex. A at 1; 9, Manzone Affidavit. Therefore, the Recognition Plan is not excluded from ERISA coverage by this regulation and qualifies as an ERISA plan under the three step test in Meredith. Recognition is the Plan's administrator. Under ERISA, the plan administrator is defined as: (i) the person
so designated by the terms of the instrument under which
(ii) if an administrator is not so designated, the plan sponsor. . . . ERISA 3(16)(A)(i) and (ii), 29 U.S.C. 1002(16)(A)(i) and (ii). There appears to be no evidence that Kaiser Texas was specifically designated the plan administrator in the Recognition Plan, within the meaning of ERISA 3(16)(A). Under ERISA, therefore, the Plan sponsor, Recognition, is the administrator. As administrator, Recognition selected Kaiser Texas to be the medical service provider for the Recognition Plan and perform the other functions described above. Kaiser Texas, on the other hand, is not an
ERISA plan and is not the administrator of
the Recognition Plan under ERISA 3(16)(A). Rather, it
is a medical service provider to
the Recognition Plan. Kaiser Texas does have certain plan administrative
functions. The
Service Agreement provides that Kaiser Texas is a named fiduciary to
review claims under
II. ERISA 514(a) DOES NOT PREEMPT STATE LAW IN FIELDS OF TRADITIONAL STATE REGULATION, SUCH AS THE COMMON LAW OF NEGLIGENCE AND WRONGFUL DEATH STATUTES, ABSENT A SHOWING THAT PREEMPTION WAS THE CLEAR AND MANIFEST PURPOSE OF ERISA A. ANALYSIS OF WHETHER A STATE
LAW IS PREEMPTED BY ERISA
The broad language of ERISA's general preemption clause, Section 514(a), states that ERISA preempts "any and all State laws insofar as they . . . relate to any employee benefit plan." 29 U.S.C. 1144(a) (emphasis added). However, application of this broad language to the claims presented in this case is not as simple as is suggested by the Kaiser defendants' bold demarcation of the claims into medical malpractice claims and "anti-managed care claims." Rather, an analysis of each of the claims presented and the state law under which these claims arise is required in light of the Supreme Court's decision in New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance Co., 514 U.S. 645 (1995). In Travelers, the Supreme Court concluded
that ERISA's "relates to" language was
not intended to modify the starting presumption that Congress did not
intend to supplant state
law. See De Buono v. NYSA-ILA Medical & Clinical Services
Fund, 117 S. Ct. 1747,
1751 (1977). The Supreme Court found that a mere analysis of
the phrase "relate to" is not
We simply must go beyond the unhelpful text
and the frustrating difficulty of defining
Id. at 656. Accordingly, the Supreme Court concluded that, in
passing Section 514(a),
to ensure that plans and plan sponsors would
be subject to a uniform body of benefits
Travelers, id. at 656-57, quoting Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142 (1990). Thus, preemption applies only where it is necessary to achieve these purposes. The Supreme Court held that the courts must
start with the "presumption that
Congress does not intend to supplant state law." Travelers, 514
U.S. at 654. Moreover,
B. BECAUSE THE CLAIMS IN THIS
CASE ARE BASED UPON LAWS
The Supreme Court has on three occasions addressed
the question of the traditional
fields of state regulation that would trigger the ERISA presumption.
As noted above, in
Travelers the field of "general health care regulation" was recognized
as one such field. Id.
In California Division of Labor Standards Enforcement v. Dillingham
Construction, 117 S.
In DeBuono, a Taft-Hartley ERISA health plan
owned and operated a hospital for the purpose of providing benefits to its participants. The Supreme
Court found that a state
hospital tax paid by the ERISA plan was not preempted, even though
ERISA's fiduciary duty
provisions would have applied to the operation of the hospital.
