Opinion ID: 739080
Heading Depth: 2
Heading Rank: 1

Heading: erisa preemption and our decision in memorial

Text: 9 We begin with a brief review of the logic and reasoning of our decision in Memorial because that decision controls our disposition of Cypress's claims in this case. ERISA preempts any and all State laws insofar as they now or hereafter relate to an employee benefit plan. 29 U.S.C. § 1144(a) (emphasis added). In Memorial, we set out to define the meaning of relate to in cases involving independent, third-party providers of medical services, who assert state-law causes of action for misrepresentation against insurance companies that have misrepresented the existence of health coverage to the detriment of the third-party provider. 10 Memorial Hospital was incorrectly informed by Northbrook Insurance Company that an employee of Noffs, Incorporated was covered under Noffs's health insurance plan. The benefit plan came within ERISA's scope. After tendering the employee's hospital bill to Northbrook, Memorial was informed that the employee in fact was not covered under Noffs's plan. Memorial sued, alleging, among other things, negligent misrepresentation in violation of § 21.21 of Texas's Insurance Code. The district court held that Memorial's state-law cause of action for misrepresentation was preempted by ERISA. 11 We reversed. In reaching our conclusion that Memorial's state-law claim for negligent misrepresentation was not preempted, we initially made a distinction between hospitals who assert a derivative claim for benefits (i.e., the hospital stands in the shoes of the beneficiary of the plan) and independent, third-party claims brought by health care providers such as Memorial. 904 F.2d at 243-44. To determine on which side of the line Memorial fell, we looked to our prior cases in which we found ERISA preemption had 12 two unifying characteristics: (1) the state law claims address areas of exclusive federal concern, such as the right to receive benefits under the terms of an ERISA plan; and (2) the claims directly affect the relationship among the traditional ERISA entities--the employer, the plan and its fiduciaries, and the participants and beneficiaries. 13 904 F.2d at 245 (footnotes omitted). 4 We concluded that Memorial fit into neither category and was therefore asserting its state-law claim for misrepresentation as an independent, third-party provider of medical services. 14 We asserted three justifications for our conclusion. First, we recognized the commercial realities facing third-party providers of health care services, noting that in situations in which it is not clear whether a patient is covered by a health insurance plan, the provider wants to know if payment reasonably can be expected. Thus, one of the first steps in accepting a patient for treatment is to determine a financial source for the cost of care to be provided. 904 F.2d at 246. 15 Second, when an insurance company erroneously informs a health care provider such as Memorial that a patient is covered by health insurance, state law, which allocat[es] ... risks between commercial entities that conduct business in a state, normally provides a remedy. Id. at 246-47. This is so, we reasoned, because [a] provider's state law action under these circumstances would not arise due to the patient's coverage under an ERISA plan, but precisely because there is no ERISA plan coverage. Id. at 246. 16 Third, depriving an independent third-party provider of a state-law cause of action in no way furthers, but rather defeats, Congress's purpose behind enacting ERISA. We recognized in Memorial that third-party providers would be less likely to accept the risk of nonpayment, and as a result, may require patients to make up-front payments or subject those patients to other unnecessary inconveniences before treatment is offered. Id. at 247. Nor, we reasoned, could Congress have wanted to shield welfare plan beneficiaries from the consequences of their acts toward non-ERISA health care providers when a cause of action ... would not relate to the terms or conditions of a welfare plan, nor affect--or affect only tangentially--the ongoing administration of the plan. Id. at 250. 17 In short, in Memorial, we staked out the policy arguments which support the conclusion that ERISA does not preempt a third-party provider's state-law claims if that third party's claim is premised on a finding that the beneficiary is not covered at all by an existing ERISA plan. As such, we defined what it meant for a third party's state-law claims to relate to an ERISA plan, premising our conclusion on the commercial realities faced by third-party providers, basic notions of federalism, and Congress's intent behind enacting ERISA.