To amend the Employee Retirement Income Security Act of 1974 to preclude preemption of a State cause of action relating to a denial of a claim for benefits under a health care plan.

SECTION 1. ERISA PREEMPTION NOT TO APPLY TO CERTAIN STATE LAW CAUSES OF 
              ACTION.

    (a) In General.--Section 514 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1144) is amended--
            (1) by redesignating subsections (d) and (e) as subsection 
        (e) and (f), respectively, and
            (2) by inserting after subsection (c) the following new 
        subsection:
    ``(d) Preemption Not To Apply to Causes of Action Under State Law 
Involving Medically Reviewable Decision.--
            ``(1) In general.--Except as provided in this subsection, 
        nothing in this title (including section 502) shall be 
        construed to supersede or otherwise alter, amend, modify, 
        invalidate, or impair any cause of action under State law of a 
        participant or beneficiary under a group health plan (or the 
        estate of such a participant or beneficiary) against the plan, 
        the plan sponsor, any health insurance issuer offering health 
        insurance coverage in connection with the plan, or any managed 
        care entity in connection with the plan to recover damages 
        resulting from personal injury or for wrongful death if such 
        cause of action arises by reason of a medically reviewable 
        decision.
            ``(2) Definitions and related rules.--For purposes of this 
        subsection--
                    ``(A) Medically reviewable decision.--The term 
                `medically reviewable decision' means a denial of a 
                claim for benefits under the plan.
                    ``(B) Personal injury.--The term `personal injury' 
                means a physical injury and includes an injury arising 
                out of the treatment (or failure to treat) a mental 
                illness or disease.
                    ``(C) Claim for benefit.--The term `claim for 
                benefits' means any request for coverage (including 
                authorization of coverage), for eligibility, or for 
                payment (or reimbursement for payment) in whole or in 
                part, for an item or service under a group health plan 
                or health insurance coverage.
                    ``(D) Denial of claim for benefits.--The term 
                `denial' means, with respect to a claim for benefits, a 
                denial (in whole or in part) of, or a failure to act on 
                a timely basis upon, the claim for benefits and 
                includes a failure to provide benefits (including items 
                and services) required to be provided under this title.
                    ``(E) Managed care entity.--
                            ``(i) In general.--The term `managed care 
                        entity' means, in connection with a group 
                        health plan and subject to clause (ii), any 
                        entity that is involved in determining the 
                        manner in which or the extent to which items or 
                        services (or reimbursement therefor) are to be 
                        provided as benefits under the plan.
                            ``(ii) Treatment of treating physicians, 
                        other treating health care professionals, and 
                        treating hospitals.--Such term does not include 
                        a treating physician or other treating health 
                        care professional of the participant or 
                        beneficiary and also does not include a 
                        treating hospital insofar as it is acting 
                        solely in the capacity of providing treatment 
                        or care to the participant or beneficiary. 
                        Nothing in the preceding sentence shall be 
                        construed to preempt vicarious liability of any 
                        plan, plan sponsor, health insurance issuer, or 
                        managed care entity.
            ``(3) Exclusion of employers and other plan sponsors.--
                    ``(A) Causes of action against employers and plan 
                sponsors precluded.--Subject to subparagraph (B), 
                paragraph (1) does not apply with respect to--
                            ``(i) any cause of action against an 
                        employer or other plan sponsor maintaining the 
                        plan (or against an employee of such an 
                        employer or sponsor acting within the scope of 
                        employment), or
                            ``(ii) a right of recovery, indemnity, or 
                        contribution by a person against an employer or 
                        other plan sponsor (or such an employee) for 
                        damages assessed against the person pursuant to 
                        a cause of action to which paragraph (1) 
                        applies.
                    ``(B) Certain causes of action permitted.--
                Notwithstanding subparagraph (A), paragraph (1) applies 
                with respect to any cause of action that is brought by 
                a participant or beneficiary under a group health plan 
                (or the estate of such a participant or beneficiary) to 
                recover damages resulting from personal injury or for 
                wrongful death against any employer or other plan 
                sponsor maintaining the plan (or against an employee of 
                such an employer or sponsor acting within the scope of 
                employment) if such cause of action arises by reason of 
                a medically reviewable decision, to the extent that 
                there was direct participation by the employer or other 
                plan sponsor (or employee) in the decision.
                    ``(C) Direct participation.--
                            ``(i) Direct participation in decisions.--
                        For purposes of subparagraph (B), the term 
                        `direct participation' means, in connection 
                        with a decision described in subparagraph (B), 
                        the actual making of such decision or the 
                        actual exercise of control in making such 
                        decision or in the conduct constituting the 
                        failure.
                            ``(ii) Rules of construction.--For purposes 
                        of clause (i), the employer or plan sponsor (or 
                        employee) shall not be construed to be engaged 
                        in direct participation because of any form of 
                        decisionmaking or other conduct that is merely 
                        collateral or precedent to the decision 
                        described in subparagraph (B) on a particular 
                        claim for benefits of a particular participant 
                        or beneficiary, including (but not limited 
                        to)--
                                    ``(I) any participation by the 
                                employer or other plan sponsor (or 
                                employee) in the selection of the group 
                                health plan or health insurance 
                                coverage involved or the third party 
                                administrator or other agent;
                                    ``(II) any engagement by the 
                                employer or other plan sponsor (or 
                                employee) in any cost-benefit analysis 
                                undertaken in connection with the 
                                selection of, or continued maintenance 
                                of, the plan or coverage involved;
                                    ``(III) any participation by the 
                                employer or other plan sponsor (or 
                                employee) in the process of creating, 
                                continuing, modifying, or terminating 
                                the plan or any benefit under the plan, 
                                if such process was not substantially 
                                focused solely on the particular 
                                situation of the participant or 
                                beneficiary referred to in paragraph 
                                (1)(A); and
                                    ``(IV) any participation by the 
                                employer or other plan sponsor (or 
                                employee) in the design of any benefit 
                                under the plan, including the amount of 
                                copayment and limits connected with 
                                such benefit.''.
    (b) Conforming Amendment.--Section 502(b)(4) of such Act (29 U.S.C. 
1132(b)(4)) is amended by striking ``514(e)(3)'' and inserting 
``514(f)(3)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to acts and omissions (from which a cause of action arises) 
occurring on or after the date of the enactment of this Act.

Summary: Amends the Employee Retirement Income Security Act of 1974 (ERISA) to preclude federal preemption of a cause of action brought under state law by a participant or beneficiary under a group health plan to recover damages resulting from personal injury or for wrongful death against the plan, the plan sponsor, any health insurance issuer offering health insurance coverage in connection with the plan, or any managed care entity in connection with the plan if such cause of action arises by reason of a medically reviewable decision denying a benefits claim. Allows such a cause of action under state law against any employer or other plan sponsor maintaining the plan (or against an employee of such an employer or sponsor acting within the scope of employment) to the extent that there was direct participation by the employer or other plan sponsor (or employee) in such decision.

Declares that this waiver of federal preemption does not apply (that is, ERISA does supersede state law) with respect to: (1) any cause of action against an employer or other plan sponsor maintaining the plan (or against an employee of such an employer or sponsor acting within the scope of employment), except where the employer or plan sponsor (or employee) participated directly in the decision to deny the claim; or (2) a right of recovery, indemnity, or contribution by a person against an employer or other plan sponsor (or such an employee) for damages assessed against the person pursuant to a cause of action under state law allowed by this Act.