Opinion ID: 35610
Heading Depth: 3
Heading Rank: 1

Heading: State Law Tort Claims for Damages

Text: 30 Mayeaux and Germain contend that the district court erred in granting summary judgment dismissing their tort claims for pain and suffering, irreparable connective tissue damage, depression, loss of consortium, loss of earning capacity, lost wages, mental anguish, and attorney's fees. We agree with the district court's holding that these claims are preempted by ERISA. 31 Mayeaux and Germain base their insistence that these state law tort claims have not been preempted on the Supreme Court's decision in Pegram v. Herdrich. 25 There, the Court held that mixed eligibility and treatment decisions that were made by an HMO acting through its physicians were not fiduciary acts under ERISA; and that, as such, those mixed decisions could not give rise to an ERISA breach of fiduciary duty claim. 26 32 Pegram carved out a narrow class of state law claims from ERISA conflict preemption. That carve-out was predicated on the defining feature of the HMO scheme as a combination of both insurer and provider of medical services. 27 In the traditional fee-for-service context, treatment decisions are made by the patient's unconflicted physician based exclusively on his medical judgment about the appropriate medical response: In contrast, eligibility decisions are made subsequently by the insurer based on the policy's coverage for a particular condition or medical procedure. 28 When an HMO makes benefits decisions through its physicians, though, the structure of that business model allows for some treatment decisions to converge with eligibility decisions. 29 In that context, such decisions consequently become  mixed  because the eligibility determination cannot, in practical terms, be untangled from physicians' judgments about reasonable medical treatment. 30 As we recognized in Haynes v. Prudential Health Care , the [ Pegram ] Court pushed the door ajar to treat mixed eligibility and treatment decisions as medical decisions for the purposes of ERISA, but it did not sanction the blanket application of mixed eligibility decision in all ERISA preemption cases. 31 Now, by baldly characterizing BCBS's interpretation of the Adler Plan as a mixed decision, Mayeaux and Germain attempt to have us broaden Pegram 's carve-out to cover the denial-of-benefits decision at issue here. This we cannot do because we now know that the Supreme Court rejects such an expansive reading of Pegram. 33 While this case was pending, the Supreme Court unanimously decided Aetna Health Inc. v. Davila, 32 a consolidated appeal of two law suits by individuals who sued their HMOs for liability under the Texas Health Care Liability Act (THCLA), a statute that imposed a duty on health insurance carriers, HMOs, and other entities managing health care plans to exercise ordinary care when making health care treatment decisions. 33 In holding that such suits were completely preempted by ERISA, the Court's decision in Davila confirms the extreme narrowness of the scope of the mixed decision carve-out articulated in Pegram. Davila explains that [t]he fact that a benefits determination is infused with medical judgments does not necessarily convert the plan administrator's decision into a non-fiduciary act. 34 Instead, the indispensable pillar buttressing Pegram 's rationale for excluding mixed decisions from being treated as fiduciary acts under ERISA was, as Davila makes clear, the structure of the ERISA plan in question — that is, a physician-owned-and-operated HMO in which [t]he plaintiff's treating physician was also the person charged with administering plaintiff's benefits. 35 As a result, Pegram has no application outside the HMO context: 34 Pegram, in highlighting its conclusion that mixed eligibility decisions were not fiduciary in nature, contrasted the operation of [t]raditional trustees administer[ing] a medical trust and physicians through whom HMOs act. A traditional medical trust is administered by paying out money to buy medical care, whereas physicians making mixed eligibility decisions consume the money as well. And, significantly, the Court stated that [p]rivate trustees do not make treatment judgments. But a trustee managing a medical trust undoubtedly must make administrative decisions that require the exercise of medical judgment. 36 35 Davila thus expressly rejects any effort to extend Pegram 's mixed-decision principle to cover traditional indemnity insurers like BCBS: Since administrators making benefits determinations, even determinations based extensively on medical judgments, are ordinarily acting as plan fiduciaries, it was essential to Pegram 's conclusion that the decisions challenged there were truly mixed eligibility and treatment decisions, i.e., medical necessity decisions made by the plaintiff's treating physician qua treating physician and qua benefits administrator. Put another way, the reasoning of Pegram only makes sense where the underlying negligence also plausibly constitutes medical maltreatment by a party who can be deemed to be a treating physician or such a physician's employer. 37 36 We, therefore, hold that Mayeaux and Germain's state law tort claims are completely preempted by ERISA and affirm the district court's grant of summary judgment in favor of BCBS.