The argument against
The Texas common law of negligence with respect
to the provision and arrangement
of medical care and the Texas wrongful death statute at issue in this
case are, without
question, laws relating to traditional fields of state regulation. They are also part of a broad
spectrum of state laws regulating health care in that they provide
remedies for negligence in
the delivery of health care. Therefore, the Kaiser defendants
bear "the considerable burden
of overcoming the starting presumption that Congress does not
intend to supplant state
law,'" De Buono, 117 S.Ct. at 1752, by demonstrating that it was the
clear and manifest
purpose of Congress to preempt the Texas law. As explained below,
the Kaiser defendants
C. ERISA 514(a) DOES NOT PREEMPT
THE STATE LAW CLAIMS
"[N]othing in the language of [ERISA] or the
context of its passage indicates that
Congress chose to displace general health care regulation, which historically
has been a
matter of local concern . . . ." Travelers, id. at 656.
In light of the Supreme Court's
pronouncement, the Kaiser defendants simply cannot show that Congress
intended to supplant
Where ERISA provides law governing an area, such as plan administration, preemption of state law in that area is very broad. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987) (state tort claim based on denial of claim for benefits is preempted). In the instant case, however, care must be taken to distinguish the Kaiser defendants' functions administering the Recognition Plan and their functions as corporations in the business of arranging and providing medical services for a fee to the subscribers to the Service Agreement. The distinction between plan administration and the provision of non-administrative services, such as health care, to a plan can be better understood by examining the essential elements that constitute a plan and the core administrative functions of a plan. ERISA 3(1), which defines "employee welfare
plan," does not have a separate
definition of the terms "plan, fund or program," but the essentials
of a plan have been
interpreted to be "[a]t a minimum, . . . the existence of intended
benefits, intended
beneficiaries, a source of financing, and a procedure to apply for
and collect benefits."
Donovan v. Dillingham, 688 F.2d 1367, 1371 (11th Cir. 1982).
The administrative
procedures needed for a plan to function, the "administrative realities"
of plans, include
"determining eligibility, calculating benefit levels, making disbursements,
monitoring the
availability of funds for benefit payments, and keeping appropriate
records to comply with
reporting requirements." Fort Halifax Packing Co., Inc. v. Coyne,
482 U.S. 1, 9 (1987)
(ERISA preempts state law that would subject these functions to conflicting
requirements of
different states); Smith v. Jefferson Pilot Life Insurance, Co., 14
F.3d 562, 570 (11th Cir.
Here, the ERISA plan is the Recognition Plan,
which is the arrangement by which
Recognition undertook to provide medical care benefits to eligible
employees by contracting
with Kaiser Texas for these employees to become subscribers under the
Service Agreement.
As subscribers to the Service Agreement, Recognition employees were
entitled to medical
In its capacity as a provider and arranger
of medical services, Kaiser Texas has
contracted with other service providers (such as Kaiser Hospitals and
the Medical
Association) for doctors and hospitals to provide direct care to the
subscribers under the
Service Agreement. The Kaiser defendants also establish procedures
for the delivery of When entering into these contracts and establishing
these procedures, the Kaiser
defendants were not acting as administrator of the Recognition Plan
or of any other ERISA
plan, but rather on their own corporate behalf. Any decision
made by the Kaiser defendants
regarding the payment of its health care providers was a business decision
made in its
If these decisions were considered to be acts of plan administration, it would lead to an absurd result. As the Kaiser defendants have a financial incentive to arrange for and provide medical care at the least expense to itself, even as non-profit corporations, these decisions are business decisions. Because determining the compensation of its health care providers is a discretionary act, it would be a fiduciary act under ERISA 3(21)(A), 29 U.S.C. 1002(21)(A), if performed on behalf of a plan; therefore, Kaiser defendants could not effectively conduct themselves as a business because of an inherent conflict of interest. Their interest in keeping the corporations financially sound would conflict with their duty as a fiduciary to act solely in the interests of the participants and beneficiaries under ERISA 404(a)(1)(A). For example, in selecting their doctors or other health care providers and in determining how to compensate them, the Kaiser defendants would not be permitted to consider their own costs or act in their own interests, but would be required to act solely in the participants' interests. Of the three Kaiser defendants, only Kaiser Texas performed any administrative functions for the Recognition Plan. Under the Service Agreement, the only administrative function performed by Kaiser Texas for the Recognition Plan was the review of claims. See Manzone Affidavit Ex. A at 1. The state laws at issue here have nothing to do with actions Kaiser Texas may have taken in administering the Recognition Plan. They do not subject the administration of the Recognition Plan to conflicting state laws and, therefore, do not interfere with the clear and manifest purpose of Congress in enacting ERISA 514(a). The state laws at issue all relate to Kaiser Texas' other role as a medical service provider and are within areas of traditional state regulation that Congress intended to preserve. D. THE KAISER DEFENDANTS HAVE
