In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 03-2841

JIM KLASSY and BARBRA KLASSY,

Plaintiffs-Appellants,

v.

PHYSICIANS PLUS INSURANCE COMPANY

and GARY JOHNSON,

Defendants-Appellees.

____________

Appeal from the United States District Court 

for the Western District of Wisconsin.

No. 03 C 49—Barbara B. Crabb, Chief Judge.

____________

ARGUED JANUARY 22, 2004—DECIDED JUNE 15, 2004

____________

Before EASTERBROOK,MANION, andROVNER, Circuit Judges.

MANION, Circuit Judge. Jim and Barbra Klassy sued

Physicians Plus Insurance Company (“Physicians Plus”)

and Dr. Gary Johnson, alleging numerous claims stemming from Physicians Plus’s refusal to approve payment for

a bloodless hip surgery for Barbra, who is a practicing

Jehovah’s Witness. The district court dismissed the Klassys’

claims, one for failure to state a claim and the others as

being completely preempted by the Employment Retire-
2 No. 03-2841

ment Income Security Act of 1974. 29 U.S.C. §§ 1001, et seq.

(“ERISA”). The district court then gave the Klassys the

opportunity to amend their complaint to state a claim under

ERISA, but they instead filed this appeal. On appeal, the

Klassys challenge only the district court’s holding that

Barbra’s medical malpractice claim against Dr. Gary

Johnson is completely preempted by ERISA. We affirm.

I.

At the relevant time, Jim and Barbra Klassy had health

insurance with Physicians Plus. The Klassys’ insurance plan

was an HMO and, as such, the Klassys were required to

obtain treatment from a Physicians Plus physician, unless a

plan physician was unable to provide the necessary treatment. Accordingly, in 2001, when Barbra began experiencing pain in her hip, she went to a Physicians Plus primary

care physician. The primary care physician in turn referred

Barbra to Dr. Harvey Barash, an orthopedic surgeon and

plan physician. After seeing Dr. Barash, Barbra requested

authorization from Physicians Plus for a surgical revision to

her hip. This request was passed on to Dr. Gary Johnson, a

Physicians Plus medical director. Dr. Johnson reviewed Dr.

Barash’s notes and concluded that the procedure was not a

covered benefit because the need for the surgery had not

been “definitely established.” Dr. Barash disagreed with Dr.

Johnson’s findings and wrote him, explaining that Barbra

had a compelling need for surgery. There was an added

wrinkle: The Klassys are both Jehovah’s Witnesses and they

believe that the Bible prohibits blood transfusions. Dr.

Barash thus noted that he supported authorization of Dr.

Carl Nelson to perform the surgery, because he was the only

known physician who could perform the procedure in

compliance with Barbra Klassy’s religious beliefs.
No. 03-2841 3

1 Under the Plan, the Plan was required to pay for out-ofnetwork providers if Plan doctors could not provide “medically

indicated” treatments.

Dr. Johnson refused to authorize payment to Dr. Nelson

because Dr. Nelson was an “out-of-network” doctor, but Dr.

Johnson agreed to authorize the surgery by a plan physician.1

 However, because no plan physician would agree to

perform a “bloodless” surgery, Barbra traveled to Arkansas

and paid for the procedure herself. After surgery, Jim and

Barbra Klassy filed a complaint against Dr. Johnson and

Physicians Plus in Wisconsin state court.

The Klassys alleged in their complaint that Physicians

Plus violated Title VII by refusing to accommodate Barbra’s

religious beliefs, asserting that Physicians Plus should be

treated as an employer because it was acting as an agent of

Jim’s employer. The complaint also alleged six state law

claims, including the torts of bad faith, medical malpractice,

and negligence, as well as claims for breach of contract,

breach of the implied covenant of good faith and fair

dealing, and estoppel. The defendants removed the case to

federal court. The Klassys then filed a motion to remand

their state law claims, contending that the medical malpractice claim raised novel issues of state law. A few weeks later,

the defendants filed a motion to dismiss. 

The district court denied the Klassys’ motion to remand

and granted the defendants’ motion to dismiss, concluding

that Physicians Plus was not an employer for purposes of

Title VII and that the state law claims were completely preempted by ERISA. The Klassys appeal. On appeal, the

Klassys challenge only the dismissal of their state law

malpractice claim against Dr. Johnson.
4 No. 03-2841

II.

