ERISA was enacted to protect participants in employer-based pension and welfare benefit plans. After several highly visible pension plan failures and abuses in the 1960s and early 1970s, the Congress enacted ERISA in 1974. Although it was established primarily as a pension law, ERISA also regulates welfare benefits—including health care benefits—that participants and their beneficiaries receive through employers. ERISA lays out the framework within which employer-based health benefit plans must operate. ERISA requires plans to (1) designate a named fiduciary to administer a plan in the sole interest of the participants, (2) provide pertinent documents and plan-related information to participants, and (3) file annual reports with DOL—the federal agency responsible for overseeing ERISA’s implementation. However, ERISA’s regulatory requirements for employer-based health care plans are not nearly as comprehensive as are those for pension plans. ERISA’s requirements do not focus solely on health care but apply to a variety of employer-based welfare benefit plans. Also, ERISA provides no financial or solvency standards to which employer-based health benefit plans must adhere. By enacting ERISA, the Congress created a federally administered regulatory scheme that applies, with some exceptions, to all employer-based pension and welfare benefit plans, including employer-based health plans. The Congress included a section in ERISA that states that ERISA supersedes, or preempts, all state laws that “relate to” an employee benefit plan. According to employer groups, this “preemption” provision helps eliminate problems for multistate employers who could face conflicting and burdensome state statutes and regulations when they provide health benefits in more than one state. Because the states have traditionally been granted the power to regulate the business of insurance, the Congress “saved” insurance laws from ERISA’s preemption provision. That is, ERISA cannot supersede a state insurance law. However, an employer-based health plan cannot be deemed to be a health insurer for the purposes of being regulated by state insurance laws under this “savings” clause. Employers who choose to provide health care benefits can do so in different ways. An employer can self-fund the coverage—that is, assume the financial risk associated with health insurance. Because self-funded plans are not considered to be an insurance product, they are exempt from state insurance laws and are therefore regulated solely through ERISA. Alternatively, an employer can purchase a health insurance product directly from an established health insurer. State laws regulating health insurers are saved from preemption. Consequently, the states can regulate the insurance product that the ERISA plan purchases. For example, an insurance product purchased by an employer would have to cover all state-mandated health care benefits, but all those benefits would not have to be covered in a self-funded plan. Similarly, such a product would be subject to state law requirements for grievance and appeal procedures. The distinction between self-funded and purchased health plans does not apply to the remedies available under ERISA for benefit claims disputes under employee benefit plans. With respect to these remedies, ERISA does not distinguish between the disputed benefit’s being provided through an employer-purchased plan or a self-funded plan. As the Supreme Court has found, ERISA preempts state law claims for compensatory damages that result from benefit denials because the state laws governing such claims “relate to” employee benefit plans. Furthermore, under its preemption clause, ERISA may or may not supersede state tort laws that govern the kinds and amounts of compensation that may be available for health-care-related injuries. Most workers and their families in the private sector receive their health insurance coverage through employers. According to DOL statistics, about 125 million people receive health insurance through about 2.5 million employer-based health care plans covered by ERISA. While the exact number of people who receive health care through self-funded employer-based plans is unknown, several studies have estimated that approximately 40 percent of insured people are enrolled in self-funded plans, plans that are free from state insurance regulation. During the past decade, the number of people enrolled in employer-based managed health care plans has continued to increase. About 29 percent of those who received health insurance through an employer-based plan were enrolled in some type of managed care in 1988, according to KPMG Peat Marwick. Figure 1 shows that a far greater percentage of people who received health insurance through an employer in 1995 were enrolled in managed care plans than in fee-for-service, even compared with just 2 years earlier. Furthermore, four times as many employers offered no fee-for-service option in 1997 as in 1988. Paying for health care in the United States has become increasingly expensive. In the 1980s, employers in the private sector, who shoulder much of the health care costs, were becoming particularly attuned to the alarming speed at which these costs were rising. As cost growth continued at double-digit rates, employers began to search for more economical ways of providing health care benefits while maintaining or improving the quality of care. In their search, many employers began to turn away from traditional fee-for-service health care and look to managed care—which, among other things, selectively contracts with providers and manages the use of services. This transition to managed health care has made benefit determinations more critical for participants in employer-based plans. For many years, private-sector employers relied on traditional fee-for-service health insurance to provide their employees with health care benefits. Health insurance became increasingly expensive, partly because participants had virtually an unlimited choice of health care providers with few controls on service use or costs. Traditional fee-for-service insurers paid the bills for covered services and typically did not become involved in medical treatment decisions. These insurers played primarily a financial role and left medical decision-making to physicians and hospitals. Under a traditional fee-for-service health insurance plan, (1) the attending physician usually decided when medical services were necessary, (2) the patient received the services, and (3) the insurer either paid or did not pay, depending on an independent retrospective review of the claim. Therefore, benefit disputes usually focused on whether the insurer would pay, not on whether services would be provided. Generally, managed health care attempts to contain costs by addressing both the price and quantity of health care services. Managed care plans attempt to ensure that services provided to plan enrollees are necessary, delivered efficiently, and priced appropriately. Managed care covers a broad spectrum of health care delivery arrangements and financing. Types of managed care plans include health maintenance organizations (HMO), preferred provider organizations (PPO), and point of service (POS) plans.HMOs—the oldest form of managed care—operate under several different models. For example, staff model HMOs employ health care providers directly and often serve only enrolled HMO patients at facilities owned by the HMOs. Independent practice association (IPA) model HMOs contract with providers who serve other patients as well as HMO enrollees in the providers’ own offices. Managed care plans may use different methods to control access to care, but prospective UR—used to determine in advance the medical necessity or appropriateness of more costly, nonroutine health care services—is distinctive. Prospective UR adds a layer of review to the decision-making between attending physicians and their patients. In managing patient care, most managed care plans have adopted prospective UR procedures. Prospective UR determines whether the attending physician’s proposed course of medical treatment and proposed service location are necessary based on clinical criteria. Managed care plans often assume the administrative function of making benefit determinations—that is, determining whether a specific treatment or procedure is covered by the employer’s plan. Plans may assume this function when employers contract with HMOs and other types of managed care to provide health care services for ERISA participants or when the plans administer employer-based ERISA self-funded plans. Prospective UR procedures vary among managed care plans. Plans differ in the services