OCTOBER TERM, 2001
Syllabus
RUSH PRUDENTIAL HMO, INC.
v. MORAN ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH
CIRCUIT
No.00-1021. Argued January 16, 2002-Decided June 20, 2002
Petitioner Rush Prudential HMO, Inc., a health maintenance
organization (HMO) that contracts to provide medical services for
employee welfare benefit plans covered by the Employee Retirement
Income Security Act of 1974 (ERISA), denied respondent Moran's
request to have surgery by an unaffiliated specialist on the ground
that the procedure was not medically necessary. Moran made a
written demand for an independent medical review of her claim, as
guaranteed by §4-10 of Illinois's HMO Act, which further provides
that "[i]n the event that the reviewing physician determines the
covered service to be medically necessary," the HMO "shall provide"
the service. Rush refused her demand, and Moran sued in state court
to compel compliance with the Act. That court ordered the review,
which found the treatment necessary, but Rush again denied the
claim. 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. The District Court treated Moran's claim as a
suit under ERISA and denied it on the ground that ERISA preempted §
4-10. The Seventh Circuit reversed. It found Moran's reimbursement
claim preempted by ERISA so as to place the case in federal court,
but it concluded that the state Act was not preempted as a state
law that "relate[s] to" an employee benefit plan, 29 U. S. C. §
1144(a), because it also "regulates insurance" under ERISA's saving
clause, § 1144(b)(2)(A).
Held: ERISA does not preempt the Illinois HMO Act. Pp.
364-387.
(a) In deciding whether a law regulates insurance, this Court
starts with a commonsense view of the matter,
Metropolitan Life
Ins. Co. v.
Massachusetts, 471 U. S. 724, 740, which
requires a law to "be specifically directed toward" the insurance
industry,
Pilot Life Ins. Co. v.
Dedeaux, 481 U. S. 41, 50. It then
tests the results of the commonsense enquiry by employing the three
factors used to point to insurance laws spared from federal
preemption under the McCarran-Ferguson Act. Pp. 365-375.
(1) The Illinois HMO Act is directed toward the insurance
industry, and thus is an insurance regulation under a commonsense
view. Although an HMO provides health care in addition to
insurance, nothing
356
in the saving clause requires an either-or choice between health
care and insurance. Congress recognized, the year before passing
ERISA, that HMOs are risk-bearing organizations subject to state
insurance regulation. That conception has not changed in the
intervening years. States have been adopting their own HMO enabling
Acts, and at least 40, including Illinois, regulate HMOs primarily
through state insurance departments. Rush cannot submerge HMOs'
insurance features beneath an exclusive characterization of HMOs as
health care providers. And the argument of Rush and its
amici that §4-10 sweeps beyond the insurance industry,
capturing organizations that provide no insurance and regulating
noninsurance activities of HMOs that do, is based on unsound
assumptions. Pp. 366-373.
(2) The McCarran-Ferguson factors confirm this conclusion. A
state law does not have to satisfy all three factors to survive
preemption, and § 4-10 clearly satisfies two. The independent
review requirement satisfies the factor that a provision regulate
"an integral part of the policy relationship between the insurer
and the insured."
Union Labor Life Ins. Co. v.
Pireno, 458 U.
S. 119, 129. Illinois adds an extra review layer when there is
an internal disagreement about an HMO's denial of coverage, and the
reviewer both applies a medical care standard and construes policy
terms. Thus, the review affects a policy relationship by
translating the relationship under the HMO agreement into concrete
terms of specific obligation or freedom from duty. The factor that
the law be aimed at a practice "limited to entities within the
insurance industry,"
ibid., is satisfied for many of the
same reasons that the law passes the commonsense test: It regulates
application of HMO contracts and provides for review of claim
denials; once it is established that HMO contracts are contracts
for insurance, it is clear that §4-1O does not apply to entities
outside the insurance industry. pp. 373-375.
(b) This Court rejects Rush's contention that, even though
ERISA's saving clause ostensibly forecloses preemption,
congressional intent to the contrary is so clear that it overrides
the statutory provision. Pp. 375-386.
(1) The Court has recognized an overpowering federal policy of
exclusivity in ERISA's civil enforcement provisions located at 29
U. S. C. § 1132(a); and it has anticipated that in a conflict
between congressional polices of exclusively federal remedies and
the States' regulation of insurance, the state regulation would
lose out if it allows remedies that Congress rejected in ERISA,
Pilot Life, 481 U. S., at 54. Rush argues that § 4-10 is
preempted for creating the kind of alternative remedy that this
Court disparaged in
Pilot Life, one that subverts
congressional intent, clearly expressed through ERISA's structure
and legislative history, that the federal remedy displace state
causes of action. Rush
357
overstates
Pilot Life's rule. The enquiry into state
processes alleged to "supplemen[t] or supplan[t]" ERISA remedies,
id., at 56, has, up to now, been more straightforward than
it is here.
Pilot Life, Massachusetts Mut. Life Ins. Co. v.
Russell, 473
U. S. 134, and
Ingersoll-Rand Co. v.
McClendon,
498 U. S. 133,
all involved an additional claim or remedy that ERISA did not
authorize. In contrast, the review here may settle a benefit
claim's fate, but the state statute does not enlarge the claim
beyond the benefits available in any § 1132(a) action. And although
the reviewer's determination would presumably replace the HMO's as
to what is medically necessary, the ultimate relief available would
still be what ERISA authorizes in a § 1132(a) suit for benefits.
This case therefore resembles the claims-procedure rule that the
Court sustained in
UNUM Life Ins. Co. of America v.
Ward, 526 U.
S. 358. Section 4-1O's procedure does not fall within
Pilot
Life's categorical preemption. Pp. 377-380.
(2) Nor does §4-10's procedural imposition interfere
unreasonably with Congress's intention to provide a uniform federal
regime of "rights and obligations" under ERISA. Although this Court
has recognized a limited exception from the saving clause for
alternative causes of action and alternative remedies, further
limits on insurance regulation preserved by ERISA are unlikely to
deserve recognition. A State might provide for a type of review
that would so resemble an adjudication as to fall within
Pilot
Life's categorical bar, but that is not the case here. Section
4-10 is significantly different from common arbitration. The
independent reviewer has no free-ranging power to construe contract
terms, but instead confines review to the single phrase "medically
necessary." That reviewer must be a physician with credentials
similar to those of the primary care physician and is expected to
exercise independent medical judgment, based on medical records
submitted by the parties, in deciding what medical necessity
requires. This process does not resemble either contract
interpretation or evidentiary litigation before a neutral arbiter
as much as it looks like the practice of obtaining a second
opinion. In addition, §4-10 does not clash with any deferential
standard for reviewing benefit denials in judicial proceedings.
ERISA itself says nothing about a standard. It simply requires
plans to afford a beneficiary some mechanism for internal review of
a benefit denial and provides a right to a subsequent judicial
forum for a claim to recover benefits. Although certain
"discretionary" plan interpretations may receive deference from a
reviewing court, see
Firestone Tire &
Rubber Co.
v.
Bruch, 489
U. S. 101, 115, nothing in ERISA requires that medical
necessity decisions be "discretionary" in the first place. Pp.
381-386.
230 F.3d
959, affirmed.