The Klassys argue that the district court erred in concluding that their medical malpractice claim against Dr.

Johnson was preempted by ERISA because their claim is

a state law claim for medical malpractice. Although the

Klassys presented their claim as a state law malpractice

claim, if the claim is within the scope of Section 502(a) of

ERISA it is completely preempted, no matter how the

Klassys have characterized it. Jass v. Prudential Health Care

Plan, Inc., 88 F.3d 1482, 1488 (7th Cir. 1996). Section 502(a)

provides that “a civil action may be brought . . . by a participant or beneficiary—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 U.S.C. § 1132(a)(1). 

This court has set forth three factors for use in determining whether a claim is within the scope of Section 502(a) and

thus completely preempted: “[W]hether the plaintiff [is]

eligible to bring a claim under that section; whether the

plaintiff’s cause of action falls within the scope of an ERISA

provision that the plaintiff can enforce via § 502(a); and

whether the plaintiff’s state law claim cannot be resolved

without an interpretation of the contract governed by

federal law.” Jass, 88 F.3d at 1487.

These factors make clear that the Klassys’ claim, although

framed as a medical malpractice claim, is really a § 502(a)

denial of benefits claim. First, as plan participants, the

Klassys are eligible to bring a claim under Section 502(a). See

29 U.S.C. § 1132(a)(1). Second, the basis of the Klassys’ claim

is that Dr. Johnson did not approve payment for the bloodless surgery, which concerns her rights “to recover benefits

due to [her] under the terms of [her] plan.” Id. Finally, to

determine whether Dr. Johnson was negligent in refusing to

approve the out-of-network surgery requires a determination of whether the surgery was covered. 
No. 03-2841 5

In response, the Klassys cite to the Supreme Court’s decision in Pegram v. Herdrich, 530 U.S. 211 (2000). In Pegram,

the Court held that treatment decisions made by an HMO,

acting through its physician employees, are not “fiduciary

acts” within the meaning of ERISA. In so holding, the Court

explained that an HMO’s responsibilities with regard to

patient care could be divided between “eligibility decisions”

and “treatment decisions.” However, the Court further

explained that most questions of insurance coverage

involved “mixed eligibility and treatment decisions” and

that in such mixed cases “eligibility decisions cannot be

untangled from physicians’ judgments about reasonable

medical treatment.” Id. at 229. The Court then held that

Congress did not intend HMOs to be treated as fiduciaries

under ERISA to the extent they make mixed eligibility and

treatment decisions.

Although the Supreme Court in Pegram expressly noted

that it was not addressing the interaction of § 502(a) and

state law claims, Pegram, 530 U.S. at 229 n.9, the Klassys

posit that the reasoning of Pegram applies equally to the

question of ERISA preemption. That is, the Klassys maintain

that Pegram changed the landscape of ERISA preemption,

and that post-Pegram state law claims based on treatment

decisions or mixed eligibility/treatment decisions are not

preempted. 

The Klassys find support in the Second Circuit’s decision

in Cicio v. Does, 321 F.3d 83 (2d Cir. 2003). Cicio involved

(among other things) a claim of medical malpractice under

state law brought by the widow of a cancer victim against

an HMO doctor who denied approval for a stem-cell chemotherapy treatment. The Second Circuit, after summarizing

the pre-Pregram preemption precedent, stated: “The Pegram

opinion has further ramifications for our analysis because of

its detailed description and analysis of decision-making in

the context of health care provisions.” Id. at 101. The court
6 No. 03-2841

2 These decisions focused on whether Pegram altered the framework for determining if claims were completely preempted by

§ 502(a). As Land recognized, such state law claims may still be

subject to conflict preemption under Section 514(a). See Land, 339

(continued...)

in Cicio then summarized the Pegram discussion of eligibility, treatment, and mixed decisions, after which it reasoned

that “Pegram thus alters the framework used in [ERISA

preemption cases such as] Jass, in which a decision must be

about either ‘treatment’ or ‘eligibility’ and in which any

element of benefits determination suffices to make a

decision an ‘eligibility’ decision, that may only be challenged in a § 502(a) action.” Id. at 102. The Second Circuit

then held that where the alleged malpractice of an HMO

doctor involves a mixed eligibility and treatment decision,

ERISA does not preempt a state law malpractice claim.