requiring prior authorization, the type of personnel making decisions, and the criteria used to determine medical necessity.Plan-based medical personnel such as physicians or nurses may be involved at different stages of the process and may exercise independent clinical judgment rather than relying exclusively on plan-specified criteria. However, they exercise this judgment for the purpose of determining plan coverage for the service in question. Such decisions are made independently from the decisions made by a patient’s attending physician. (The attending physician and plan officials may discuss the plan’s benefit coverage decision.) Figure 2 shows that compared with traditional fee-for-service care, the coverage decisions at managed care plans for some services are often made through a prospective UR process—before the patient receives health care services. Ultimately, the health plan decides whether a particular service is covered based on the review conducted by its agents. A health plan’s decision to deny coverage does not preclude the attending physician from providing treatment—if the patient can obtain other funding to pay for it. Nonetheless, it may be that for financial or other reasons, the patient may not obtain the recommended service. Consequently, benefit disputes involving managed care plans often focus on whether the plan should compensate the patient for any injuries or damages that may have occurred because the disputed service was not provided. Plan participants who believe they have been denied a plan benefit can seek to reverse the denial through the plan’s claims appeal process. If participants are unsuccessful, they can sue the plan as a last resort. If participants are successful in court, the only remedy under ERISA allows them to receive the denied benefit and, at the court’s discretion, attorney fees. Groups representing consumers are concerned that ERISA’s remedy does not sufficiently deter inappropriate benefit denials and that it is difficult to pursue claims in court. Conversely, employer groups believe that ERISA already provides the appropriate mechanism for protecting plan participants. ERISA requires that employer-based health benefit plans provide participants with information on covered benefits in a summary plan description (SPD). The SPD gives details on the plan and describes the rights, benefits, and responsibilities under the plan. Plans that meet federal standards for HMOs are permitted to omit certain information from their SPDs and are deemed to satisfy ERISA’s requirements for resolving benefit disputes. ERISA requires plans to have a system for resolving benefit disputes. The minimum procedures that an employer-based health benefit plan must follow when denying a benefit and for resolving any dispute that arises from the denial are specified in ERISA and its implementing regulations, which were published in 1977. Generally, as shown in table 1, it can take up to 1 year to complete the benefit denial and resolution process: (1) plans have 90 days in which to deny a benefit, although they can request an extension of up to 90 days; (2) a participant has up to 60 days to appeal after the denial, or request a review of the decision; and (3) the plan must resolve the appeal promptly, within 60 days, although an additional 60 days can be requested under special circumstances. ERISA’s requirements for handling benefit appeals are limited in some respects. For example, the regulations contain no provisions for expedited appeals. Furthermore, there is no provision for an independent review of the plan participant’s appeal. The same entity that initially denied the benefit can make the appeal decision. If not satisfied with the results of the appeal process, a plan participant has the final recourse of suing the plan. ERISA provides that when a participant is not satisfied with the results obtained through a plan’s appeal process, the only way to resolve the benefit denial is to sue the plan to obtain the benefit. This remedy applies to participants in all employer-based health plans, except those sponsored by governments and churches—both those self-funded and those purchased from an insurer. While this type of civil suit can be filed initially in either a federal or state court, frequently the cases in state courts are removed to a federal court on a defendant’s motion. If successful in court, however, the participant is entitled only to receive the denied benefit and, at the court’s discretion, attorney fees. If a participant establishes in a lawsuit that a plan wrongfully denied a benefit, ERISA authorizes the court to order that the benefit be provided. ERISA does not contain any provisions for compensating for damages that may occur because of the benefit denial such as lost wages, additional health care costs, or pain and suffering. Nor does ERISA provide for any punitive damages. Generally, when a benefit is refused or a claim is denied, a participant’s ultimate recourse is to sue under ERISA. (The participant may be required first to go through an administrative appeal process.) In such a case, the participant asserts that a service promised through the employer-based health care plan was not provided. Under ERISA, the plan’s fiduciary is responsible for protecting the interests of the participants. ERISA states that fiduciaries have a duty to act “solely in the interest of the participants and beneficiaries and for the exclusive purpose of providing benefits to participants and their beneficiaries. . . .” In this role, a fiduciary must be prudent and act according to the plan documents. Under ERISA, the failure to pay a valid claim may constitute a breach of a fiduciary’s responsibilities. However, courts ordinarily uphold the fiduciary’s decision unless the participant can show that the decision was “arbitrary and capricious.” Arbitrary and capricious behavior may include such activities as (1) using undisclosed medical criteria that are more restrictive than those used by other insurers, (2) basing a denial on an ambiguous provision of the benefit agreement, or (3) failing to comply with ERISA’s notification and reconsideration procedures if that failure prevented a request of reconsideration of an adverse determination. Benefit coverage determinations have taken on a more critical role as employers have changed from traditional fee-for-service health care to managed care. Benefit denials can now more easily restrict access to care because benefit determinations are often made before services are provided, especially for nonroutine, high-cost services or treatments. This is a different situation from traditional fee-for-service coverage. A participant may not be financially able to obtain more costly services if the plan does not pay. According to representatives of consumer groups, ERISA’s remedy does not deter inappropriate benefit denials. ERISA provides no penalty when benefits are denied inappropriately. If found to be in the wrong, the employer-based plan must then only provide the benefit that had been denied. In addition, consumer groups believe that saving money gives employer-based health plans an incentive to deny benefits. Plan participants may face other problems pertaining to benefit denials, according to consumer group representatives. For example, participants may not be aware of or understand the information contained in the SPDs that explains the benefit appeal process or ERISA’s remedy. A recent study found that according to state regulators, most plan participants neither read nor understood plan documents. Furthermore, it may be difficult for a plan participant to pursue a benefit denial in court because the participant may not be able to find or afford legal representation. Attorneys often accept cases on a contingency fee basis—they receive a percentage of the final settlement or award made by the court. However, the ultimate success in winning an ERISA case is receiving the denied benefit and, at the court’s discretion, reasonable attorney fees. There is no chance for a large monetary award based on damages. Therefore, attorneys have little financial incentive to take these cases. According to groups that represent employers, the Congress sought to strike a balance in the remedy it provided for benefit denials when it enacted ERISA. Representatives of employer groups believe that the Congress chose to include a remedy that was not overly burdensome on employers because they provide health care benefits voluntarily. These groups believe that ERISA’s remedy must consider the employers who voluntarily provide health care coverage and the plan participants who expect to receive services they believe are covered by