remedies under ERISA

The previous essay mentioned that the remedy provision of ERISA was so limited in 1974 because no one could have imagined the complexity of the health care delivery system which developed in the 1980s and 1990s in America. That remedy provision of ERISA is found in sec. 502(a)(1)(B):

"A civil action may be brought--(1) by a participant or beneficiary--...(B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan," 29 USC 1132(a)(a)(B).

As the Supreme Court has pointed out, this remedy scheme eliminates any kind of consequential or punitive damages. All you get is what the terms of the "plan" provide.

Well, the major change in American health care provision in the 1980s and 1990s was the explosion of PPO's (preferred provider networks) and HMO's (health maintenance organizations). One of their goals was to cut the dramatic and runaway costs of provision of health care. Health care expenses rose, it was argued, not simply because there was no "discipline" in the system (i.e., physicians had no incentive to cut costs) but because the rapid growth of sophisticated and expensive medical equipment and procedures (such as magnetic resonance imagery). In addition, the providers became the insurers, so the provision and payment for services was given by the same entity. Thus, where there was no systemic conflict between the doctors and insurers under the "old" system, such a tension was implicit in the new system. Every decision made by a doctor was potentially susceptible to review by the "business" people. Cheaper alternatives for treatment were sought. Shortened hospital stays became the rule. Often the insurer/provider seemed to be the adversary of the policy holder. Of course much of this "mess" was papered over by platitudes and the positive experience of many people with their physicians.

Back to Davila

Now we can understand two things: (1) why Davila's and Calad's insurers decided to pursue cheaper (and even damaging) health care alternatives for them; and (2) why the remedies that ERISA provided were so scanty. The patients' rights movement in the 1990s arose as a result of (1); legislation was passed in that decade to try to level the playing field between the patient and his/her medical provider. When cases actually made it to court, however, relying on the state laws allowing claims for negligence against HMOs, the HMOs attorneys would remove the cases to federal court under 502 above, and then argue that ERISA, as a "comprehensive" scheme to deal with health insurance plans passed by Congress, would "preempt" any state law causes of action that a person might have. This meant that the ERISA remedies would be the sole remedies available to a person. Since those remedies just required that HMOs enforce the terms of their policies, the HMOs were off scot-free, since they argued that this was exactly what they were doing--enforcing their insurance contracts. For example, in Davila, their basic argument was that the decision to deny reimbursement for Vioxx and pay only for a cheaper drug (which actually did damage to Davila) was precisely what the insurance contract provided for. Thus, since the only remedy a person has under ERISA is to get what the insurance contract provided for, the insurers argued that Davila and Calad had no claim to anything from the court.

And the Supreme Court accepted this logic. It did so on the basis of its numerous precedents, especially its 1987 Pilot Rock decision. ERSIA completely preempts state law. Though there were certain complexities in interpretation that grew up between Pilot Rock and Davila, the basic point was that ERISA remedies would preempt state remedies.

Conclusion

Thus, the decision was a sort of "slam dunk" decision for the Court, even though it resulted in denying the claims of Davila and Calad. But the two concurrers, Ginsburg and Breyer, pointed out the "gaping wound" created in our jurisprudence because of the limited remedies under ERISA. As one court said: "The vital thing..is that either Congress or the Court act quickly, because the current situation is plainly untenable." That is, we have an obvious situation where HMO's are given a rather free hand to deny coverage for their patients with few if any repercussions for their decision. Even if their denial is of something clearly within the plain language of the insurance contract, Justice Thomas gives cold comfort to the sufferers. They can simply "pay" for the service that should have been approved and then sue for reimbursement. Hello? Who has the money to put out of pocket medical expenses in the five or six figures for coverage that was already yours, and then wait around for years while the courts order the HMO to pay for what the policy provides for and do all this without much hope that you would get attorney fees and costs reimbursed to you also? What world, in fact, does Justice Thomas inhabit?

As one online review of this decision says: "The Court's ruling paves the way for HMOs to deny medical benefits to patients without the the threat of being held accountable in a court of law." Since one of the functions of law is to deter egregious behavior by holiding out the possiblity of punishment for it, law cannot function as it was meant to function in the ERISA preemption context.

So, Justices Breyer and Ginsburg were reduced at the end to expressing their wish that Congress would act by revising ERISA. That hasn't yet happened. And, with the Administration mired to its neck in Iraq and Afghanistan, do you think that the President will get on national TV any time in the near future and say, "Oh, yes, my fellow Americans, about the limited remedies in ERISA..."? Dream on.

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