Rush Prudential Hmo, Inc. v. Moran

536 U.S. 355 (2002)

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Nature of the Case

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Facts

The Employee Retirement Income Security Act of 1974, as amended (ERISA) regulates employee welfare benefit plans and generally pre-empts state laws related to such plans. However, certain state laws, including those that regulate insurance, are saved from pre-emption under 29 USCS 1144(b)(2)(A). A provision of the Illinois health maintenance organization (HMO) statute required an HMO to (1) provide, on-demand, review, by a physician who was unaffiliated with the HMO, of the denial of a covered health care service to one of the HMO's members; and (2) provide such service if the reviewing physician determined the service to be medically necessary. D is an HMO that contracts to provide medical services for employee welfare benefits plans covered by the Employee Retirement Income Security Act of 1974 (ERISA). P was insured under D’s plan. D promised to provide P with “medically necessary” services. These terms gave D the 'broadest possible discretion' to determine whether a medical service claimed by a beneficiary is covered under the certificate. The certificate specified that the service is covered as “medically necessary” if: (1) it is furnished by the participating doctor for diagnosis or the treatment of a sickness or injury or maintenance of the beneficiary’s good health, (2) if it is safe and effective for the intended use and its omission would adversely affect the beneficiary’s medical condition; (3) It is furnished by a provider with appropriate training, experience, staff and facilities of that particular service. D contracted with physicians and each beneficiary could choose a primary care physician from the list of those contracted by D. D would only pay for a medical service by an unaffiliated physician only if the service has been authorized both by the primary care physician and D’s Medical Director. P began to have pain and numbness in her right shoulder, Dr. LaMarre administered 'conservative' treatments but they failed. Dr. LaMarre recommended that D approve surgery by an unaffiliated specialist, Dr. Terzis, who had developed an unconventional treatment for P's condition. D denied the request. D proposed that P must undergo standard surgery performed by a physician affiliated with D. P demanded an independent medical review of the claim as guaranteed under Sections 4-10 of Illinois HMO Act. When D failed to provide the independent review, P sued in an Illinois State Court to compel compliance with the State Act. The State Court ordered D to submit a review by an independent physician. Dr. Dellan, stated that the procedure was medically necessary following the definition of medical necessity in the certificate of D and also by his expertise and judgment. D’s medical Director refused to concede that the surgery had been medically necessary and again denied P’s claim. P had the surgery by Dr. Terzis at her own expense and submitted a $94,841.27 reimbursement claim to D in an amended complaint. D consulted three physicians who unanimously agreed that P’s surgery was medically unnecessary. D eventually removed the case to the Federal Court arguing that the amended complaint was a claim under ERISA benefits. The District Court denied P’s claim treating it as a claim under ERISA and ruled that ERISA preempted the state independent medical review statute. The Court of Appeals of the Seventh Circuit reversed the District Court’s judgment. D petitioned at the Supreme Court for a certiorari review.