the plan. Furthermore, the ERISA Industry Committee—which represents major private employers regarding public policy and related matters affecting employee benefit plans—believes that despite employers’ shift since 1974 from predominantly fee-for-service health benefit plans to mostly managed care plans, ERISA continues to provide an adequate framework for protecting plan participants. According to this employer group, ERISA protects participants by requiring that plan fiduciaries act in their sole interest and that denied claims receive fair hearings. Employers have no incentive to deny benefits that are rightly due to plan participants, according to several employer groups. Employer groups say that employers provide health benefits to keep their employees healthy so that the employees can be productive. In addition, representatives of the American Association of Health Plans believe that significant counterbalances prevent inappropriate benefit denials. According to the association, health plans are also concerned about making improper benefit denials. For example, health plans could face a loss of business and reputation and could risk incurring unfavorable publicity. Furthermore, representatives of employer groups said that plan fiduciaries can be assessed penalties if they are found to make arbitrary and capricious benefit determinations. For example, they said that ERISA provides the authority to ban individuals or entities from acting as plan fiduciaries, effectively putting them out of business. In principle this sanction is available, but in practice it is rarely invoked. ERISA’s preemption clause generally prevents plan participants from holding managed care plans directly liable under state laws for the damages that result from their negligent acts or omissions, and it complicates plan participants’ ability to hold managed care plans indirectly liable for the negligence—medical malpractice—of their providers. This situation has caused much debate. Federal courts are addressing the scope of ERISA preemption as it relates to negligence in an employer-based managed care arrangement. Physicians and other health care providers can be held directly liable for their own negligent acts—generally called medical malpractice. Medical malpractice is defined as acts of omission or commission, usually based on negligence, that result in injuries. Plan participants may attempt to hold health care providers directly liable for injury by filing medical malpractice claims seeking compensation for monetary and nonmonetary losses. In addition to monetary and nonmonetary losses, plaintiffs can seek to obtain punitive damages. Medical malpractice claims are generally governed by state tort law.State tort laws may differ with respect to the kinds and amounts of compensation that are available. A determination of liability for medical malpractice is based upon four elements: (1) the existence of a duty of care to the patient, (2) an applicable standard of care and its violation, (3) a compensable injury to the patient resulting from that breach, and (4) a causal connection between the violation of the standard of care and the harm complained of. The medical malpractice liability system is generally thought to have three primary goals: (1) provide compensation to people who are injured through negligent medical care, (2) create an incentive for physicians to provide careful treatment, and (3) provide accountability in dispute resolution. In addition, health care organizations, including hospitals and managed care plans, can be held directly liable for their own negligent acts or omissions. That is, a managed care plan can be held directly liable for its own failure to fulfill a duty owed to its patients in non-ERISA-based plans and can be sued for damages under state laws. For example, a negligence claim brought against a managed care plan can be based on a benefit denial or some other aspect of employee benefit plan administration, including UR and preauthorization of services, alleging that the actions of the plan constitute direct negligence. An injured person’s right to sue a managed care plan—for example, an HMO—under state law for the medical malpractice of its health care providers is evolving in much the same way that the right to sue a hospital for the negligence of its providers evolved. Initially, hospitals were viewed as only providing a place where patients could receive services from independent health care providers. However, courts eventually began to address whether hospitals could be held “vicariously” or indirectly liable for the actions of health care providers—who were either employees or independent contractors—in addition to being held directly liable for their own actions. Plan participants are increasingly attempting to hold HMOs to be vicariously liable when health-care-related injuries occur. For example, an employer can be held indirectly responsible for the actions of its employees under the legal theory of “respondeat superior.” This theory of law applies most clearly to staff model HMOs in which health care providers are directly employed by the HMO. A staff model HMO’s employed health care providers are typically physicians, nurses, and others, including those who make UR decisions. Consequently, plan participants’ attorneys can try to hold staff model HMOs liable for the negligent actions of their health care providers. Most HMOs, however, treat physicians as independent contractors rather than retaining them as direct, salaried employees. When an HMO contracts with physician associations to provide health care services—the IPA model—the HMO also may be held liable for negligent medical care if the plan participant perceives the HMO to be providing the health care. This is the “ostensible agency” theory of law. Courts must determine whether the HMO represented the physician to be its employee and whether the patient looked to the HMO, rather than the physician, as the health care provider.If the patient has no choice when selecting a treating physician, the patient could more reasonably look to the HMO as a provider. ERISA’s preemption clause complicates the ability of employer-based health care plan participants to sue managed care plans when injuries occur. In fact, ERISA has become a major source of confusion as to whether a plan participant may recover damages from a managed care organization for the negligence of its health care providers. Because ERISA preempts state laws that “relate to” employee benefit plans, managed care plans have argued that ERISA preempts the ability to sue them under state tort laws either directly for their own negligence or indirectly for the negligence of health care providers. When sued by an ERISA plan participant in a state court, the managed care plan can seek to move the case to federal court because of ERISA and, even in state court, can assert ERISA preemption as a defense. As ERISA provides more limited remedies than state tort laws—only the benefit denied and no compensatory or punitive damages—there are incentives for managed care organizations to claim the ERISA preemption. Managed care entities increasingly perform several functions simultaneously for employer-based plans—UR, plan administration, arranging or providing medical treatment—and consequently the distinction between administering a plan and providing health care may be less clear. Federal courts have found that the UR entity may make medical decisions in the context of making a benefit determination under an employer’s ERISA plan. DOL has intervened as amicus curiae—“friend of the court”—in eight lawsuits addressing ERISA’s preemption of state tort laws. In these cases, DOL argued that ERISA does not preempt negligence or medical malpractice claims against HMOs when the plan participant is part of an employer-based health plan. Federal appellate courts have concluded that when the action of a managed care plan involves benefit administration, ERISA preempts damage claims under state law, even though the plan’s action may have been a wrongful denial of benefits. Whether a plan action is benefit administration or a medical decision is not always clear; the distinction often depends on the facts of each case. Courts have generally concluded that benefit determinations by plans—for example, that a particular medical service is not covered—fall in the category of benefit administration. Once the action of the plan is characterized as benefit administration, ERISA preempts state causes of action. The federal courts are divided on the effect of ERISA when the managed care plan acts not merely as a benefit administrator but as a provider of medical care. Some courts have