Patients’ Right-to-Sue Case Reaches Supreme Court

March 22, 2004

The U.S. Supreme Court is scheduled to hear arguments on March 23 in a pivotal case concerning the right of patients to sue their health plans. The case pits state laws granting such rights against federal law which some say pre-empts any state provisions.

At issue in this case is whether the Employee Retirement Income Security Act (ERISA) preempts state law claims by ERISA plan participants or beneficiaries who assert that their employer’s health care plan did not cover or excluded certain services or products.

ERISA was enacted in 1974 to give the federal government regulatory power over pension and other benefit plans offered to employees by their employers. Because employers often provide employees with health care plans under the terms of employment, ERISA applies to most people who obtain their health coverage through their jobs.

Liability insurers are watching closely. If those who support ERISA preemption are victorious, the remedies for plaintiffs will be restricted because ERISA does not permit punitive damages or other awards available under some state laws.

In this particular case, Juan Davila, a participant in an employee health benefit plan insured by Aetna, sued the company under Texas law for damages allegedly resulting from a medication that his doctor prescribed after Aetna, in accordance with the terms of the health plan, determined that coverage was not available for a different medication.

Aetna removed the case to federal district court, which concluded that Davila’s state-law claims were preempted by ERISA. The court of appeals reversed the lower court decision, holding that Davila’s claims were not preempted.

The Supreme Court last November agreed to combine the case with another ERISA matter and hear both at the same time. The cases are Aetna Health Inc. v. Davila, U.S., No. 02-1845, cert. granted 11/3/03 and CIGNA HealthCare of Texas Inc. v. Calad, U.S., No. 03-83, cert. granted 11/3/03).

The Supreme Court has previously addressed ERISA preemption of state HMO laws. In 2003, in Kentucky Association of Health Plans Inc. v. Miller, the high court unanimously found that ERISA did not preempt Kentucky’s “any willing provider” law.

A year earlier, in Rush Prudential HMO Inc. v. Moran, the court found that ERISA did not preempt an Illinois statute allowing for independent medical reviews of HMO decisions.

Texas became the first state to give its citizens the right to sue their health plans when it passed the Texas Health Care Liability Act in 1997. Today, in addition to Texas, 10 other states — Arizona, California, Georgia, Maine, New Jersey, North Carolina, Oklahoma, Oregon, Washington and West Virginia — have similar laws giving patients the right to sue, plus the right to independent or external reviews.

John B. Shely, a partner with the Dallas law firm Andrews Kurth LLP and a lawyer representing Aetna in the Supreme Court case, said, “Establishing that federal law controls this area is important, both for employers and for their employees. Multi-state employers and small employers alike must be able to rely upon a uniform and predictable system of remedies and liability when they contract to provide healthcare coverage for their employees. Likewise, employees will experience even more rapidly rising healthcare costs if every case involving an adverse result becomes a tort claim instead of having been quickly resolved as a payment dispute from the outset.”

But the National Council of State Legislators has a different view:
“A ruling by the court that medical treatment decisions made by HMO physicians, surgeons, and nurses are immune from applicable state standards of care would eliminate an important safeguard for citizens enrolled in HMOs,” the groups maintains. “It would also erode the authority of the states in the area of health care regulation by invalidating a large body of state law designed to provide remedies for persons who receive medical treatment that falls below the standards set by the states.”

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