358
SOUTER, J., delivered the opinion of the Court, in which
STEVENS, O'CONNOR, GINSBURG, and BREYER, JJ., joined. THOMAS, J.,
filed a dissenting opinion, in which REHNQUIST, C. J., and SCALIA
and KENNEDY, JJ., joined,
post, p. 388.
John G.
Roberts, Jr., argued the cause for
petitioner.
With him on the briefs were Clifford D. Stromberg, Craig A.
Hoover, Jonathan S. Franklin, Catherine E. Stetson, James
Daniel P. Albers argued the cause for respondents. With
him on the brief for respondent Moran were
Mark E. Rust and
Stanley C.
Fickle. James E. Ryan, Attorney General,
Joel D. Bertocchi, Solicitor General, and
John Philip
Schmidt and
Mary Ellen Margaret Welsh, Assistant
Attorneys General, filed a brief for respondent State of
Illinois.
Deputy Solicitor General Kneedler argued the cause for the
United States as amicus curiae urging affirmance. With him on the
brief were Acting Solicitor General Clement, James A. Feldman,
Howard M. Radzely, Allen H. Feldman, Nathaniel 1. Spiller, and
Elizabeth Hopkins.*
* Miguel A. Estrada and
Andrew S.
Tulumello filed a brief for the American Association of
Health Plans, Inc., et al. as
amici curiae urging
reversal.
Briefs of
amici curiae urging affirmance were filed for
the State of Texas et al. by
John Cornyn, Attorney General
of Texas,
Howard G.
Baldwin, Jr., First Assistant
Attorney General,
Jeffrey S.
Boyd, Deputy Attorney
General,
Julie Parsley, Solicitor General,
Christopher
Livingston, Assistant Attorney General, and
David C.
Mattax, and by the Attorneys General for their respective
jurisdictions as follows:
Janet Napolitano of Arizona,
Bill Lockyer of California,
Gregory D'Auria of
Connecticut,
M. Jane Brady of Delaware,
Robert A.
Butterworth of Florida,
Earl I. Anzai of Hawaii,
Steve Carter of Indiana, G.
Steven Rowe of Maine,
Thomas F.
Reilly of Massachusetts,
J.
Joseph Curran, Jr., of Maryland,
Jennifer M. Granholm
of Michigan,
Mike Hatch of Minnesota,
Mike Moore of
Mississippi,
Jeremiah W (Jay) Nixon of Missouri,
Mike
McGrath of Montana,
Frankie Sue Del Papa of Nevada,
John J. Farmer, Jr., of New Jersey,
Patricia A. Madrid of New Mexico,
Eliot Spitzer of
New York,
Roy Cooper of North Carolina,
Betty D.
Montgomery of Ohio,
W A. Drew Edmondson of Oklahoma,
D. Michael Fisher of Pennsylvania,
Charles M.
359
JUSTICE SOUTER delivered the opinion of the Court. Section 4-10
of Illinois's Health Maintenance Organization Act, 215 Ill. Compo
Stat., ch. 125, § 4-10 (2000), provides recipients of health
coverage by such organizations with a right to independent medical
review of certain denials of benefits. The issue in this case is
whether the statute, as applied to health benefits provided by a
health maintenance organization under contract with an employee
welfare benefit plan, is preempted by the Employee Retirement
Income Security Act of 1974 (ERISA), 88 Stat. 832, as amended, 29
U. S. C. § 1001
et seq. We hold it is not.
I
Petitioner, Rush Prudential HMO, Inc., is a health maintenance
organization (HMO) that contracts to provide medical services for
employee welfare benefit plans covered by ERISA. Respondent Debra
Moran is a beneficiary under one such plan, sponsored by her
husband's employer. Rush's "Certificate of Group Coverage," issued
to employees who participate in employer-sponsored plans, promises
that Rush will provide them with "medically necessary" services.
The terms of the certificate give Rush the "broadest possible
discretion" to determine whether a medical service claimed by a
Condon of South Carolina, Paul G. Summers of Tennessee, Mark L.
Shurtleff of Utah, William H. Sorrell of Vermont, Randolph A.
Beales of Virginia, Christine O. Gregoire of Washington, Darrell V.
McGraw, Jr., of West Virginia, Hoke MacMillan of Wyoming, and
Anabelle Rodriguez of Puerto Rico; for AARP et al. by Mary Ellen
Signorille, Michael R. Schuster, Paula Brantner, Ronald Dean, and
Judith L. Lichtman; for the American Medical Association et al. by
Jack R. Bierig, Richard G. Taranto, Jon N. Ekdahl, Leonard A.
Nelson, and Saul
J. Morse; for the National Association of
Insurance Commissioners by Jennifer R. Cook, Mary Elizabeth
Senkewicz, and Marc I. Machiz; and for Texas Watch et al. by George
Parker Young.
Briefs of
amici curiae were filed for the California
Consumer Health Care Council et al. by
Sharon J.
Arkin; and for United Policyholders by
Arnold R.
Levinson.
360
beneficiary is covered under the certificate. The certificate
specifies that a service is covered as "medically necessary" if
Rush finds:
"(a) [The service] is furnished or authorized by a Participating
Doctor for the diagnosis or the treatment of a Sickness or Injury
or for the maintenance of a person's good health.
"(b) The prevailing opinion within the appropriate specialty of
the United States medical profession is that [the service] is safe
and effective for its intended use, and that its omission would
adversely affect the person's medical condition.
"(c) It is furnished by a provider with appropriate training,
experience, staff and facilities to furnish that particular service
or supply." Record, PI. Exh. A, p. 21.
As the certificate explains, Rush contracts with physicians "to
arrange for or provide services and supplies for medical care and
treatment" of covered persons. Each covered person selects a
primary care physician from those under contract to Rush, while
Rush will pay for medical services by an unaffiliated physician
only if the services have been "authorized" both by the primary
care physician and Rush's medical director. See
id., at 11,
16.
In 1996, when Moran began to have pain and numbness in her right
shoulder, Dr. Arthur LaMarre, her primary care physician,
unsuccessfully administered "conservative" treatments such as
physiotherapy. In October 1997, Dr. LaMarre recommended that Rush
approve surgery by an unaffiliated specialist, Dr. Julia Terzis,
who had developed an unconventional treatment for Moran's
condition. Although Dr. LaMarre said that Moran would be "best
served" by that procedure, Rush denied the request and, after
Moran's internal appeals, affirmed the denial on the ground that
the procedure was not "medically necessary."
230
F.3d 959, 963
(CA7
361
2000). Rush instead proposed that Moran undergo standard
surgery, performed by a physician affiliated with Rush.
In January 1998, Moran made a written demand for an independent
medical review of her claim, as guaranteed by § 4-10 of Illinois's
HMO Act, 215 Ill. Compo Stat., ch. 125, § 4-10
et seq.
(2000), which provides:
"Each Health Maintenance Organization shall provide a mechanism
for the timely review by a physician holding the same class of
license as the primary care physician, who is unaffiliated with the
Health Maintenance Organization, jointly selected by the patient
... , primary care physician and the Health Maintenance
Organization in the event of a dispute between the primary care
physician and the Health Maintenance Organization regarding the
medical necessity of a covered service proposed by a primary care
physician. In the event that the reviewing physician determines the
covered service to be medically necessary, the Health Maintenance
Organization shall provide the covered service."
