Source: http://caselaw.findlaw.com/us-supreme-court/536/355.html
Timestamp: 2015-08-05 04:48:15
Document Index: 309061886

Matched Legal Cases: ['§4', '§4', '§1144', '§1144', '§4', '§4', '§4', '§1132', '§1132', '§1132', '§4', '§4', '§4', '§1001', '§4', '§4', '§1', '§4', '§1441', '§1132', '§1144', '§1144', '§4', '§1132', '§1001', '§1144', '§1144', '§4', '§1144', '§1144', '§4', '§1144', '§1', '§1301', '§300', '§1311', '§300', '§1301', '§300', '§1304', '§300', '§21', '§1742']

RUSH PRUDENTIAL HMO, INC. v. MORAN et al., (2002)
Argued: January 16, 2002 Decided: June 20, 2002
Petitioner Rush Prudential HMO, Inc., a health maintenance organization (HMO) that contracts to provide medical services for employee welfare benefits plans covered by the Employee Retirement Income Security Act of 1974 (ERISA), denied respondent Moran's request to have surgery by an unaffiliated specialist on the ground that the procedure was not medically necessary. Moran made a written demand for an independent medical review of her claim, as guaranteed by §4-10 of Illinois's HMO Act, which further provides that "[i]n the event that the reviewing physician determines the covered service to be medically necessary," the HMO "shall provide" the service. Rush refused her demand, and Moran sued in state court to compel compliance with the Act. That court ordered the review, which found the treatment necessary, but Rush again denied the claim. While the suit was pending, Moran had the surgery and amended her complaint to seek reimbursement. Rush removed the case to federal court, arguing that the amended complaint stated a claim for ERISA benefits. The District Court treated Moran's claim as a suit under ERISA and denied it on the ground that ERISA preempted §4-10. The Seventh Circuit reversed. It found Moran's reimbursement claim preempted by ERISA so as to place the case in federal court, but it concluded that the state Act was not preempted as a state law that "relates to" an employee benefit plan, 29 U. S. C. §1144(a), because it also "regulates insurance" under ERISA's saving clause, §1144(b)(2)(a).
(a) In deciding whether a law regulates insurance, this Court starts with a commonsense view of the matter, Metropolitan Life Ins. Co. v. Massachusetts, 471 U. S. 724, 740, which requires a law to "be specifically directed toward" the insurance industry, Pilot Life Ins. Co. v. Dedeaux, 481 U. S. 41, 50. It then tests the results of the commonsense enquiry by employing the three factors used to point to insurance laws spared from federal preemption under the McCarran-Ferguson Act. Pp. 6-18.
(1) The Illinois HMO Act is directed toward the insurance industry, and thus is an insurance regulation under a commonsense view. Although an HMO provides healthcare in addition to insurance, nothing in the saving clause requires an either-or choice between healthcare and insurance. Congress recognized, the year before passing ERISA, that HMOs are risk-bearing organizations subject to state insurance regulation. That conception has not changed in the intervening years. States have been adopting their own HMO enabling Acts, and at least 40, including Illinois, regulate HMOs primarily through state insurance departments. Rush cannot submerge HMOs' insurance features beneath an exclusive characterization of HMOs as health care providers. And the argument of Rush and its amici that §4-10 sweeps beyond the insurance industry, capturing organizations that provide no insurance and regulating noninsurance activities of HMOs that do, is based on unsound assumptions. Pp. 9-16.
(2) The McCarran-Ferguson factors confirm this conclusion. A state law does not have to satisfy all three factors to survive preemption, and §4-10 clearly satisfies two. The independent review requirement satisfies the factor that a provision regulate "an integral part of the policy relationship between the insurer and the insured." Union Labor Life Ins. Co. v. Pireno, 458 U. S. 119, 129. Illinois adds an extra review layer when there is an internal disagreement about an HMO's denial of coverage, and the reviewer both applies a medical care standard and construes policy terms. Thus, the review affects a policy relationship by translating the relationship under the HMO agreement into concrete terms of specific obligation or freedom from duty. The factor that the law be aimed at a practice "limited to entities within the insurance industry," ibid., is satisfied for many of the same reasons that the law passes the commonsense test: It regulates application of HMO contracts and provides for review of claim denials; once it is established that HMO contracts are contracts for insurance, it is clear that §4-10 does not apply to entities outside the insurance industry. Pp. 16-18.