held that ERISA does not preempt malpractice suits against managed care plans under state law when the complaint is based on medical advice or care by the plan provided through an employee or an agent of the plan. Other courts have held that ERISA preempts suits against managed care plans under state law based on malpractice by plan employees or agents. The appendix summarizes some of the decisions on ERISA by the federal courts addressing these issues. When ERISA’s preemption of state tort law applies, plan participants/ consumers, employers, and managed care plans are affected differently. As a result, each of these groups has its own distinct reaction to the role that ERISA’s preemption clause plays in the ability to file claims for medical malpractice and benefit denials under state law. Consumer groups object to ERISA’s preemption clause because it denies plan participants the ability to pursue damage claims against plans for benefit decisions under state law. As federal court cases have shown, ERISA plan participants have been left without any legal right to sue for damages when injuries occur as a result of such benefit coverage decisions. There are no data to show how often participants are left without the right to sue for damages. Moreover, the high cost of treatments may effectively keep plan participants from paying for care themselves that employer-based plans determine to be medically unnecessary or not covered. In addition, ERISA’s remedy for injuries occurring because of benefit denials is insufficient, according to consumer advocates. They believe that providing more remedies would also improve the quality of health care that consumers would get by holding managed care plans accountable for unfair denials, limitations, or reductions in care. Employers provide health care benefits voluntarily to help attract and retain workers, especially in a competitive environment, and to help keep trained employees healthy and productive. Many employees consider these benefits to be important. When employers choose to provide health care benefits, employer groups believe that ERISA’s preemption gives them the ability to design innovative health plans that can be consistent across state borders. Employer groups say that if plan fiduciaries were subject to compensatory or punitive damages, employers would be less likely to provide health benefits because of the higher costs associated with them. When managed care plans administer employer-based health care benefits, they believe that they are protected from state law remedies by ERISA’s preemption clause. They view making benefit determinations—including whether a particular service is medically necessary—as administrative functions associated with benefit plans covered by ERISA. They believe that subjecting such decisions to state law remedies would raise costs as participants/consumers and trial lawyers seek damages from plans because of their perceived “deep pockets.” According to the American Association of Health Plans, the very methods that have made health plans successful at arranging for affordable, high-quality health care would be undermined. Also, the association maintains that the need to defend against tort claims for denial of benefits would cause health plans to take defensive measures. For example, the association notes that plans may authorize coverage for more services, whether or not they are medically necessary, to avoid possible litigation. However, the scope of defensive measures may be limited. One survey showed that the final benefit denial rate was no more than 3 percent, although higher denial rates may be associated with certain services or specialties. In effect for more than two decades, the remedies ERISA provides are facing increased scrutiny. While they were considered to be sufficiently fair when enacted by the Congress in 1974, much has changed since then. Now, as more federal court cases challenge ERISA preemption, many members of the Congress believe that the time has come to revisit either ERISA’s civil enforcement scheme—its remedies section—or its preemption clause. In addition to the legislative proposals that have been introduced, alternative solutions may merit further exploration. Nonetheless, any changes made to ERISA will evoke positive reactions by some of those who are affected and negative reactions by others. In the first session of the 105th Congress, two different types of amendments to ERISA were introduced to address the question of compensating plan participants who are injured as a result of improper medical decisions made by managed care entities. Generally, these proposals would either (1) provide for compensation in ERISA’s civil enforcement section or (2) change ERISA’s preemption clause so that it does not supersede state tort laws. The two proposal types differ with respect to how injured plan participants would be able to seek relief. Under the first type, ERISA itself would provide more remedies for alleged injuries. Under the second, ERISA would make it easier for participants to pursue state-provided remedies when seeking compensation from managed care plans. The courts are the arena within which participants pursue remedies when injuries occur under employer-based managed care plans, but more could be done to try to avoid litigation. Several studies and groups have supported this preventive or “upstream” strategy. Rather than amending ERISA to provide for the ability to pursue increased remedies for damages that result from medical decisions made by managed care entities, more attention could be placed on resolving disputes earlier. The National Association of Insurance Commissioners took the position that ERISA should be changed to ensure more government oversight and authority over ERISA health plans’ claim and coverage determinations. Also, according to the association, ERISA needs to provide participants with more meaningful internal and external appeal mechanisms in addition to the appeals to courts that are permitted. It also suggested that ERISA could be revised to require each ERISA health plan to provide independent alternative dispute resolution mechanisms to mediate or adjudicate disputes with participants that cannot be resolved through internal review. The association believed that ERISA should be amended to give participants in ERISA health plans access to state tort law remedies, subject to reasonable limits, only if its other suggested changes were not implemented. A recent study on managed care plan liability stated that having a procedure through which participants could appeal a managed care plan’s benefit denials to an outside reviewer could resolve disputes before harm occurred and could prevent the need for lawsuits later on. Analysts sponsored by the National Institute for Health Care Management reported that an ideal system for resolving benefit disputes should “Recognize the inevitability of conflict between emotionally vulnerable patients and any economically rational health system by anticipating common disputes, tempering expectations with clear rules and implementing timely, efficient dispute resolution mechanisms.” Also, several groups we spoke with representing consumers, health care plans, and employers told us that more emphasis needs to be placed on strengthening the grievance and appeal procedure within managed care plans. Furthermore, the President’s Advisory Commission on Consumer Protection and Quality in the Health Care Industry stated that a timely appeal process can help reduce the incidence of injury. As a result, the commission recommended that the internal and external appeal process be enhanced. The Commission recommended the establishment of external review systems that would be limited to reviewing (1) decisions relating to services that are “experimental” or “investigational,” (2) decisions in which a service is determined not to be medically necessary and the cost exceeds a “significant threshold,” and (3) decisions in which the denial, based on medical necessity, could jeopardize the life or health of a patient. While DOL supports the need to strengthen ERISA’s claim resolution procedure, it also believes that stronger remedies are needed. According to DOL, stronger remedies are needed at the end of the process to ensure compliance with the process “upstream.” That is, DOL believes that it could develop a regulation to implement a better claim resolution procedure for plan participants but could not ensure compliance if there was no cost imposed for failure to comply. Consumer groups also concur with DOL’s concern that current ERISA remedies do not adequately protect plan participants or deter plans from noncompliance. Any