The Act defines a "Health Maintenance Organization" as "any
organization formed under the laws of this or another state to
provide or arrange for one or more health care plans under a system
which causes any part of the risk of health care delivery to be
borne by the organization or its providers." Ch. 125, § 1-2.1
1 In the health care industry, the term "Health Maintenance
Organization" has been defined as "[a] prepaid organized delivery
system where the organization
and the primary care
physicians assume some financial risk for the care provided to its
enrolled members .... In a
pure HMO, members must obtain
care from within the system if it is to be reimbursed." Weiner
& de Lissovoy, Razing a Tower of Babel: A Taxonomy for Managed
Care and Health Insurance Plans, 18 J. of Health Politics, Policy
and Law 75, 96 (Spring 1993) (emphasis in original). The term
"Managed Care Organization" is used more broadly to refer to any
number of systems combining health care delivery with financing.
Id., at 97. The Illinois definition of HMO does not appear
to be limited to the tradi-
362
When Rush failed to provide the independent review, Moran sued
in an Illinois state court to compel compliance with the state Act.
Rush removed the suit to Federal District Court, arguing that the
cause of action was "completely preempted" under ERISA. 230 F. 3d,
at 964.
While the suit was pending, Moran had surgery by Dr. Terzis at
her own expense and submitted a $94,841.27 reimbursement claim to
Rush. Rush treated the claim as a renewed request for benefits and
began a new inquiry to determine coverage. The three doctors
consulted by Rush said the surgery had been medically
unnecessary.
Meanwhile, the federal court remanded the case back to state
court on Moran's motion, concluding that because Moran's request
for independent review under § 4-10 would not require
interpretation of the terms of an ERISA plan, the claim was not
"completely preempted" so as to permit removal under 28 U. S. C. §
1441.2 230 F. 3d, at 964. The state court enforced the state
statute and ordered Rush to submit to review by an independent
physician. The doctor selected was a reconstructive surgeon at
Johns Hopkins Medical Center, Dr. A. Lee Dellon. Dr. Dellon decided
that Dr. Terzis's treatment had been medically necessary, based on
the definition of medical necessity in Rush's Certificate of
tional usage of that term, but instead is likely to encompass a
variety of different structures (although Illinois does distinguish
HMOs from pure insurers by regulating "traditional" health
insurance in a different portion of its insurance laws, 215 Ill.
Compo Stat., ch. 5 (2000)). Except where otherwise indicated, we
use the term "HMO" because that is the term used by the State and
the parties; what we intend is simply to describe the structures
covered by the Illinois Act.
2Jn light of our holding today that §4-10 is not preempted by
ERISA, the propriety of this ruling is questionable; a suit to
compel compliance with §4-10 in the context of an ERISA plan would
seem to be akin to a suit to compel compliance with the terms of a
plan under 29 U. S. C. § 1132(a)(3). Alternatively, the proper
course may have been to bring a suit to recover benefits due,
alleging that the denial was improper in the absence of compliance
with §4-10. We need not resolve today which of these options is
more consonant with ERISA.
363
Group Coverage, as well as his own medical judgment. Rush's
medical director, however, refused to concede that the surgery had
been medically necessary, and denied Moran's claim in January
1999.
Moran amended her complaint in state court to seek reimbursement
for the surgery as "medically necessary" under Illinois's HMO Act,
and Rush again removed to federal court, arguing that Moran's
amended complaint stated a claim for ERISA benefits and was thus
completely preempted by ERISA's civil enforcement provisions, 29 U.
S. C. § 1132(a), as construed by this Court in
Metropolitan Life
Ins. Co. v.
Taylor, 481 U. S. 58 (1987). The
District Court treated Moran's claim as a suit under ERISA, and
denied the claim on the ground that ERISA preempted Illinois's
independent review statute.3
The Court of Appeals for the Seventh Circuit reversed.
230 F.3d
959 (2000). Although it found Moran's state-law reimbursement
claim completely preempted by ERISA so as to place the case in
federal court, the Seventh Circuit did not agree that the
substantive provisions of Illinois's HMO Act were so preempted. The
court noted that although ERISA broadly preempts any state laws
that "relate to" employee benefit plans, 29 U. S. C. § 1144(a),
state laws that "regulat[e]
3 No party has challenged Rush's status as defendant in this
case, despite the fact that many lower courts have interpreted
ERISA to permit suits under § ll32(a) only against ERISA plans,
administrators, or fiduciaries. See,
e. g.,
Everhart v.
Allmerica Financial Life Ins. Co.,
275 F.3d
751,
754-756 (CA9 2001);
Garren v.
John
Hancock Mut. Life Ins. Co., 114 F.3d
186, 187 (CAll 1997);
Jass v.
Prudential Health Care
Plan, Inc., 88 F.3d
1482, 1490
(CA7 1996). Without commenting on the
correctness of such holdings, we assume (although the information
does not appear in the record) that Rush has failed to challenge
its status as defendant because it is, in fact, the plan
administrator. This conclusion is buttressed by the fact that the
plan's sponsor has granted Rush discretion to interpret the terms
of its coverage, and by the fact that one of Rush's challenges to
the Illinois statute is based on what Rush perceives as the limits
that statute places on fiduciary discretion. Whatever Rush's true
status may be, however, it is immaterial to our holding.
364
insurance" are saved from preemption, § 1144(b)(2)(A). The court
held that the Illinois HMO Act was such a law, the independent
review requirement being little different from a state-mandated
contractual term of the sort this Court had held to survive ERISA
preemption. See 230 F. 3d, at 972 (citing
UNUM Life Ins. Co. of
America v.
Ward, 526 U. S. 358, 375-376
(1999)). The Seventh Circuit rejected the contention that
Illinois's independent review requirement constituted a forbidden
"alternative remedy" under this Court's holding in
Pilot Life
Ins. Co. v.
Dedeaux, 481 U. S. 41 (1987), and
emphasized that § 4-10 does not authorize any particular form of
relief in state courts; rather, with respect to any ERISA health
plan, the judgment of the independent reviewer is only enforceable
in an action brought under ERISA's civil enforcement scheme, 29 U.
S. C. § 1132(a). 230
Because the decision of the Court of Appeals conflicted with the
Fifth Circuit's treatment of a similar provision of Texas law in
Corporate Health Ins., Inc. v.
Texas Dept. of Ins.,
215 F.3d
526 (2000), we granted certiorari, 533 U. S. 948 (2001). We now
affirm.
II
To "safeguar[d] ... the establishment, operation, and
administration" of employee benefit plans, ERISA sets "minimum
standards ... assuring the equitable character of such plans and
their financial soundness," 29 U. S. C. § 1001(a), and contains an
express preemption provision that ERISA "shall supersede any and
all State laws insofar as they may now or hereafter relate to any
employee benefit plan .... " § 1144(a). A saving clause then
reclaims a substantial amount of ground with its provision that
"nothing in this subchapter shall be construed to exempt or relieve
any person from any law of any State which regulates insurance,
banking, or securities." § 1144(b)(2)(A). The "unhelpful" drafting
of these antiphonal clauses,
New York State Confer-
365
ence of Blue Cross &
Blue Shield Plans v.