(1) The Court has recognized an overpowering federal policy of exclusivity in ERISA's civil enforcement provisions located at 29 U. S. C. §1132(a); and it has anticipated that in a conflict between congressional polices of exclusively federal remedies and the States' regulation of insurance, the state regulation would lose out if it allows remedies that Congress rejected in ERISA, Pilot Life, 473 U. S. 134, and Ingersoll-Rand Co. v. McClendon, 498 U. S. 133, all involved an additional claim or remedy that ERISA did not authorize. In contrast, the review here may settle a benefit claim's fate, but the state statute does not enlarge the claim beyond the benefits available in any §1132(a) action. And although the reviewer's determination would presumably replace the HMO's as to what is medically necessary, the ultimate relief available would still be what ERISA authorizes in a §1132(a) suit for benefits. This case therefore resembles the claims-procedure rule that the Court sustained in UNUM Life Ins. Co. of America v. Ward, 526 U. S. 358. Section 4-10's procedure does not fall within Pilot Life's categorical preemption. Pp. 20-24.
(2) Nor does §4-10's procedural imposition interfere unreasonably with Congress's intention to provide a uniform federal regime of "rights and obligations" under ERISA. Although this Court has recognized a limited exception from the saving clause for alternative causes of action and alternative remedies, further limits on insurance regulation preserved by ERISA are unlikely to deserve recognition. A State might provide for a type of review that would so resemble an adjudication as to fall within Pilot Life's categorical bar, but that is not the case here. Section 4-10 is significantly different from common arbitration. The independent reviewer has no free-ranging power to construe contract terms, but instead confines review to the single phrase "medically necessary." That reviewer must be a physician with credentials similar to those of the primary care physician and is expected to exercise independent medical judgment, based on medical records submitted by the parties, in deciding what medical necessity requires. This process does not resemble either contract interpretation or evidentiary litigation before a neutral arbiter as much as it looks like the practice of obtaining a second opinion. In addition, §4-10 does not clash with any deferential standard for reviewing benefit denials in judicial proceedings. ERISA itself says nothing about a standard. It simply requires plans to afford a beneficiary some mechanism for internal review of a benefit denial and provides a right to a subsequent judicial forum for a claim to recover benefits. Although certain "discretionary" plan interpretations may receive deference from a reviewing court, see Firestone Tire & Rubber Co. v. Bruch, 489 U. S. 101, 115, nothing in ERISA requires that medical necessity decisions be "discretionary" in the first place. Pp. 24-30.
Souter, J., delivered the opinion of the Court, in which Stevens, O'Connor, Ginsburg, and Breyer, JJ., joined. Thomas, J., filed a dissenting opinion, in which Rehnquist, C. J., and Scalia and Kennedy, JJ., joined.
RUSH PRUDENTIAL HMO, INC., PETITIONER v. DEBRA C. MORAN et al.
Section 4-10 of Illinois's Health Maintenance Organization Act, 215 Ill. Comp. Stat., ch. 125, §4-10 (2000), provides recipients of health coverage by such organizations with a right to independent medical review of certain denials of benefits. The issue in this case is whether the statute, as applied to health benefits provided by a health maintenance organization under contract with an employee welfare benefit plan, is preempted by the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 832, as amended, 29 U. S. C. §1001 et seq. We hold it is not.
In January 1998, Moran made a written demand for an independent medical review of her claim, as guaranteed by §4-10 of Illinois's HMO Act, 215 Ill. Comp. Stat., ch. 125, §4-10 et seq. (2000), which provides:
"any organization formed under the laws of this or another state to provide or arrange for one or more health care plans under a system which causes any part of the risk of health care delivery to be borne by the organization or its providers." Ch. 125, §1-2.1 When Rush failed to provide the independent review, Moran sued in an Illinois state court to compel compliance with the state Act. Rush removed the suit to Federal District Court, arguing that the cause of action was "completely preempted" under ERISA. 230 F. 3d, at 964.
