main | table | intro| 1 | 2 | 3| 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15| 16 | 17| 18 |*
	Chapter 7 ERISA
	Many courageous battles by indignant citizens against the abuses of managed care companies have led to legislative action in every state. The supporters of state legislative change have often been shocked to find out that their effort does not reach the target. Many managed care programs have been deemed to be protected by federal legislation that supersedes state mandates. How so?
	The problem that reduces state health insurance coverage mandates to little more than symbolic gestures is that the courts have long interpreted the Federal Employee Retirement Security Act of l974 (ERISA) as nullifying or preempting any state laws that relate to a qualified self-insured plan in any way.
	ERISA was adopted to reform the management of voluntary pension plans by private employers. It established federal standards, superseding state law, for the funding of employee pensions. During the ERISA debate, with minimal discussion, Congress extended the "ERISA exemption" to state laws governing all types of employee benefit plans, including health care.
	The problems created by ERISA have been clearly articulated as follows(14): When the federal government takes over the regulation of an industry from the states, it ordinarily creates a federal regulatory system with uniform standards and mechanisms of enforcement such as the Food and Drug Administration. ERISA established uniform standards for pension plans (which work reasonably well) but did not do so for health plans. Although health plans governed by ERISA are often described as federally regulated, the law does not prescribe any substantive standard for them. It requires only that a health plan provide employees with a brief summary of the main terms and conditions of the plan, invest its funds prudently, and report to the Department of Labor. ERISA does not require health plans to offer any specific benefits or meet any standards for contracting with physicians, setting payment rates, or deciding about patient care. The result is an anomalous law that precludes state regulation of ERISA health plans without substituting federal standards, leaving the plan in a regulatory vacuum.
	About 65 percent of the private health insurance market is controlled by self-insured plans and their contracting partners. This means that most managed care entrepreneurs have long felt immune from state laws that address their abuses
	Bryan Welch (see chapter on The Warriors) has made a lucid analysis of how recent court decisions are breaking the "ERISA shield(15)". The first major breakthrough we had in ERISA was in 1995, when the Third Circuit Court of Appeals held that a managed care company could be sued, despite ERISA, for 'vicarious liability' for any medical negligence that occurred in its health system… This notion has been upheld in many jurisdictions across the country. It is now a predictable enough judicial determination that no lawyer or litigant need hesitate to litigate against managed care out of certainty as to how a court will rule when straightforward medical negligence has occurred in an ERISA managed care plan.
	Managed care companies have still tried to protect themselves with the distinction between "medical care decisions" (not pre-empted) and "benefit decisions" (pre-empted). A benefit decision would occur when the company claimed the service was not covered by the benefit offered, and, of course, kept on reducing the benefit.
	As noted by Dr. Welch, this distinction is also being eroded in the courts. In a New Jersey federal court decision in 1998, ...the court held that the managed care company's decision to pay for only one day of postnatal care represented a negligent design of a health care system and characterized this as a 'quality' consideration.
	Efforts in congress to assert patients' rights would de facto brake the ERISA barrier because such rights would have uniform application regardless of the "benefits" proposed by the managed care companies.
	We should expect more action against the ERISA exemption in the states. When the Texas governor allowed legislation challenging the ERISA shield to be implemented in the state, many expected successful challenges in federal courts. The first challenge in federal court failed, and legal action formerly forbidden by ERISA has already started in Texas.
	The lack of federal rules on the implementation of the ERISA exemption, often called the "ERISA Vacuum", gives added value to the states advocacy for direct access to specialists, freedom to communicate with patients, free access to information about plan coverage, and the right to sue in state courts.
	The importance of the vacuum has been clear in litigation based on the contention that the states and not ERISA govern quality of medical care, and the states have the right to demand quality from programs covered by ERISA. Outcomes in the courts may map the medicine of the future.
main | table | intro| 1 | 2 | 3| 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | *
©2000 Munoz and Eist, The People v. Managed Care