Travelers Ins. Co., 514 U. S. 645, 656
(1995), occupies a substantial share of this Court's time, see,
e. g., Egelhoff v.
Egelhoff, 532 U. S. 141 (2001);
UNUM Life Ins. Co. of America v.
Ward, supra; California
Div. of Labor Standards Enforcement v.
Dillingham
Constr., N.
A., Inc., 519 U. S. 316 (1997);
Metropolitan Life Ins. Co. v.
Massachusetts, 471 U. S. 724 (1985). In
trying to extrapolate congressional intent in a case like this,
when congressional language seems simultaneously to preempt
everything and hardly anything, we "have no choice" but to temper
the assumption that "'the ordinary meaning ... accurately expresses
the legislative purpose,'"
id., at 740 (quoting
Park
'N
Fly v.
Dollar Park &
Fly, Inc.,
469 U. S. 189,
194 (1985)), with the qualification" 'that the historic police
powers of the States were not [meant] to be superseded by the
Federal Act unless that was the clear and manifest purpose of
Congress.'''
Travelers, supra, at 655 (quoting
Rice
v.
Santa Fe Elevator Corp., 331 U. S. 218, 230
(1947)).
It is beyond serious dispute that under existing precedent §
4-10 of the Illinois HMO Act "relates to" employee benefit plans
within the meaning of § 1144(a). The state law bears "indirectly
but substantially on all insured benefit plans,"
Metropolitan
Life, 471 U. S., at 739, by requiring them to submit to an
extra layer of review for certain benefit denials if they purchase
medical coverage from any of the common types of health care
organizations covered by the state law's definition of HMO. As a
law that "relates to" ERISA plans under § 1144(a), § 4-10 is saved
from preemption only if it also "regulates insurance" under §
1144(b)(2)(A). Rush insists that the Act is not such a law.
A
In
Metropolitan Life, we said that in deciding whether a
law "regulates insurance" under ERISA's saving clause, we start
with a "common-sense view of the matter," 471 U. S.,
366
at 740, under which "a law must not just have an impact on the
insurance industry, but must be specifically directed toward that
industry."
Pilot Life Ins. Co. v.
Dedeaux, supra, at
50. We then test the results of the commonsense enquiry by
employing the three factors used to point to insurance laws spared
from federal preemption under the McCarran-Ferguson Act, 15 U. S.
C. § 1011
et seq.4 Although this is not the place to plot
the exact perimeter of the saving clause, it is generally fair to
think of the combined "commonsense" and McCarran-Ferguson factors
as parsing the "who" and the "what": when insurers are regulated
with respect to their insurance practices, the state law survives
ERISA. Cf.
Group Life &
Health Ins. Co. v.
Royal Drug Co., 440 U. S. 205, 211 (1979)
(explaining that the "business of insurance" is not coextensive
with the "business of insurers").
1
The commonsense enquiry focuses on "primary elements of an
insurance contract[, which] are the spreading and underwriting of a
policyholder's risk."
Ibid. The Illinois statute addresses
these elements by defining "health maintenance organization" by
reference to the risk that it bears. See 215 Ill. Compo Stat., ch.
125, § 1-2(9) (2000) (an HMO "provide[s] or arrange[s] for ...
health care plans under a system which causes any part of the risk
of health care delivery to be borne by the organization or its
providers").
Rush contends that seeing an HMO as an insurer distorts the
nature of an HMO, which is, after all, a health care provider, too.
This, Rush argues, should determine its characterization, with the
consequence that regulation of an HMO is not insurance regulation
within the meaning of ERISA.
4The McCarran-Ferguson Act requires that the business of
insurance be subject to state regulation, and, subject to certain
exceptions, mandates that "[n]o Act of Congress shall be construed
to invalidate ... any law enacted by any State for the purpose of
regulating the business of insurance .... " 15 U. S. C. §
1012(b).
367
The answer to Rush is, of course, that an HMO is both: it
provides health care, and it does so as an insurer. Nothing in the
saving clause requires an either-or choice between health care and
insurance in deciding a preemption question, and as long as
providing insurance fairly accounts for the application of state
law, the saving clause may apply. There is no serious question
about that here, for it would ignore the whole purpose of the
HMO-style of organization to conceive of HMOs (even in the
traditional sense, see n. 1,
supra) without their insurance
element.
"The defining feature of an HMO is receipt of a fixed fee for
each patient enrolled under the terms of a contract to provide
specified health care if needed."
Pegram v.
Herdrich,
530 U. S. 211,
218 (2000). "The HMO thus assumes the financial risk of providing
the benefits promised: if a participant never gets sick, the HMO
keeps the money regardless, and if a participant becomes
expensively ill, the HMO is responsible for the treatment .... "
Id., at 218-219. The HMO design goes beyond the simple
truism that all contracts are, in some sense, insurance against
future fluctuations in price, R. Posner, Economic Analysis of Law
104 (4th ed. 1992), because HMOs actually underwrite and spread
risk among their participants, see,
e. g., R.
Shouldice, Introduction to Managed Care 450-462 (1991), a feature
distinctive to insurance, see,
e. g., SEC v.
Variable
Annuity Life Ins. Co. of America, 359 U. S. 65, 73 (1959)
(underwriting of risk is an "earmark of insurance as it has
commonly been conceived of in popular understanding and usage");
Royal Drug, supra, at 214-215, n. 12 ("[U]nless there is
some element of spreading risk more widely, there is no
underwriting of risk").
So Congress has understood from the start, when the phrase
"Health Maintenance Organization" was established and defined in
the HMO Act of 1973. The Act was intended to encourage the
development of HMOs as a new form of health care delivery system,
see S. Rep. No. 93-129, pp. 7-9
368
(1973), and when Congress set the standards that the new health
delivery organizations would have to meet to get certain federal
benefits, the terms included requirements that the organizations
bear and manage risk. See,
e. g., Health Maintenance
Organization Act of 1973, § 1301(c), 87 Stat. 916, as amended, 42
U. S. C. § 300e(c); S. Rep. No. 93-129, at 14 (explaining that HMOs
necessarily bear some of the risk of providing service, and
requiring that a qualifying HMO "assum[e] direct financial
responsibility, without benefit of reinsurance, for care ... in
excess of the first five thousand dollars per enrollee per year").
The Senate Committee Report explained that federally qualified HMOs
would be required to provide "a basic package of benefits,
consistent with existing health insurance patterns,"
id., at
10, and the very text of the Act assumed that state insurance laws
would apply to HMOs; it provided that to the extent state insurance
capitalization and reserve requirements were too stringent to
permit the formation of HMOs, "qualified" HMOs would be exempt from
such limiting regulation. See § 1311, 42 U. S. C. § 300e-10. This
congressional understanding that it was promoting a novel form of
insurance was made explicit in the Senate Report's reference to the
practices of "health insurers to charge premium rates based upon
the actual claims experience of a particular group of subscribers,"
thus "raising costs and diminishing the availability of health
insurance for those suffering from costly illnesses," S. Rep. No.