Meanwhile, the federal court remanded the case back to state court on Moran's motion, concluding that because Moran's request for independent review under §4-10 would not require interpretation of the terms of an ERISA plan, the claim was not "completely preempted" so as to permit removal under 28 U. S. C. §1441.2 230 F. 3d, at 964. The state court enforced the state statute and ordered Rush to submit to review by an independent physician. The doctor selected was a reconstructive surgeon at Johns Hopkins Medical Center, Dr. A. Lee Dellon. Dr. Dellon decided that Dr. Terzis's treatment had been medically necessary, based on the definition of medical necessity in Rush's Certificate of Group Coverage, as well as his own medical judgment. Rush's medical director, however, refused to concede that the surgery had been medically necessary, and denied Moran's claim in January 1999.
Moran amended her complaint in state court to seek reimbursement for the surgery as "medically necessary" under Illinois's HMO Act, and Rush again removed to federal court, arguing that Moran's amended complaint stated a claim for ERISA benefits and was thus completely preempted by ERISA's civil enforcement provisions, 29 U. S. C. §1132(a), as construed by this Court in Metropolitan Life Ins. Co. v. Taylor, 481 U. S. 58 (1987). The District Court treated Moran's claim as a suit under ERISA, and denied the claim on the ground that ERISA preempted Illinois's independent review statute.3 The Court of Appeals for the Seventh Circuit reversed. 230 F. 3d 959 (2000). Although it found Moran's state-law reimbursement claim completely preempted by ERISA so as to place the case in federal court, the Seventh Circuit did not agree that the substantive provisions of Illinois's HMO Act were so preempted. The court noted that although ERISA broadly preempts any state laws that "relate to" employee benefit plans, 29 U. S. C. §1144(a), state laws that "regulat[e] insurance" are saved from preemption, §1144(b)(2)(A). The court held that the Illinois HMO Act was such a law, the independent review requirement being little different from a state-mandated contractual term of the sort this Court had held to survive ERISA preemption. See 230 F. 3d, at 972 (citing UNUM Life Ins. Co. of America v. Ward, 526 U. S. 358, 375-376 (1999)). The Seventh Circuit rejected the contention that Illinois's independent review requirement constituted a forbidden "alternative remedy" under this Court's holding in Pilot Life Ins. Co. v. Dedeaux, 481 U. S. 41 (1987), and emphasized that §4-10 does not authorize any particular form of relief in state courts; rather, with respect to any ERISA health plan, the judgment of the independent reviewer is only enforceable in an action brought under ERISA's civil enforcement scheme, 29 U. S. C. §1132(a). 230 F. 3d, at 971.
To "safeguar[d] ... the establishment, operation, and administration" of employee benefit plans, ERISA sets "minimum standards ... assuring the equitable character of such plans and their financial soundness," 29 U. S. C. §1001(a), and contains an express preemption provision that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan ... ." §1144(a). A saving clause then reclaims a substantial amount of ground with its provision that "nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities." §1144(b)(2)(A). The "unhelpful" drafting of these antiphonal clauses, New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U. S. 645, 656 (1995), occupies a substantial share of this Court's time, see, e.g., Egelhoff v. Egelhoff, 532 U. S. 141 (2001); UNUM Life Ins. Co. of America v. Ward, supra; California Div. of Labor Standards Enforcement v. Dillingham Constr., N. A., Inc., 519 U. S. 316 (1997); Metropolitan Life Ins. Co. v. Massachusetts, 471 U. S. 724 (1985). In trying to extrapolate congressional intent in a case like this, when congressional language seems simultaneously to preempt everything and hardly anything, we "have no choice" but to temper the assumption that " `the ordinary meaning ... accurately expresses the legislative purpose,' " id., at 740 (quoting Park 'N Fly v. Dollar Park and Fly, Inc., 469 U. S. 189, 194 (1985)), with the qualification " `that the historic police powers of the States were not [meant] to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.' " Travelers, supra, at 655 (quoting Rice v. Santa Fe Elevator Corp., 331 U. S. 218, 230 (1947)).
It is beyond serious dispute that under existing precedent §4-10 of the Illinois HMO Act "relates to" employee benefit plans within the meaning of §1144(a). The state law bears "indirectly but substantially on all insured benefit plans," Metropolitan Life, 471 U. S., at 739, by requiring them to submit to an extra layer of review for certain benefit denials if they purchase medical coverage from any of the common types of health care organizations covered by the state law's definition of HMO. As a law that "relates to" ERISA plans under §1144(a), §4-10 is saved from preemption only if it also "regulates insurance" under §1144(b)(2)(A). Rush insists that the Act is not such a law.