NOT DEMONSTRATED THAT IT
The Kaiser defendants contend that certain of the plaintiffs' claims, alleging injury caused by the negligence of the Kaiser defendants involving financial arrangements among themselves and with other health care providers that discouraged adequate or necessary care (characterized by the Kaiser defendants as "anti-managed care" claims, but see note 4, supra) are preempted. However, the Kaiser defendants have failed to carry their burden of demonstrating that preempting mis-managed care claims was a clear and manifest purpose of Congress in enacting ERISA 514(a). Accordingly, the presumption of non-preemption prevails. The Kaiser defendants have not demonstrated that it was the clear and manifest purpose of Congress to preempt state laws which subject them to state regulation in their capacity as health care, or "managed care," providers. Actions taken by the Kaiser defendants in their capacity as a service provider are, therefore, subject to state laws regulating the quality of the service provided, although state laws regulating their actions taken reviewing claims for the Recognition Plan under the Service Agreement are preempted. The recent decision in Shea v. Esenstein,
107 F.3d 625 (8th Cir. 1997), relied upon
by the Kaiser defendants, is not analogous to the instant case in that
the action brought in
Shea was based Medica's failure to disclose incentive fees, while in
the instant case the
plaintiffs do not allege that there is a duty under state law to disclose
the incentive fee
The Kaiser defendants also rely upon the holding
in Lancaster v. Kaiser Foundation
Health Plan of Mid-Atlantic States, Inc., 958 F. Supp. 1137 (E.D. Va.
1997), which again
demonstrates the importance of identifying which elements of a service
providers' activities
are performed in their capacity as a service provider, and which are
performed as an
The Lancaster court's characterization of
a claim for negligent arrangement of
medical care as a claim involving the denial of a benefit is flatly
contrary to Dukes v. U.S.
Healthcare, Inc., 57 F.3d 350 (3d Cir. 1995). In Dukes, which
was cited with approval by
the Lancaster court as "blaz[ing] precisely the analytical trail followed
here," Lancaster, 958
Nothing in the complaints indicates that the
plaintiffs are complaining about their
Dukes, 57 F.3d at 356-57. It is important to note that the malpractice
complained of by Dukes was both the
failure and refusal of the medical providers to perform additional
blood studies, and that the
malpractice complained of by the Viscontis was, in part, the failure
of Serena's obstetrician
to provide additional treatment for the treatment of her symptoms of
preeclampsia. As in
Dukes, the plaintiffs here are not alleging that the medical providers
failed to perform
additional testing because the ERISA plan refused to pay or otherwise
provide for medical
services, or that the plan in any way withheld some quantity of plan
benefits due. Instead, as
in Dukes, the plaintiffs claim that the Kaiser defendants' actions
were a legally significant
The simple fact that negligent medical treatment
may cost less than competent medical
treatment, and may therefore affect the "quantity" of medical care
provided, does not serve
to trigger preemption under the Dukes analysis. It is, therefore,
obvious that court in
Lancaster failed to use the same benchmark as the Dukes court in determining
whether the
The Fifth Circuit has specifically stated that malpractice claims arising from decisions "made by a doctor in the course of treatment" are not preempted. Corcoran v. United Healthcare, Inc., 965 F.2d 1321, 1331 n.16 (5th Cir. 1992). In Corcoran, the health plan sponsored by Mrs. Corcoran's employer had a cost-containment feature known as "utilization review." Id. at 1323. That provision required plan participants to obtain advance approval (or "pre-certification") for overnight hospital admissions and certain medical procedures. Id. Unless pre-certification was obtained, the plan would not pay for such hospitalizations or procedures. Id. The employer contracted with United Healthcare, Inc. ("United") to make the pre-certification decisions for the plan. Toward the end of her pregnancy, Mrs. Corcoran's
physician ordered her hospitalized
so that he could monitor the fetus around the clock. Id. at 1322-23.
