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Supreme Court To Consider ERISA Preemption Cases

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NU Online News Service, Nov. 3, 2003, 5:53 p.m. EST — Washington

The U.S. Supreme Court has agreed to decide whether managed care patients can sue their plans in state courts in connection with allegations of negligence arising from adverse medical necessity decisions.

At issue is whether state court actions against employer-sponsored health maintenance organizations are preempted by the Employee Retirement Income Security Act.

In two cases?Aetna v. Davila and CIGNA v. Calad?the 5th Circuit Court of Appeals ruled that ERISA does not preempt state law actions when HMOs make decisions that involve both eligibility and treatment.

Because ERISA does not preempt state law actions when HMOs make decisions that involve treatment, the patients in the two cases can sue their plans in state court for failure to use ordinary care in making decisions on medical necessity, the 5th Circuit ruled.

In one case, Ruby Calad, who was covered by a health plan run by a unit of CIGNA Corp., Philadelphia, underwent a hysterectomy. CIGNA allowed Calad a one-day hospital stay, which is standard, even though the attending physician recommended a longer stay.

Calad suffered complications and had to return to the hospital a few days later. She charged that the complications were caused by her early release.

In the other case, Juan Davila, who suffers from diabetes and arthritis, was covered by an Aetna managed care plan. His physician prescribed the medication Vioxx for Davila’s arthritis pain.

According to the 5th Circuit Court of Appeals, studies show that Vioxx has a lower rate of gastrointestinal toxicity than other drugs on Aetna’s formulary.

However, Aetna required Davila to try two different medications first. Aetna said it would evaluate him for Vioxx use only if he suffered a detrimental reaction to the two other drugs.

After three weeks on one of the drugs, Davila was rushed to the hospital suffering from bleeding ulcers. He is now unable to take any medication absorbed through the stomach.

Both Calad and Davila sued their respective health plans under the Texas Health Care Liability Act, alleging that the plans acted negligently in making medical necessity decisions.

The health plans challenged the lawsuits in federal court, claiming that state law actions are preempted by ERISA, and a U.S. District Court agreed.

However, the 5th Circuit said the lawsuits are not preempted. Citing U.S. Supreme Court precedents, the 5th Circuit said that HMOs generally make three types of decisions?eligibility decisions, treatment decisions and mixed eligibility and treatment decisions.

It is unlikely that ERISA was intended to preempt mixed decisions, because to do so would effectively preempt state medical malpractice law, the 5th Circuit said.

There is no clear evidence that Congress ever intended that ERISA create a federal common law of malpractice, the 5th Circuit said.

Thus, the 5th Circuit said, a lawsuit based on state medical malpractice law that involves a mixed decision is not preempted.