93-129, at 29-30. The federal Act responded to this insurance
practice by requiring qualifying HMOs to adopt uniform capitation
rates, see § 1301(b), 42 U. S. C. § 300e(b), and it was because of
that mandate "pos[ing] substantial competitive problems to newly
emerging HMOs," S. Rep. No. 93-129, at 30, that Congress authorized
funding subsidies, see § 1304, 42 U. S. C. § 300e-4. The Senate
explanation left no doubt that it viewed an HMO as an insurer; the
subsidy was justified because "the same stringent requirements do
not apply to other indemnity or service benefits insurance
plans."
369
S. Rep. No. 93-129, at 30. In other words, one year before it
passed ERISA, Congress itself defined HMOs in part by reference to
risk, set minimum standards for managing the risk, showed awareness
that States regulated HMOs as insurers, and compared HMOs to
"indemnity or service benefits insurance plans."
This conception has not changed in the intervening years.
Since passage of the federal Act, States have been adopting
their own HMO enabling Acts, and today, at least 40 of them,
including Illinois, regulate HMOs primarily through the States'
insurance departments, see Aspen Health Law and Compliance Center,
Managed Care Law Manual 31-32 (Supp. 6, Nov. 1997), although they
may be treated differently from traditional insurers, owing to
their additional role as health care providers,5 see,
e.
g., Alaska Ins. Code § 21.86.010 (2000) (health department
reviews HMO before insurance commissioner grants a certificate of
authority); Ohio Rev. Code Ann. § 1742.21 (West 1994) (health
department may inspect HMO). Finally, this view shared by Congress
and the States has passed into common understanding. HMOs (broadly
defined) have "grown explosively in the past decade and [are] now
the dominant form of health plan coverage for privately insured
individuals." Gold & Hurley, The Role of Managed Care
"Products" in Managed Care "Plans," in Contemporary Managed Care 47
(M. Gold ed. 1998). While the original form of the HMO was a single
corporation employing its own physicians, the 1980's saw a variety
of other types of structures develop even as traditional insurers
altered their own
5We have, in a limited number of cases, found certain contracts
not to be part of the "business of insurance" under McCarran-
Ferguson, notwithstanding their classification as such for the
purpose of state regulation. See,
e. g., SEC
v.
Variable Annuity Life Ins. Co. of America, 359 U. S. 65 (1959). Even
then, however, we recognized that such classifications are relevant
to the enquiry, because Congress, in leaving the "business of
insurance" to the States, "was legislating concerning a concept
which had taken on its coloration and meaning largely from state
law, from state practice, from state usage."
Id., at 69.
370
plans by adopting HMO-like cost-control measures. See Weiner
& de Lissovoy, Razing a Tower of Babel: A Taxonomy for Managed
Care and Health Insurance Plans, 18 J. of Health Politics, Policy
and Law 75, 83 (Spring 1993). The dominant feature is the
combination of insurer and provider, see Gold & Hurley,
supra, at 47, and "an observer may be hard pressed to
uncover the differences among products that bill themselves as
HMOs, [preferred provider organizations], or managed care overlays
to health insurance," Managed Care Law Manual,
supra, at 1.
Thus, virtually all commentators on the American health care system
describe HMOs as a combination of insurer and provider, and observe
that in recent years, traditional "indemnity" insurance has fallen
out of favor. See,
e. g., Weiner & de Lissovoy,
supra, at 77 ("A common characteristic of the new managed
care plans was the degree to which the roles of insurer and
provider became integrated"); Gold, Understanding the Roots: Health
Maintenance Organizations in Historical Context, in Contemporary
Managed Care,
supra, at 7, 8, 13; Managed Care Law Manual,
supra, at 1; R. Rosenblatt, S. Law, & S. Rosenbaum, Law
and the American Health Care System 552 (1997); Shouldice,
Introduction to Managed Care, at 13, 20. Rush cannot checkmate
common sense by trying to submerge HMOs' insurance features beneath
an exclusive characterization of HMOs as providers of health
care.
2
On a second tack, Rush and its
amici dispute that §4-10
is aimed specifically at the insurance industry. They say the law
sweeps too broadly with definitions capturing organizations that
provide no insurance, and by regulating noninsurance activities of
HMOs that do. Rush points out that Illinois law defines HMOs to
include organizations that cause the risk of health care delivery
to be borne by the organization itself, or by "its providers." 215
Ill. Compo Stat., ch. 125, § 1-2(9) (2000). In Rush's view, the
reference to "its
371
providers" suggests that an organization may be an HMO under
state law (and subject to § 4-10) even if it does not bear risk
itself, either because it has "devolve[d]" the risk of health care
delivery onto others, or because it has contracted only to provide
"administrative" or other services for selffunded plans. Brief for
Petitioner 38.
These arguments, however, are built on unsound assumptions.
Rush's first contention assumes that an HMO is no longer an insurer
when it arranges to limit its exposure, as when an HMO arranges for
capitated contracts to compensate its affiliated physicians with a
set fee for each HMO patient regardless of the treatment provided.
Under such an arrangement, Rush claims, the risk is not borne by
the HMO at all. In a similar vein, Rush points out that HMOs may
contract with third-party insurers to protect themselves against
large claims.
The problem with Rush's argument is simply that a reinsurance
contract does not take the primary insurer out of the insurance
business, c:t:
Hartford Fire Ins. Co. v.
California,
509 U. S. 764
(1993) (applying McCarran-Ferguson to a dispute involving primary
insurers and reinsurers);
id., at 772-773 ("[P]rimary
insurers ... usually purchase insurance to cover a portion of the
risk they assume from the consumer"), and capitation contracts do
not relieve the HMO of its obligations to the beneficiary. The HMO
is still bound to provide medical care to its members, and this is
so regardless of the ability of physicians or third-party insurers
to honor their contracts with the HMO.
Nor do we see anything standing in the way of applying the
saving clause if we assume that the general state definition of HMO
would include a contractor that provides only administrative
services for a self-funded plan.6 Rush points
6 ERISA's "deemer" clause provides an exception to its saving
clause that prohibits States from regulating self-funded plans as
insurers. See 29 U. S. C. § 1144(b)(2)(B);
FMC Corp. v.
Holliday, 498
U. S. 52, 61 (1990). Therefore, Illinois's Act would not be
"saved" as an insurance law to the
372
out that the general definition of HMO under Illinois law
includes not only organizations that "provide" health care plans,
but those that "arrange for" them to be provided, so long as "any
part of the risk of health care delivery" rests upon "the
organization or its providers." 215 Ill. Compo Stat., ch. 125, §
1-2(9) (2000). See Brief for Petitioner 38. Rush hypothesizes a
sort of medical matchmaker, bringing together ERISA plans and
medical care providers; even if the latter bear all the risks, the
matchmaker would be an HMO under the Illinois definition. Rush
would conclude from this that § 4-10 covers noninsurers, and so is
not directed specifically to the insurance industry. Ergo, ERISA's
saving clause would not apply.
It is far from clear, though, that the terms of § 4-10 would
even theoretically apply to the matchmaker, for the requirement
that the HMO "provide" the covered service if the independent
reviewer finds it medically necessary seems to assume that the HMO
in question is a provider, not the mere arranger mentioned in the
general definition of an HMO. Even on the most generous reading of
Rush's argument, however, it boils down to the bare possibility
(not the likelihood) of some overbreadth in the application of §
4-10 beyond orthodox HMOs, and there is no reason to think Congress
would have meant such minimal application to noninsurers to remove
a state law entirely from the category of insurance regulation
saved from preemption.