Mrs. Corcoran sought
pre-certification from United for this hospitalization. United
denied the request on the
grounds that the hospitalization was unnecessary. Id. at 1324.
The fetus went into distress
In a straight application of Pilot Life, the court held that ERISA preempted the Corcoran's negligence action. As in Pilot Life, the state common law cause of action asserted by the Corcorans arose from the denial of a benefit under an ERISA plan and, therefore, was preempted. Id. at 1332. The court recognized that United necessarily exercised medical judgment in determining whether to grant the requested hospitalization, but found that United did so only in the "context of making a determination about the availability of benefits under the plan." Id. at 1331. United's medical decision was not made in the context of treating Mrs. Corcoran as a patient, that is, United's decision was not one "made by a doctor in the course of treatment." Id. at 1331 n.16. The court expressly recognized, without disapproval, the cases holding that negligence actions against physicians for decisions made in the course of treatment are not preempted and found them distinguishable on their facts only. Id. citing, e.g., Independence HMO v. Smith, 733 F. Supp. 983 (E.D. Pa. 1990). Corcoran does not stand for the proposition
that state claims relating to an HMO cost-containment program are preempted.
It only found that the utilization review decisions are
determinations of claims for benefits, and state claims arising therefrom
are preempted under
Pilot Life. In Corcoran, claims for negligence in the delivery
of medical care, i.e., a
The courts have confirmed the distinction
between actions based on the denial of a
claim for benefits, which are preempted, and actions based on tortious
conduct in the
delivery of medical care, which is not preempted in cases where the
HMO is alleged to be
vicariously liable for the negligence of its doctors. The Tenth
Circuit has ruled that a claim
In Jass, Betty Jass received medical care from PruCare,
a managed care program,
through an ERISA covered health plan sponsored by her husband's employer.
88 F.3d at
1485 She underwent complete knee replacement surgery and subsequently
requested
rehabilitation treatment. Id. at 1485 PruCare determined
that rehabilitation was medically
The other apparent rationales for the court's holding in Jass are erroneous. The court stated that "[t]o allow a vicarious liability claim against an ERISA Plan for the alleged negligence of a listed physician would require multi-state plans to vary their plan administration to avoid strict vicarious liability under differing state laws." Id. This is wrong because it equates the HMO to the ERISA plan. As fully discussed above, the HMO is not an ERISA plan, it is a separate corporation that provides services to a plan. Differing state laws on vicarious liability affect only the HMO's liability; the plan has no liability. The court in Jass also stated that the claims relate to an ERISA plan because "to determine whether an actual or apparent agency relationship existed between [the doctor] and PruCare would require an examination of the health care benefit plan to determine the relationship between [the doctor], PruCare and Jass." Id. This also is erroneous because the relation between the doctor and PruCare has nothing to do with the structure of the plan; it relates only to how PruCare conducts its business of arranging for medical care. Further, under Travelers, a claim could not be preempted simply because it requires an examination of a benefit plan. Finally, the court found that, absent the plan,
Jass probably would not have gone to
the doctor with whom PruCare contracted. This rationale is also
erroneous under Travelers.
The same faulty rationales in Jass are found in cases were courts have
found claims against
HMOs for negligence in arranging for or providing medical care to participants
in ERISA
Accordingly, application of Travelers and
its progeny requires the conclusion that the
claims in this case are not preempted.
For the foregoing reasons, the Secretary respectfully
suggests that the Kaiser
defendants's Motion for Partial Summary Judgment should be denied as
to the issues
addressed hereinabove.
For the Secretary of Labor
J. DAVITT McATEER
MARC I. MACHIZ
KAREN HANDORF
___________________________________
I hereby certify that a true and correct copy of
the foregoing Secretary of Labor's
Brief as Amicus Curiae With Respect to Defendants Kaiser Foundation
Health Plan of Texas,
Kaiser Foundation Health Plan, Inc., and Kaiser Foundation Hospital's
Motion for Partial
Summary Judgment was sent to the following by FedEx overnight courier
this 2nd day of
John A. Scully, Esq.
Tony D. Crabtree, Esq.
McCauley, MacDonald & Devin 3800 Renaissance Tower 1201 Elm Street Dallas, TX 75270 |