April 01, 2013

The Evolving Law on Federal Preemption of Extracontractual Claims against Medicare Advantage Plans

John K. DiMugno

Federal preemption of state law remedies against health insurers and health maintenance organizations is an important factor contributing to the growth of managed care and prevalence of utilization review in the healthcare industry over the past quarter century. The U.S. Supreme Court’s broad interpretation of the preemptive reach of the Employee Retirement Income Security Act of 1974 (ERISA) has removed a significant deterrent to the adoption of managed care practices by employer-sponsored health plans: exposure to the full panoply of state law tort remedies, including punitive damages. The Court’s decisions have allowed employer-sponsored health plans to withhold payment for medical services recommended by a beneficiary’s treating physician, knowing that the beneficiary’s remedy for a wrongful refusal is an ERISA enforcement action—essentially a contractual remedy to recover withheld benefits.

Premium Content For:
  • Senior Lawyers Division
Join - Now