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HMOs Shield From State Malpractice Suits

This Summer, the U.S. Supreme Court held, in Aetna Health Inc. v. Davila, that ERISA, the federal law that regulates employee benefit plans, shields employer-sponsored health plans from a Texas statute that gives patients the right to sue health plans for not exercising ordinary care when "making health care decisions."

This case involves two different patients. One patient had been taking Vioxx, but experienced severe complications after his HMO required him to try different drugs before it would pay for the Vioxx. The other patient's physician recommended a longer hospital stay than authorized by her health plan. After being discharged, the patient returned to the emergency room with significant complications.

The Supreme Court determined that Congress intended ERISA to provide the exclusive enforcement mechanism for employee-sponsored health plans, and, therefore, any state law that "duplicates, supplements or supplants ERISA civil enforcement" is preempted.

What is at stake in this controversy is whether an HMO can be held liable for "consequential" damages. Under ERISA, the HMO is only liable to provide or pay for the cost of the withheld service. On the other hand, if the HMO were subject to a state "malpractice" claim, then the HMO might also be liable for the damages the patient suffered as a "consequence" of the withheld service. Such consequential damages may include lost earnings and pain and suffering. Accordingly, the economic results of the Supreme Court preempting the Texas statute are enormous.

However, the Aetna decision does not change the rule announced in a prior Supreme Court case, Pegram v. Herdrich. In Aetna, the decision not to pay for the treatments at issue was made by HMO employees, other than the treating physician. In Pegram, the decision not to provide the requested treatment was made by the treating physician. Thus, decisions to withhold treatment made by the treating physician are still subject to state medical malpractice suits, even if the physician is acting on behalf of an HMO.


September 22, 2004




Rosen, Barry F.


Health Care