effort to amend ERISA or make other changes would likely involve tradeoffs among the divergent interests of consumers, managed care plans, and employers. For example, if the Congress amended either ERISA’s preemption clause or remedies section as discussed previously, plan participants would have access to a broader array of remedies for adverse outcomes under employer-based managed care plans. Patients commonly expect that the medical care they receive is of reasonable quality. ERISA’s preemption of the liability of health plans may remove a powerful incentive to provide high-quality service. An amendment to make it easier to hold managed care plans liable for injuries could cause plans to take more actions to avoid injuries, and the number of adverse outcomes could decrease. Furthermore, the denial of benefits can, if it affects the course of treatment, cause physical injury, which in turn may result in the loss of income or one’s job. Such losses cannot be recovered by reimbursing the patient for the cost of the denied benefit. Amending ERISA could change this. If more participants were able to pursue benefit disputes, however, the courts could potentially have to handle more cases. The limited data available indicate that in recent years more medical malpractice claims are being filed. The number could increase if ERISA were amended. But an adverse outcome does not necessarily mean that a claim will be filed. The findings of a study conducted at New York hospitals and reported in The New England Journal of Medicine in 1991 showed that the number of negligent adverse outcomes was eight times the number of tort claims filed. Thus, as shown by this study, many individuals who are injured by medical negligence may not file a claim. Some contend that even when patients bring malpractice suits, the current liability system for resolving such claims is inefficient and ineffective. Many agree that in the current system, claims take a long time to be resolved, legal costs are high, and settlements and awards are unpredictable. Further, there is concern about whether the system deters the negligent practice of medicine. In contrast, according to managed care and employer groups, health care costs could increase if ERISA were amended to provide compensation in its civil enforcement section or to change its preemption clause so that it does not supersede state tort laws. Some have expressed concern that the increases would be significant. According to the Corporate Health Care Coalition, expanding ERISA’s remedies to encourage more litigation without improving the quality of decision-making would greatly increase plan liabilities and have a “chilling effect” on the use of managed care techniques. As a result, health plans might find it more difficult to deny even inappropriate claims. However, data to accurately estimate the likely extent of such potential increases are lacking. If managed care plans can be sued under state tort law, plan representatives say that they will pass the costs associated with these suits on to employers—the payers of health care. Employers say that faced with such cost increases, they might in response (1) reduce health care benefits, perhaps by excluding from coverage particular treatments and procedures; (2) provide a “defined contribution,” or a fixed amount earmarked for such costs, to employees’ health care costs; (3) shift more of the cost to employees by making them pay a higher percentage of the premiums; or (4) eliminate health care benefits completely.Consequently, plan participants could end up with expanded remedies for adverse outcomes but potentially fewer or more expensive health care benefits. Employer groups also suggest that the increased ability of plan participants to sue managed care plans and UR firms would lead to what ERISA preemption was intended to prevent. That is, benefit determination decisions would be considered treatment decisions (which would elicit the full array of malpractice remedies), and plans operating in multiple states would be subject to various laws. In addition, employers are concerned that they would be more likely to be sued for damages resulting from benefit denials or medical negligence because of their perceived “deep pockets.” To date, however, no employers have been held liable for such damages. When the Congress enacted ERISA in 1974, it would have been nearly impossible to predict the state of the U.S. health care delivery system in the late 1990s. Managed care has grown rapidly only within the past decade. Benefit coverage decisions now are more often made in advance of treatment, which creates a new kind of potential legal liability not faced by traditional fee-for-service health insurers—and not envisioned a quarter of a century ago. ERISA’s remedies section and preemption clause and their effect on compensation for injured plan participants have posed challenging questions for the courts. Recent case law displays a trend toward expanding liability beyond health care providers to include managed health care organizations. Generally, an HMO will be held liable when it directly provides medical services, when the provider is acting as its agent, or when it leads a beneficiary to reasonably believe that the provider is its agent. However, plan participants can be left without a remedy for injuries when they occur because of benefit denials. As managed care enrollment continues to grow, HMO exposure to liability will undoubtedly increase. Proposed changes to ERISA’s remedies section or its preemption clause seek to provide for fair and appropriate remedies for participants in managed care plans. However, analysts’ efforts to assess the merits of such changes have been far from definitive, in part because the contending parties’ interests and views differ sharply and in part because strong evidence on the effects of amending ERISA on cost and quality is absent. That is, there is no research on how or how much plans’, employers’, and consumers’ costs would change if ERISA were amended. To date, much of the debate surrounding ERISA’s current remedies has focused on a proposed “downstream” approach—which seeks to change the remedies available through the courts. Many have suggested that an “upstream” approach—which seeks to prevent court suits and protracted litigation—may warrant consideration as well. DOL reviewed a draft of this report and provided technical comments, which we incorporated as appropriate. We also furnished a draft of this report for review to the American Association of Health Plans, Association of Private Pension and Welfare Plans, the ERISA Industry Committee, two ERISA experts—one of whom specifically represented the consumer viewpoint—and one expert in medical malpractice. In commenting on the draft, the American Association of Health Plans focused on several areas that it believed needed to be clarified and revised. These included (1) distinguishing better between benefit coverage determinations and treatment decisions and clarifying the roles of physicians and plans in those decisions; (2) clarifying the discussion of plans’ direct liability and vicarious liability for physicians’ medical malpractice; and (3) providing additional information on state requirements for managed care plans’ grievance and appeal processes, the incidence of service denials, and existing “counterbalances” to plans’ inappropriate denial of benefits. The association also suggested the need both to discuss more fully the concern of some about proposed expansions of state tort law damages for health care liability and to make more prominent the discussion of “upstream” solutions such as improved grievance and appeal procedures for participants. The final report contains revisions to reflect these clarifications and additions. In its comments, the ERISA Industry Committee emphasized that ERISA is an adaptable and flexible law that is as relevant now as when it was enacted in 1974. Furthermore, the committee believed that the nature of benefit determinations has not fundamentally changed because of the transition from fee-for-service to managed health care. The committee stated that because in most cases health plans are making payment decisions and not treatment decisions, participants are not prohibited from obtaining treatment at their own expense and health care providers can still treat participants. Therefore, the committee believed that the draft report overstated the significance of changes in the health care delivery system as they relate to the legal issues associated with ERISA’s appeal procedures and remedies. While we acknowledged the committee’s position on the role that ERISA’s standards play in the