LOCATION: South Carolina State Ports Authority
DOCKET NO.: 00-1021
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Seventh Circuit
CITATION: 536 US 355 (2002)
ARGUED: Jan 16, 2002
DECIDED: Jun 20, 2002
John G. Roberts, Jr. - argued the cause for petitioner
Andrew S. Tulumello - for the American Association of Health Plans, Inc., et al. as amici curiae urging reversal
Daniel P. Albers - on behalf of the Respondent
Edwin S. Kneedler - on behalf of the United States, as amicus curiae
Miguel A. Estrada - for the American Association of Health Plans, Inc., et al. as amici curiae urging reversal
Facts of the case
Rush Prudential HMO, Inc., a health maintenance organization that provides medical services for employee welfare benefits plans covered by the Employee Retirement Income Security Act of 1974 (ERISA), denied Debra Moran's request to have surgery by an unaffiliated specialist. Under the Illinois HMO Act (Act), which provides that "in the event that the reviewing physician determines the covered service to be medically necessary," the HMO "shall provide" the service, Moran made a written demand for an independent medical review of her claim. After Rush refused her demand, Moran sued in state court to compel compliance with the Act. The court ordered the review, which found the treatment necessary. While the suit was pending, Moran had the surgery and amended her complaint to seek reimbursement. Rush removed the case to federal court, arguing that the amended complaint stated a claim for ERISA benefits. Ultimately, the Court of Appeals found Moran's reimbursement claim preempted by ERISA so as to place the case in federal court, but it concluded that the Act was not preempted as a state law that "relates to" an employee benefit plan because it also "regulates insurance" under ERISA's saving clause.
Is the Illinois Health Maintenance Organization Act, as applied to health benefits provided by a health maintenance organization under contract with an employee welfare benefit plan, preempted by the Employee Retirement Income Security Act of 1974?
Media for Rush Prudential HMO, Inc. v. MoranAudio Transcription for Oral Argument - January 16, 2002 in Rush Prudential HMO, Inc. v. Moran
Audio Transcription for Opinion Announcement - June 20, 2002 in Rush Prudential HMO, Inc. v. Moran
William H. Rehnquist:
The opinion of the Court in two cases will be announced by Justice Souter.
David H. Souter:
The first of these is No. 00-1021, Rush Prudential HMO, Inc. against Moran.
The case comes to us on writ of certiorari to the United States Court of Appeals for the Seventh Circuit.
The Employee Retirement Income Security Act of 1974 (ERISA) preempts State Laws that relate to employee benefit plans, but it saves from preemption State Laws that regulate insurance.
The question here is whether Section 410 of the Illinois Health Maintenance Organization Act is preempted.
The petitioner Rush Prudential is an HMO that provides medical services for employee benefit plans covered by ERISA.
The respondent Debra Moran is a beneficiary under a Rush Health Plan.
She sought an unusual medical treatment and Rush denied it on the ground that it was not medically necessary.
The situation is addressed by Illinois HMO Act which guarantees that in certain disputes over the medical necessity of a treatment, an independent physician will review the claim.
If the reviewer decides that treatment is necessary, the HMO must provide it.
Moran sued to force Rush to comply with the statute.
The reviewer here found that Moran’s treatment was necessary.
Rush argued that the reviewer’s decision did not matter because the Illinois Act was preempted by ERISA.
The Seventh Circuit held that the Act was a law that regulated insurance and was saved from preemptions.
We granted certiorari and in an opinion filed today with the Clerk of Court, we affirm.
HMO as defined by Illinois both provides Health Care and assumes the financial risk of providing it.
Thus, the Act is targeted toward the segment of the insurance industry and it regulates insurance within the meaning of the ERISA provision that preserves State Law.
This alone would answer the question of preemption but for the fact that in Pilot Life Insurance against the Dedeaux, we held that even State Insurance Laws might be preempted if they interfered with ERISA's exclusive scheme of remedies for benefit denials.
Here, Rush contends that the Act provides a remedy binding arbitration and is therefore preempted under Pilot Life.
We do not accept the argument because the Act does not provide any cause of action or separate relief a plan member like Moran must still sue under ERSIA to obtain benefits.
The independent review procedure is not a true arbitration but is instead more like a medical judgment that states may regulate.
Justice Thomas has filed a dissenting opinion in which he is joined by the Chief Justice, Justice Scalia, and Justice Kennedy.