In sum, prior to ERISA's passage, Congress demonstrated an
awareness of HMOs as risk-bearing organizations subject to state
insurance regulation, the state Act defines HMOs by reference to
risk bearing, HMOs have taken over much business formerly performed
by traditional indemnity insurers, and they are almost universally
regulated as insurers under state law. That HMOs are not
traditional "indem-
extent it applied to self-funded plans. This fact, however, does
not bear on Rush's challenge to the law as one that is targeted
toward non-riskbearing organizations.
373
nity" insurers is no matter; "we would not undertake to freeze
the concepts of 'insurance' ... into the mold they fitted when
these Federal Acts were passed."
SEC v.
Variable Annuity
Life Ins. Co. of America, 359 U. S., at 71. Thus, the Illinois
HMO Act is a law "directed toward" the insurance industry, and an
"insurance regulation" under a "commonsense" view.
B
The McCarran-Ferguson factors confirm our conclusion.
A law regulating insurance for McCarran- Ferguson purposes
targets practices or provisions that "ha[ve] the effect of
transferring or spreading a policyholder's risk; ... [that are] an
integral part of the policy relationship between the insurer and
the insured; and [are] limited to entities within the insurance
industry."
Union Labor Life Ins. Co. v.
Pireno,
458 U. S. 119,
129 (1982). Because the factors are guideposts, a state law is not
required to satisfy all three McCarran-Ferguson criteria to survive
preemption, see
UNUM Life Ins. Co. v.
Ward, 526 U.
S., at 373, and so we follow our precedent and leave open whether
the review mandated here may be described as going to a practice
that "spread[s] a policyholder's risk." For in any event, the
second and third factors are clearly satisfied by § 4-10.
It is obvious enough that the independent review requirement
regulates "an integral part of the policy relationship between the
insurer and the insured." Illinois adds an extra layer of review
when there is internal disagreement about an HMO's denial of
coverage. The reviewer applies both a standard of medical care
(medical necessity) and characteristically, as in this case,
construes policy terms. C£
Pegram v.
Herdrich, 530 U.
S., at 228-229. The review affects the "policy relationship"
between HMO and covered persons by translating the relationship
under the HMO agreement into concrete terms of specific obligation
or freedom from duty. Hence our repeated statements that the
interpretation of insurance contracts is at the "core" of the
business of
374
insurance. E. g., SEC v. National Securities, Inc.,
393 U. S. 453, 460
(1969).
Rush says otherwise, citing
Union Labor Life Ins. Co.
v.
Pireno, supra, and insisting that that case holds
external review of coverage decisions to be outside the "policy
relationship." But Rush misreads
Pireno. We held there that
an insurer's use of a "peer review" committee to gauge the
necessity of particular treatments was not a practice integral to
the policy relationship for the purposes of McCarranFerguson. 458
U. S., at 131-132. We emphasized, however, that the insurer's
resort to peer review was simply the insurer's unilateral choice to
seek advice if and when it cared to do so. The policy said nothing
on the matter. The insurer's contract for advice from a third party
was no concern of the insured, who was not bound by the peer review
committee's recommendation any more, for that matter, than the
insurer was. Thus it was not too much of an exaggeration to
conclude that the practice was "a matter of indifference to the
policyholder,"
id., at 132. Section 4-10, by contrast, is
different on all counts, providing as it does a legal right to the
insured, enforceable against the HMO, to obtain an authoritative
determination of the HMO's medical obligations.
The final factor, that the law be aimed at a "practice ...
limited to entities within the insurance industry,"
id., at
129, is satisfied for many of the same reasons that the law passes
the commonsense test. The law regulates application of HMO
contracts and provides for review of claim denials; once it is
established that HMO contracts are, in fact, contracts for
insurance (and not merely contracts for medical care), it is clear
that § 4-10 does not apply to entities outside the insurance
industry (although it does not, of course, apply to all entities
within it).
Even if we accepted Rush's contention, rejected already, that
the law regulates HMOs even when they act as pure administrators,
we would still find the third factor satisfied.
375
That factor requires the targets of the law to be limited to
entities within the insurance industry, and even a matchmaking HMO
would fall within the insurance industry. But the implausibility of
Rush's hypothesis that the pure administrator would be bound by §
4-10 obviates any need to say more under this third factor. Cf.
Barnett Bank of Marion Gty., N.
A. v.
Nelson,
517 U. S. 25, 39
(1996) (holding that a federal statute permitting banks to act as
agents of insurance companies, although not insurers themselves,
was a statute regulating the "business of insurance" for McCarran-
Ferguson purposes).
III
Given that § 4-10 regulates insurance, ERISA's mandate that
"nothing in this subchapter shall be construed to exempt or relieve
any person from any law of any State which regulates insurance," 29
U. S. C. § 1144(b)(2)(A), ostensibly forecloses preemption. See
Metropolitan Life, 471 U. S., at 746 ("If a state law
'regulates insurance,' ... it is not preempted"). Rush, however,
does not give up. It argues for preemption anyway, emphasizing that
the question is ultimately one of congressional intent, which
sometimes is so clear that it overrides a statutory provision
designed to save state law from being preempted. See
American
Telephone &
Telegraph Go. v.
Gentral Office
Telephone, Inc., 524 U. S. 214, 227 (1998)
(AT&T)
(clause in Communications Act of 1934 purporting to save "the
remedies now existing at common law or by statute," 47 U. S. C.
§414 (1994 ed.), defeated by overriding policy of the filed-rate
doctrine);
Adams Express Go. v.
Groninger, 226 U. S. 491, 507 (1913)
(saving clause will not sanction state laws that would nullify
policy expressed in federal statute; "the act cannot be said to
destroy itself" (internal quotation marks omitted)).
In ERISA law, we have recognized one example of this sort of
overpowering federal policy in the civil enforcement provisions, 29
U. S. C. § 1132(a), authorizing civil actions for
376
six specific types of relief.7 In
Massachusetts Mut. Life
Ins. Co. v.
Russell, 473 U. S. 134 (1985), we
said those provisions amounted to an "interlocking, interrelated,
and interdependent remedial scheme,"
id., at 146, which
Pilot Life described as "represent[ing] a careful balancing
of the need for prompt and fair claims settlement procedures
against the public interest in encouraging the formation of
employee benefit plans," 481 U. S., at 54. So, we have held, the
civil enforcement provisions are of such extraordinarily preemptive
power that they override even the "well-pleaded complaint" rule for
establishing the conditions under which a cause of action may be
removed to a federal forum.
Metropolitan Life Ins. Co. v.
Taylor, 481 U. S., at 63-64.