current health care environment, we believe the evidence suggests that prospective benefit coverage decisions can, in fact, affect participants’ ability to obtain needed treatments, especially if other financial resources are not available. The ERISA Industry Committee suggested, as did the American Association of Health Plans, that we distinguish better between benefit coverage determinations and treatment decisions, as well as elaborating on concerns about the effectiveness of the tort system as a remedy. The committee also commented that the report could better reflect the role of an employer-sponsored health benefit plan’s fiduciary in safeguarding participants’ interests and the potential that increased liability could cause benefit plan administrators to take defensive and other measures, with resulting increased costs and decreased coverage. We revised the final report to reflect these clarifications and perspectives. In response to additional comments from these and other reviewers, we clarified certain distinctions and made technical changes as appropriate. We did not receive comments from the Association of Private Pension and Welfare Plans. As we arranged with your offices, unless you announce the report’s contents earlier, we plan no further distribution of it until 30 days after the date of this letter. We will then send copies to the Secretary of Labor. We will make copies available to others on request. If you or your staff have any questions, please call me at (202) 512-7114. This report was prepared initially under the direction of the late Michael Gutowski; his role was later assumed by Jonathan Ratner. Major contributors to this report include Joseph Petko, Roger Thomas, Susan Poling, and Barry Bedrick. The preemption clause of the Employee Retirement Income Security Act of 1974 (ERISA) provides that ERISA supersedes any and all state laws “insofar as they . . . relate to any employee benefit plan” covered by the act. In many instances, the courts have concluded that ERISA preempts participant claims against managed care providers. Although plan participants may have limited remedies under ERISA, the remedies under state law that would typically be more generous, such as compensatory, punitive, or extracontractual damages, are barred by ERISA preemption. As managed care has become more widespread, plan participants or beneficiaries have sought to sue ERISA plans, employers, and organizations conducting utilization review (UR) under state law for malpractice, wrongful death, or benefit denials because of their actions or determinations under the plans. The plans, employers, and UR providers have argued that under the preemption clause, these state remedies are not available. (They have also argued that suits of this kind filed in state court must be removed to federal court.) In this appendix, we discuss these issues and describe some of the cases. In preparing this appendix, we reviewed federal case law and law review articles. The federal courts have found that ERISA may or may not preempt state law governing negligence or malpractice in suits against a managed care plan by a plan participant, depending on the circumstances of the case. It seems clear that if a court concludes that a claim is based on the wrongful denial of a benefit offered by the health plan, ERISA will preempt any claim for relief under state law. Under ERISA, the only remedy available to plan participants may be a court order requiring that the benefit be provided; ERISA preempts remedies authorized under state law such as compensatory, punitive, or extracontractual damages for malpractice. Some federal courts have permitted malpractice suits under state law against managed care plans to go forward where the provider is considered to be an agent of the plan or where the plan directly provides medical services. (HMO) provides medical services to members for a flat or fixed fee. HMO subscribers or members are usually required to use an HMO-employed or HMO-contracted physician in order to qualify for coverage. A preferred provider organization (PPO) typically arranges for independent physicians, specialists, servicing hospitals, and other providers to provide medical care to subscribing members based on a fixed, usually discounted, fee. Both PPOs and HMOs typically use UR in some form. Under UR, the organization or a third party under contract with it evaluates proposed procedures or treatments to determine on the basis of clinical criteria whether they are medically necessary. Many employers who provide health care benefits through group plans regulated under ERISA have turned to managed care to control health care costs. As managed care has emerged as a principal cost-control measure, ERISA’s federal preemption has affected the ability of participants to seek compensatory or punitive damages from managed care plans, based on a plan’s role in providing medical care. Critics of ERISA preemption believe that it is fundamentally unfair that ERISA supersedes state control over medical malpractice or negligent care cases. They also object to the limited remedies available under ERISA for the denial of a claim, which contrasts with state extracontractual, punitive, or compensatory damages for the same denial outside ERISA: When a UR organization determines that a particular treatment is not medically necessary, it is arguably making a medical decision. Yet ERISA leaves plan participants without a remedy for negligence or medical malpractice by a UR organization. ERISA was enacted to protect the interests of employees and their beneficiaries through comprehensive federal requirements and protections for employee pension and welfare benefit plans. It sets standards for pension plans, including standards for vesting, accrual, and funding, and provides fiduciary standards for both pension and welfare benefit plans. ERISA’s federal preemption provision is intended to avoid conflicting state rules on the administration of these federally regulated plans. The ERISA preemption provision—section 514(a) of ERISA—says that with certain exceptions, ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” covered by ERISA. If a plan participant or beneficiary claims to have been the victim of negligence or medical malpractice, or wrongful denial of benefits by the plan, and injury or other damage resulted, then preemption is significant: Although state law typically authorizes punitive, compensatory, or extracontractual damages, such as for emotional distress, loss of consortium, or injury, ERISA does not. The federal courts are increasingly being called upon to define more precisely the scope of ERISA preemption. Courts of appeals for the various federal circuits have interpreted the preemption provision differently. Conflicts among the circuits can be resolved by a definitive ruling by the Supreme Court or by legislation. claims “to recover benefits due to 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 . . . .”Complete preemption under section 502 is a jurisdictional concept; if the defendant successfully argues that complete preemption applies, the case is removed to federal court. In general, if a plaintiff chooses to file an action in state court, the defendant cannot force the removal of the action to federal court unless the plaintiff’s complaint specifically raises issues of federal law. Suits filed in state court alleging malpractice or breach of contract in violation of state law would therefore ordinarily not be subject to removal on the defendant’s motion. Presumably, in ERISA cases, defendants seek removal to federal court because they believe their federal defense—that section 514 preempts state law—will receive a more sympathetic hearing there than in state court. However, merely raising a federal issue as a defense does not ordinarily justify removal. Complete preemption is an exception to the general rule that removal is required only when the plaintiff’s complaint raises a federal issue. The Supreme Court decided in Metropolitan Life Ins. Co. v. Taylor that a defendant may have a case removed from state to federal court even though the plaintiff’s complaint does not raise federal issues if federal legislation has “so completely pre-empt a particular area that any civil complaint raising this select group of claims is necessarily federal in character.” Complete preemption applies to ERISA claims under section 502. In Metropolitan Life, the plaintiff’s complaint was based on common law contract and tort claims under state law only. However, the court found that any complaint brought against a plan under section 502, regardless of whether it is based on state causes of action, will be viewed as arising