ERISA Preemption Plagues
Courts and Individuals:
the Need for Congressional Action
By Melanie R. Margolis
Individuals suing their health plans too often find themselves without a remedy. These individuals have often suffered tremendous injury as a result of action or inaction by their health plans, but their claims against their health plans are frequently preempted by the Employee Retirement Income Security Act of 1974 (ERISA), which renders the courts powerless to aid these injured parties.
ERISA regulates employee benefit plans, and Section 514(a) of ERISA preempts an individual's state law causes of action that relate to employee benefit plans, including, for example, tort, contract, and wrongful death claims. The preemption provision was included in ERISA to encourage employers to offer benefit plans to their employees; but employee benefit plans are shielded from liability for actions in even the most egregious cases. Doctors and hospitals can be held liable for medical malpractice. Employee benefit plans should likewise be accountable for their decisions and actions affecting the treatment of plan members.
In Prudential Insurance Company of America v. Bast, 1998 U.S. App. LEXIS 11358, the U.S. Court of Appeals for the Ninth Circuit recently upheld a lower court's ruling that ERISA preempted the claim of the husband and child of a woman who died of cancer. Rhonda Bast was diagnosed with breast cancer in December 1990. After a mastectomy, she was diagnosed with a secondary malignancy in her lung for which her oncologist recommended an autologous bone marrow transplant procedure and high dose chemotherapy. On September 9, 1991, the center where the procedure was to be performed contacted Prudential for pre-authorization, which was denied.
After a battle, Prudential finally approved coverage in late February 1992. Rhonda Bast, however, could not have the procedure then because the cancer had metastasized to her brain. She died in January 1993. Her husband and son sued Prudential, alleging that Prudential acted in bad faith and breached its fiduciary duty to Rhonda Bast by delaying authorization for a potentially life-saving medical procedure.
The Basts argued that their case fell within the ERISA "savings clause," a provision that states that ERISA does not exempt any person from state insurance, banking, or securities laws. The court held that the Bast's claims were preempted by ERISA because they arose out of Prudential's actions as an employee benefit plan administrator, not as an insurance company.
The Ninth Circuit, calling this "a tragic set of facts," affirmed the lower court's ruling and concluded "that under existing law the Basts are left without a remedy." The court stated that "[u]nfortunately, without action by Congress, there is nothing we can do to help the Basts and others who may find themselves in this same unfortunate situation."
Proposed legislation in Congress differs along party lines on the ERISA preemption issue. Legislation sponsored by Democrats would permit suits against employer-sponsored health plans under state laws, but Republican legislation would not.
See Proposed Patientís Rights Legislation--Understanding the ERISA Preemption.