7Title 29 U. S. C. § 1132(a) provides in relevant part:
"A civil action may be brought-
"(1) by a participant or beneficiary-
"(A) for the relief provided for in subsection (c) of this
section [concerning requests to the administrator for information],
or
"(E) to recover benefits due to him under the terms of his plan,
to enforce his rights under the terms of the plan, or to clarify
his rights to future benefits under the terms of the plan;
"(2) by the Secretary, or by a participant, beneficiary or
fiduciary for appropriate relief under section 1109 of this title
[breach of fiduciary duty];
"(3) by a participant, beneficiary, or fiduciary (A) to enjoin
any act or practice which violates any provision of this subchapter
or the terms of the plan, or (E) to obtain other appropriate
equitable relief (i) to redress such violations or (ii) to enforce
any provisions of this subchapter or the terms of the plan;
"(4) by the Secretary, or by a participant, or beneficiary for
appropriate relief in the case of a violation of 1025(c) of this
title [information to be furnished to participants];
"(5) except as otherwise provided in subsection (b) of this
section, by the Secretary (A) to enjoin any act or practice which
violates any provision of this subchapter, or (E) to obtain other
appropriate equitable relief (i) to redress such violation or (ii)
to enforce any provision of this subchapter;
"(6) by the Secretary to collect any civil penalty under
paragraph (2), (4), (5), or (6) of subsection (c) of this section
or under subsection (i) or
(l) of this section."
377
A
Although we have yet to encounter a forced choice between the
congressional policies of exclusively federal remedies and the
"reservation of the business of insurance to the States,"
Metropolitan Life, 471 U. S., at 744, n. 21, we have
anticipated such a conflict, with the state insurance regulation
losing out if it allows plan participants "to obtain remedies ...
that Congress rejected in ERISA,"
Pilot Life, supra, at
54.
In
Pilot Life, an ERISA plan participant who had been
denied benefits sued in a state court on state tort and contract
claims. He sought not merely damages for breach of contract, but
also damages for emotional distress and punitive damages, both of
which we had held unavailable under relevant ERISA provisions.
Russell, supra, at 148. We not only rejected the notion that
these common law contract claims "regulat[ed] insurance,"
Pilot
Life, 481 U. S., at 50-51, but went on to say that, regardless,
Congress intended a "federal common law of rights and obligations"
to develop under ERISA,
id., at 56, without embellishment by
independent state remedies. As in
AT&T, we said the
saving clause had to stop short of subverting congressional intent,
clearly expressed "through the structure and legislative history[,]
that the federal remedy ... displace state causes of action." 481
U. S., at 57.8
Rush says that the day has come to turn dictum into holding by
declaring that the state insurance regulation, § 4-10, is preempted
for creating just the kind of "alternative remedy" we disparaged in
Pilot Life. As Rush sees it, the inde-
8 Rush and its
amici interpret
Pilot Life to have
gone a step further to hold that any law that presents such a
conflict with federal goals is simply not a law that "regulates
insurance," however else the "insurance" test comes out. We believe
the point is largely academic. As will be discussed further, even
under Rush's approach, a court must still determine whether the
state law at issue does, in fact, create such a conflict. Thus, we
believe that it is more logical to proceed as we have done
here.
378
pendent review procedure is a form of binding arbitration that
allows an ERISA beneficiary to submit claims to a new decisionmaker
to examine Rush's determination
de novo, supplanting
judicial review under the "arbitrary and capricious" standard
ordinarily applied when discretionary plan interpretations are
challenged.
Firestone Tire &
Rubber Co. v.
Bruch, 489 U.
S. 101, 110-112 (1989). Rush says that the beneficiary's option
falls within
Pilot Life's notion of a remedy that
"supplement[s] or supplant[s]" the remedies available under ERISA.
481 U. S., at 56.
We think, however, that Rush overstates the rule expressed in
Pilot Life. The enquiry into state processes alleged to
"supplemen[t] or supplan[t]" the federal scheme by allowing
beneficiaries "to obtain remedies under state law that Congress
rejected in ERISA,"
id., at 54, has, up to now, been far
more straightforward than it is here. The first case touching on
the point did not involve preemption at all; it arose from an ERISA
beneficiary's reliance on ERISA's own enforcement scheme to claim a
private right of action for types of damages beyond those expressly
provided.
Russell, 473 U. S., at 145. We concluded that
Congress had not intended causes of action under ERISA itself
beyond those specified in § 1132(a).
Id., at 148. Two years
later we determined in
Metropolitan Life Ins. Co. v.
Taylor, supra, that Congress had so completely preempted the
field of benefits law that an ostensibly state cause of action for
benefits was necessarily a "creature of federal law" removable to
federal court.
Id., at 64 (internal quotation marks
omitted).
Russell and
Taylor naturally led to the
holding in
Pilot Life that ERISA would not tolerate a
diversity action seeking monetary damages for breach generally and
for consequential emotional distress, neither of which Congress had
authorized in § 1132(a). These monetary awards were claimed as
remedies to be provided at the ultimate step of plan enforcement,
and even if they could have been characterized as products of
"insurance regulation," they would have signifi-
379
cantly expanded the potential scope of ultimate liability
imposed upon employers by the ERISA scheme.
Since
Pilot Life, we have found only one other state law
to "conflict" with § 1132(a) in providing a prohibited alternative
remedy. In
Ingersoll-Rand Co. v.
McClendon, 498 U. S. 133 (1990), we
had no trouble finding that Texas's tort of wrongful discharge,
turning on an employer's motivation to avoid paying pension
benefits, conflicted with ERISA enforcement; while state law
duplicated the elements of a claim available under ERISA, it
converted the remedy from an equitable one under § 1132(a)(3)
(available exclusively in federal district courts) into a legal one
for money damages (available in a state tribunal). Thus,
Ingersoll-Rand fit within the category of state laws
Pilot Life had held to be incompatible with ERISA's
enforcement scheme; the law provided a form of ultimate relief in a
judicial forum that added to the judicial remedies provided by
ERISA. Any such provision patently violates ERISA's policy of
inducing employers to offer benefits by assuring a predictable set
of liabilities, under uniform standards of primary conduct and a
uniform regime of ultimate remedial orders and awards when a
violation has occurred. See
Pilot Life, supra, at 56 (" 'The
uniformity of decision ... will help administrators ... predict the
legality of proposed actions without the necessity of reference to
varying state laws'" (quoting H. R. Rep. No. 93-533, p. 12
(1973))); 481 u. S., at 56 ("The expectations that a federal common
law of rights and obligations under ERISAregulated plans would
develop ... would make little sense if the remedies available to
ERISA participants and beneficiaries under [§ 1132(a)] could be
supplemented or supplanted by varying state laws").
But this case addresses a state regulatory scheme that provides
no new cause of action under state law and authorizes no new form
of ultimate relief. While independent review under § 4-10 may well
settle the fate of a benefit claim under a particular contract, the
state statute does not en-
380
large the claim beyond the benefits available in any action
brought under § 1132(a). And although the reviewer's determination
would presumably replace that of the HMO as to what is "medically
necessary" under this contract,9 the relief ultimately available
would still be what ERISA authorizes in a suit for benefits under §
1132(a).10 This case therefore does not involve the sort of
additional claim or remedy exemplified in
Pilot Life,
Russell, and
IngersollRand, but instead bears a
resemblance to the claimsprocedure rule that we sustained in
UNUM Life Ins. Co. of America v.
Ward, 526 U. S. 358 (1999),
holding that a state law barring enforcement of a policy's time
limitation on submitting claims did not conflict with § 1132(a),
even though the state "rule of decision,"
id., at 377, could
mean the difference between success and failure for a beneficiary.