under federal law. argue that his or her claim is not one that “relates to any employee benefit plan” and therefore that section 514 does not preempt his or her state cause of action. Deciphering the meaning and outer limits of “relates to” has been contentious and difficult. One federal appellate court described the law in this area as “a veritable Sargasso Sea of obfuscation.” The Supreme Court in Shaw v. Delta Air Lines Inc. provided a basic definition: a state law “relates to” an employee benefit plan, within the meaning of the preemption clause of ERISA, if the law has “a connection with or reference to such a plan.” The Court noted that it is not enough that a state law affects employee benefit plans; the effect may occur “in too tenuous, remote or peripheral a manner” to warrant concluding that the law “relates to” the plan for purposes of the preemption clause. The Supreme Court refined its interpretation of what it means for a state law to “relate to” an employee benefit plan in New York State Conference of Blue Cross and Blue Shield Plans v. Travelers Insurance Co. In that case, the Court concluded that ERISA did not preempt a state law that mandated surcharges on the hospital bills of patients insured by commercial insurers (and certain HMOs) but not on the bills of patients insured by Blue Cross and Blue Shield. The Court concluded that these laws were not “related to” ERISA plans, even though the surcharges would have an indirect economic effect on ERISA plans: “if ‘relate to’ were taken to extend to the furthest stretch of its indeterminacy, then for all practical purposes pre-emption would never run its course for ‘eally, universally, relations stop nowhere.’” The Court in Travelers relied on the fact that the surcharge under the state statute applied whether or not the health services were furnished through an ERISA-covered plan. The Court noted that “while Congress’s extension of pre-emption to all ‘state laws relating to benefit plans’ was meant to sweep more broadly than ‘state laws dealing with the subject matters covered by ERISA, reporting, disclosure, fiduciary responsibility, and the like,’ . . . nothing in the language of the Act or the context of its passage indicates that Congress chose to displace general health care regulation, which historically has been a matter of local concern . . . .” In Travelers, the Supreme Court made clear that state laws that have only an indirect influence on ERISA plans are not preempted. State laws that indirectly affect “the relative costs of various health insurance packages in a given State,” or that do not preclude plan administrators from adopting uniform administrative practice or uniform interstate benefit packages, do not implicate those “conflicting directives” from which the Congress meant to insulate ERISA plans and are therefore not preempted. some effect on the administration of ERISA plans, but that does not mean that every such state law is preempted by ERISA. ERISA’s enforcement provisions prescribe the causes of action and remedies available under this federal law. Managed care organizations involved in medical malpractice lawsuits have asserted that ERISA preempts these state law claims. A managed care arrangement that successfully asserts such a defense may effectively avoid state tort remedies of extracontractual, compensatory, punitive, or exemplary damages. ERISA provides that a participant or beneficiary may bring a civil action “to recover benefits due to him under the terms of the 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.” Only the benefits to which a plan participant or patient is contractually entitled under the terms of the plan are available under ERISA. Thus, if a benefit is denied, the remedy is to obtain the benefit. Under ERISA, no civil action can be brought for malpractice, emotional distress, wrongful death, or negligence. A review of the cases that can be categorized as a denial of a benefit as a result of a UR decision indicates that ERISA preempts state law claims for negligence, wrongful death, medical malpractice, and the like. Corcoran v. United Healthcare, Inc. illustrates the difficult issues relating to jurisdiction, remedies, and public policy faced by a court applying ERISA preemption in the managed care context. Because of the plaintiff’s high-risk pregnancy, her physician asked that the expectant mother be hospitalized for close monitoring. Under the plaintiff’s employer’s health plan, precertification and UR were necessary for the hospital admission and the length of the hospital stay. The firm performing UR for the employer’s plan determined that hospitalization was not necessary, but authorized up to 10 hours a day of home nursing care. When a nurse was not on duty, the fetus went into distress and died. The parents filed a wrongful death action in state court, alleging, in part, that Mrs. Corcoran’s unborn child had died as a result of the negligence and denial of hospital care by both the health plan and the UR firm. The defendants removed the action to federal court and moved for summary judgment. They characterized the plaintiffs’ wrongful death action as, in reality, an action for mishandling a claim by firms retained merely to administer benefits under an ERISA-covered plan. Their relationship to the plaintiffs, they contended, was wholly defined by the terms of the employer plan; as a result, plaintiffs’ claims “related to” an ERISA plan and were therefore preempted. Plaintiffs answered that preemption would “contravene the purposes of ERISA by leaving them without a remedy.” disclosure, and fiduciary obligations, but also, in a much broader sense, whenever the state laws have “a connection with or reference to” an employee benefit plan. The UR firm argued that it did not make medical decisions or provide medical advice; all it did was determine whether Mrs. Corcoran qualified for the benefits provided by the plan by applying previously established eligibility criteria. The court disagreed but held that while the UR firm made medical decisions and gave medical advice, it did so in the context of making determinations about the availability of benefits under the health plan. In the court’s view, this was enough of a relationship to an employee benefit plan to require ERISA preemption. In Tolton v. American Biodyne, Inc. the Court of Appeals for the Sixth Circuit used the same analysis to conclude that ERISA preempted state causes of action based on UR. In that case, the covered employee, Mr. Tolton, was drug-dependent and suicidal. His employer’s managed care health plan included a UR requirement. On several occasions, Mr. Tolton met with or talked to a psychologist who performed UR and, on that basis, denied him inpatient care. After attempting to obtain treatment from a variety of health care providers on a number of occasions, Mr. Tolton committed suicide. Mr. Tolton’s estate brought an action in state court against the employer’s health plan, the plan administrator, and each of the health care providers who had treated him, including the psychologist who had performed UR. The claims included wrongful death and medical malpractice. On the motion of the plan, the case was removed to federal court based upon ERISA preemption. Summary judgment was subsequently granted, in part on this same basis. action based on the psychologist’s UR decision and the denial of Mr. Tolton’s claim was also preempted. Similar facts resulted in the same outcome in a district court decision in the First Circuit, while also generating a strongly worded opinion by a judge who believed that the result was an injustice and that the Congress should amend the law. The beneficiary was denied 30-day inpatient care by a UR provider. After the beneficiary committed suicide, plaintiff brought claims for breach of contract, medical malpractice, wrongful death, loss of parental and spousal consortium, intentional and negligent infliction of emotional distress, and specific violations of the Massachusetts consumer protection laws. ERISA was found to preempt these claims, but the court commented that “ERISA has evolved into a shield of immunity that protects health insurers, UR providers, and other managed care entities from potential liability for the consequences of their wrongful denial of health benefits.” Other federal appellate courts have followed the approach taken in Corcoran and Tolton. The Eighth Circuit Court of Appeals found in Kuhl v. Lincoln National Health Plan of Kansas City, Inc., that failure of the managed care entity to preapprove heart surgery constituted a denial of benefits and thus that the state cause of action was preempted by ERISA.The failure to preapprove, in the