Several other circuits have also followed Cicio’s post-Pegram

approach. See, e.g., Roark v. Humana, Inc., 307 F.3d 298, 309

(5th Cir. 2002) (“ERISA provides no cause of action for

medical malpractice claims against an HMO” and such

claims are therefore not preempted by § 502(a)(1)(B)); Land

v. CIGNA Healthcare of Florida, 339 F.3d 1286 (11th Cir. 2003)

(applying Pegram approach and holding that the plaintiff’s

claim that the HMO’s failure to diagnose his condition correctly and failure to authorize proper medical treatment do

not fall within the civil enforcement provisions of § 502(a)

and thus are not completely preempted); Marks v. Watters,

322 F.3d 316, 324, 327 (4th Cir. 2003) (reasoning that under

Pegram, mixed eligibility and treatment decisions are not

preempted by § 502(a), but holding that the plaintiff’s claim

did not involve a treatment decision and was thus preempted); Pryzbowski v. U.S. Healthcare, Inc., 245 F.3d 266, 274

(3d Cir. 2001) (citing Pegram with approval, but concluding

that plaintiff’s claims were solely related to the approval of

benefits and were thus preempted by § 502(a)).2
No. 03-2841 7

2 (...continued)

F.3d at 1294 n.7. For a detailed discussion on the difference

between complete and conflict preemption, see Jass, 88 F.3d 1482.

3 To the extent that Dr. Johnson improperly denied coverage of

the bloodless hip surgery (as opposed to the traditional hip

(continued...)

This circuit has yet to consider the impact of Pegram on

questions of ERISA preemption, and we need not resolve

this issue today because, as discussed below, even under the

approach suggested by the Klassys and adopted in Cicio and

by other courts, the Klassys’ claim against Dr. Johnson is

preempted by ERISA.

Under the Cicio approach, decisions take one of three

forms—eligibility, treatment or mixed treatment/eligibility—and ERISA preempts only eligibility decisions, not

treatment or mixed treatment/eligibility decisions. In this

case, the Klassys’ allegations make clear that Dr. Johnson’s

decision concerned solely the question of eligibility. Here,

Dr. Johnson approved surgery for Barbra, but concluded

that a bloodless surgery performed by an out-of-network

physician would not be covered. Barbra tries to turn that

decision into one concerning “treatment,” arguing that

whether a bloodless surgery is covered concerns the appropriate treatment for her condition. However, contrary to

Barbra’s position, there is no dispute as to the appropriate

medical treatment; rather, the Klassys seek alternative treatment based on their religious beliefs. Although we are

sensitive to the Klassys’ sincerely held religious beliefs,

the sole question facing Dr. Johnson was one of eligibility

and whether a bloodless surgery performed by an out-ofnetwork physician was covered by the Plan. Therefore, even

under the Cicio approach, because the sole issue was one of

eligibility, Barbra’s claim is preempted by ERISA.3 See
8 No. 03-2841

3 (...continued)

surgery that was approved), the Klassys could have sought reimbursement in an ERISA action. In fact, the district court gave

the Klassys an opportunity to amend their complaint to allege an

ERISA denial of benefits claim, but the Klassys instead appealed.

Marks, 322 F.3d at 327 (holding that the plaintiff’s claim was

preempted by § 502(a) because the HMO did not make a

treatment determination); Pryzbowski, 245 F.3d at 274

(holding that the plaintiff’s claims, which were “limited to

[the HMO’s] delay in approving benefits, [was] conduct

falling squarely within [the] administrative function” and

thus was not preempted by § 502(a)); Difelice v. Aetna U.S.

Healthcare, 346 F.3d 442, 448 (3d Cir. 2003) (holding that

plaintiff’s claim that the HMO “interfered with” his medical

treatment by declaring treatment “medically unnecessary”

was preempted by ERISA because it could have been

brought under Section 502(a)).

III.

ERISA provides a remedy for plan participants wrongfully denied benefits. However, such claims must be

brought under ERISA and creatively pleading a denial of

benefits claim as a state law claim does not defeat the broad

preemptive force of ERISA. Thus, although the Klassys

might have succeeded under ERISA and obtained payment

for the bloodless surgery, because they instead opted to

pursue a state law claim that is preempted, the district court

properly dismissed their complaint. For these and the

foregoing reasons, we AFFIRM.
No. 03-2841 9

A true Copy:

Teste:

 _____________________________

Clerk of the United States Court of 

Appeals for the Seventh Circuit 

USCA-02-C-0072—6-15-04