In Metropolitan Life, we said that in deciding whether a law "regulates insurance" under ERISA's saving clause, we start with a "common-sense view of the matter," 440 U. S. 205, 211 (1979) (explaining that the "business of insurance" is not coextensive with the "business of insurers").
The common-sense enquiry focuses on "primary elements of an insurance contract[, which] are the spreading and underwriting of a policyholder's risk." Id., at 211. The Illinois statute addresses these elements by defining "health maintenance organization" by reference to the risk that it bears. See 215 Ill. Comp. Stat., ch. 125, §1-2(9) (2000) (an HMO "provide[s] or arrange[s] for ... health care plans under a system which causes any part of the risk of health care delivery to be borne by the organization or its providers").
So Congress has understood from the start, when the phrase "Health Maintenance Organization" was established and defined in the HMO Act of 1973. The Act was intended to encourage the development of HMOs as a new form of health care delivery system, see S. Rep. No. 93-129, pp. 7-9 (1973), and when Congress set the standards that the new health delivery organizations would have to meet to get certain federal benefits, the terms included requirements that the organizations bear and manage risk. See, e.g., Health Maintenance Organization Act of 1973, §1301(c), 87 Stat. 916, as amended, 42 U. S. C. §300e(c) (1994 ed.); S. Rep. No. 93-129, at 14 (explaining that HMOs necessarily bear some of the risk of providing service, and requiring that a qualifying HMO "assum[e] direct financial responsibility, without benefit of reinsurance, for care ... in excess of the first five thousand dollars per enrollee per year"). The Senate Committee Report explained that federally qualified HMOs would be required to provide "a basic package of benefits, consistent with existing health insurance patterns," id., at 10, and the very text of the Act assumed that state insurance laws would apply to HMOs; it provided that to the extent state insurance capitalization and reserve requirements were too stringent to permit the formation of HMOs, "qualified" HMOs would be exempt from such limiting regulation. See §1311, 42 U. S. C. §300e-10. This congressional understanding that it was promoting a novel form of insurance was made explicit in the Senate Report's reference to the practices of "health insurers to charge premium rates based upon the actual claims experience of a particular group of subscribers," thus "raising costs and diminishing the availability of health insurance for those suffering from costly illnesses," S. Rep. No. 93-129, at 29-30. The federal Act responded to this insurance practice by requiring qualifying HMOs to adopt uniform capitation rates, see §1301(b), 42 U. S. C. §300e(b), and it was because of that mandate "pos[ing] substantial competitive problems to newly emerging HMOs," S. Rep. No. 93-129, at 30, that Congress authorized funding subsidies, see §1304, 42 U. S. C. §300e-4. The Senate explanation left no doubt that it viewed an HMO as an insurer; the subsidy was justified because "the same stringent requirements do not apply to other indemnity or service benefits insurance plans." S. Rep. No. 93-129, at 30. In other words, one year before it passed ERISA, Congress itself defined HMOs in part by reference to risk, set minimum standards for managing the risk, showed awareness that States regulated HMOs as insurers, and compared HMOs to "indemnity or service benefits insurance plans."
This conception has not changed in the intervening years. Since passage of the federal Act, States have been adopting their own HMO enabling Acts, and today, at least 40 of them, including Illinois, regulate HMOs primarily through the States' insurance departments, see Aspen Health Law and Compliance Center, Managed Care Law Manual 31-32 (Supp. 6, Nov. 1997), although they may be treated differently from traditional insurers, owing to their additional role as health care providers,5 see, e.g., Alaska Ins. Code §21.86.010 (2000) (health department reviews HMO before insurance commissioner grants a certificate of authority); Ohio Rev. Code Ann. §1742.21 (West 1994) (health department may inspect HMO). Finally, this view shared by Congress and the States has passed into common understanding. HMOs (broadly defined) have "grown explosively in the past decade and [are] now the dominant form of health plan coverage for privately insured individuals." Gold & Hurley, The Role of Managed Care "Products" in Managed Care "Plans," in Contemporary Managed Care 47 (M. Gold ed. 1998). While the original form of the HMO was a single corporation employing its own physicians, the 1980s saw a