court’s view, did not constitute the provision of medical advice. The same result was reached in the Ninth Circuit in Spain v. Aetna Life Insurance Co. agent are attributed to the principal who did nothing wrong. Direct liability means that while the agent’s wrongful act caused the harm, the principal also acted negligently or wrongfully—for example, in selecting or retaining its agents or monitoring their activities. In Pacificare of Oklahoma, Inc. v. Burrage, the basis of the claims against the HMO was malpractice. The case was removed in part from state court, where it had originally been filed. But the federal district court did not agree that preemption applied and permitted the state court to hear the plaintiff’s claims that (1) the HMO primary care physician was the agent of the HMO and (2) the HMO was liable, both vicariously and directly, for the physician’s actions. The Tenth Circuit sustained the decision of the district court that ERISA did not preempt these claims against the HMO. While noting that there was no simple formulation, the court identified four categories of state laws that might “relate to” a plan, as that term is used in ERISA: “(1) laws that regulate the type of benefits or terms of ERISA plans; (2) laws that create reporting, disclosure, funding or vesting requirements for ERISA plans; (3) laws that provide rules for the calculation of the amounts of benefits to be paid under ERISA plans; and (4) laws and common law rules that provide remedies for misconduct growing out of the administration of the ERISA plan.” agent of the HMO is not preempted. The court therefore directed that the case be returned to state court. In Dukes v. U.S. Healthcare System, Inc., the court addressed several theories of negligence or medical malpractice involving an HMO. Mr. Dukes’ primary care physician ordered a blood test by a hospital that for unknown reasons was not performed and that allegedly would have disclosed extremely high blood sugar. Mr. Dukes died after additional medical treatment. His wife sued the physicians, hospitals, and HMO, U.S. Healthcare System, in state court. In seeking removal of the case to federal district court, the HMO argued that (1) Mr. Dukes had obtained medical care as a benefit from a welfare benefit plan governed by ERISA, (2) removal was required by the “complete preemption” theory, and (3) the plaintiff’s claims were preempted by section 514(a) of ERISA. The district court dismissed plaintiff’s claims against the HMO on the basis of ERISA preemption. “ny ostensible agency claim,” the district court concluded, “must be made on the basis of what the benefit plan provides and is therefore ‘related’ to it.” The court also held that “the treatment received must be measured against the benefit plan and is therefore also ‘related’ to it.” The Third Circuit Court of Appeals reversed the district court and remanded the malpractice claims to the state court. The appellate court concluded that complete preemption did not apply because the plaintiff’s claims focused only on the quality of benefits received; the plaintiff was not alleging that benefits were withheld nor seeking either to enforce rights under the terms of the plan or to have the right to future benefits clarified. The court found a significant distinction between this case and Corcoran, the case discussed previously in which ERISA was held to preempt a malpractice claim based on the UR provider’s determination—contrary to the opinion of the plaintiff’s physician—that the plaintiff did not need hospitalization during her pregnancy. This court said that the UR provider in Corcoran, “unlike the HMOs here, did not provide, arrange for, or supervise the doctors who provided the actual medical treatment for plan participants.” Another recent appellate decision, this one from the Seventh Circuit, concluded that ERISA does not preempt a claim that the administrator of an employee health benefits plan is liable under state law for medical malpractice by a physician who is an agent of the plan. The plaintiff in Rice v. Panchal was treated by a preferred provider furnished by his health plan. He brought suit in state court against the doctor for malpractice and against the health plan on an agency theory: The health plan, the plaintiff claimed, was responsible for the medical malpractice by its preferred provider. On a motion by the health plan, the case was removed to federal district court under the doctrine of complete preemption. The Seventh Circuit Court of Appeals found in Panchal that there was no complete preemption of the claim against the health plan. The court acknowledged that complete preemption would be required if the plaintiff’s state law claim could not be resolved without an interpretation of the contract—the ERISA plan—governed by federal law. In Panchal, the court said that resolving the question of whether the health plan is liable for the medical malpractice of the provider under state agency law does not require construing the ERISA plan; the issues, in this view, were whether the doctor was in fact an agent, whether he was authorized to act for the principal, and whether the injury would not have occurred but for the victim’s reliance on the agency. Answering these questions does not involve the interpretation of the ERISA plan. (In the state proceeding, the plan would be free to raise ERISA preemption under section 514 as a defense.) 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Summary: Pursuant to a congressional request, GAO reviewed how people enrolled in employer-based managed care plans are compensated when they are improperly denied health care benefits or when they experience negligent medical care and the role that the Employee Retirement Income Security Act (ERISA) plays, focusing on: (1) whether the transition from traditional employer-based fee-for-service health plans to managed care has changed the process of benefit determination; (2) the remedies that ERISA provides to participants in employer-based managed care plans who are improperly denied benefits; (3) whether ERISA affects the ability of participants to be compensated for injuries that result from either medical malpractice or improper benefit denials at employer-based managed care plans; and (4) the consequences of changing ERISA's remedies. GAO noted that: (1) managed care plans attempt to ensure that enrollees receive services that are necessary, efficiently provided, and appropriately priced; (2) since the 1980s, employers have shifted to offering managed care plans that use such techniques as prospective utilization review (UR); (3) as a result, benefit coverage decisions have increasingly shifted from being made after services are provided to before; (4) ERISA effectively limits the remedies available when employees of private-sector firms claim to have been harmed by plans' decisions to deny coverage of a particular service; (5) under ERISA, plans must have an appeal process for participants who are dissatisfied with a benefit denial; (6) if participants are not successful, they can file a civil lawsuit; (7) ERISA's exclusive remedy for improper benefit denials is to require the plan to provide the denied service and, at the court's discretion, pay attorney fees; (8) groups representing consumers believe that ERISA's limited remedy neither provides sufficient compensation for injuries that benefit denials contribute to nor effectively deters unjustified benefit denials; (9) ERISA can affect participants' ability to be compensated for injuries sustained while in an employer-based health care plan; (10) ERISA's preemption of state laws that relate to employee health benefit plans enables managed care plans and UR firms to avoid liability under state law for medical malpractice; (11) compelling evidence is lacking on the likely effects of amending ERISA to provide either expanded remedies for losses due to disputed benefit denials or the ability to sue managed care plans for medical malpractice under state tort laws; (12) consumer groups and others assert that additional remedies could: (a) improve health care quality by holding plans accountable for the consequences of their benefit coverage decisions; and (b) provide participants with a course of remedies more comparable to state tort laws; (13) managed care plan and employer groups maintain that these additional provisions would result in increased costs or benefit reductions; and (14) to date, data are not available to accurately estimate the extent to which the quality of health care would improve or the amount by which the costs of plans, employers, and employees might change if ERISA's remedies or preemption of state laws were amended.