The procedure provided by § 4-10 does not fall within
Pilot
Life's categorical preemption.
9The parties do not dispute that §4-10, as a matter of state
law, purports to make the independent reviewer's judgment
dispositive as to what is "medically necessary." We accept this
interpretation of the meaning of the statute for the purposes of
our opinion.
10 This is not to say that the court would have no role beyond
ordering compliance with the reviewer's determination. The court
would have the responsibility, for example, to fashion appropriate
relief, or to determine whether other aspects of the plan (beyond
the "medical necessity" of a particular treatment) affect the
relative rights of the parties. Rush, for example, has chosen to
guarantee medically necessary services to plan participants. For
that reason, to the extent §4-10 may render the independent
reviewer the final word on what is necessary, see n. 9,
supra, Rush is obligated to provide the service. But
insurance contracts do not have to contain such guarantees, and not
all do. Some, for instance, guarantee medically necessary care, but
then modify that obligation by excluding experimental procedures
from coverage. See,
e. g., Tillery v.
Hoffman Enclosures,
Inc., 280 F.3d
1192 (CA8 2002). Obviously, §4-10 does not have anything
to say about whether a proposed procedure is experimental. There is
also the possibility, though we do not decide the issue today, that
a reviewer's judgment could be challenged as inaccurate or biased,
just as the decision of a plan fiduciary might be so
challenged.
381
B
Rush still argues for going beyond
Pilot Life, making the
preemption issue here one of degree, whether the state procedural
imposition interferes unreasonably with Congress's intention to
provide a uniform federal regime of "rights and obligations" under
ERISA. However, "[s]uch disuniformities ... are the inevitable
result of the congressional decision to 'save' local insurance
regulation."
Metropolitan Life, 471 U. S., at 747.11
Although we have recognized a limited exception from the saving
clause for alternative causes of action and alternative remedies in
the sense described above, we have never indicated that there might
be additional justifications for qualifying the clause's
application. Rush's arguments today convince us that further limits
on insurance regulation preserved by ERISA are unlikely to deserve
recognition.
To be sure, a State might provide for a type of "review" that
would so resemble an adjudication as to fall within
Pilot
Life's categorical bar. Rush, and the dissent,
post, at
394 (opinion of THOMAS, J.), contend that § 4-10 fills that bill by
imposing an alternative scheme of arbitral adjudication at
11 Thus, we do not believe that the mere fact that state
independent review laws are likely to entail different procedures
will impose burdens on plan administration that would threaten the
object of 29 U. S. C. § 1132(a); it is the HMO contracting with a
plan, and not the plan itself, that will be subject to these
regulations, and every HMO will have to establish procedures for
conforming with the local laws, regardless of what this Court may
think ERISA forbids. This means that there will be no special
burden of compliance upon an ERISA plan beyond what the HMO has
already provided for. And although the added compliance cost to the
HMO may ultimately be passed on to the ERISA plan, we have said
that such "indirect economic effect[s],"
New York State
Conference of Blue Cross &
Blue Shield Plans v.
Travelers Ins. Co., 514 U. S. 645, 659
(1995), are not enough to preempt state regulation even outside of
the insurance context. We recognize, of course, that a State might
enact an independent review requirement with procedures so
elaborate, and burdens so onerous, that they might undermine §
1132(a). No such system is before us.
382
odds with the manifest congressional purpose to confine
adjudication of disputes to the courts. It does not turn out to be
this simple, however, and a closer look at the state law reveals a
scheme significantly different from common arbitration as a way of
construing and applying contract terms.
In the classic sense, arbitration occurs when "parties in
dispute choose a judge to render a final and binding decision on
the merits of the controversy and on the basis of proofs presented
by the parties." 1 1. MacNeil, R. Speidel, & T. Stipanowich,
Federal Arbitration Law § 2.1.1 (1995) (internal quotation marks
omitted); see also Uniform Arbitration Act § 5, 7 U. L. A. 173
(1997) (discussing submission evidence and empowering arbitrator to
"hear and determine the controversy upon the evidence produced");
Commercial Dispute Resolution Procedures of the American
Arbitration Association ~~ R33-R35 (Sept. 2000) (discussing the
taking of evidence). Arbitrators typically hold hearings at which
parties may submit evidence and conduct cross-examinations,
e. g., Uniform Arbitration Act § 5, and are often
invested with many powers over the dispute and the parties,
including the power to subpoena witnesses and administer oaths,
e. g., Federal Arbitration Act, 9 U. S. C. § 7; 28 U.
S. C. § 653; Uniform Arbitration Act § 7, 7 U. L. A., at 199; Cal.
Civ. Proc. Code Ann. §§ 1282.6, 1282.8 (West 1982).
Section 4-10 does resemble an arbitration provision, then, to
the extent that the independent reviewer considers disputes about
the meaning of the HMO contract 12 and receives "evidence" in the
form of medical records, statements from
12 Nothing in the Act states that the reviewer should refer to
the definitions of medical necessity contained in the contract, but
the reviewer did, in this case, refer to that definition. Thus, we
will assume that some degree of contract interpretation is required
under the Act. Were no interpretation required, there would be a
real question as to whether §4-10 is properly characterized as a
species of mandated-benefit law of the type we approved in
Metropolitan Life Ins. Co. v.
Massachusetts, 471 U. S. 724 (1985).
383
physicians, and the like. But this is as far as the resemblance
to arbitration goes, for the other features of review under § 4-10
give the proceeding a different character, one not at all at odds
with the policy behind § 1132(a). The Act does not give the
independent reviewer a free-ranging power to construe contract
terms, but instead, confines review to a single term: the phrase
"medical necessity," used to define the services covered under the
contract. This limitation, in turn, implicates a feature of HMO
benefit determinations that we described in
Pegram v.
Herdrich, 530
U. S. 211 (2000). We explained that when an HMO guarantees
medically necessary care, determinations of coverage "cannot be
untangled from physicians' judgments about reasonable medical
treatment."
Id., at 229. This is just how the Illinois Act
operates; the independent examiner must be a physician with
credentials similar to those of the primary care physician, 215
Ill. Compo Stat., ch. 125, § 4-10 (2000), and is expected to
exercise independent medical judgment in deciding what medical
necessity requires. Accordingly, the reviewer in this case did not
hold the kind of conventional evidentiary hearing common in
arbitration, but simply received medical records submitted by the
parties, and ultimately came to a professional judgment of his own.
Tr. of Oral Arg. 30-32.
Once this process is set in motion, it does not resemble either
contract interpretation or evidentiary litigation before a neutral
arbiter, as much as it looks like a practice (having nothing to do
with arbitration) of obtaining another medical opinion. The
reference to an independent reviewer is similar to the submission
to a second physician, which many health insurers are required by
law to provide before denying coverage.13
The practice of obtaining a second opinion, however, is far
removed from any notion of an enforcement scheme, and
13 See,
e. g., Cal. Ins. Code Ann. § 10123.68
(West Supp. 2002); Ind. Code §27-13-37-5 (1999); N. J. Stat. Ann. §
17B:26-2.3 (1996); Okla. Admin. Code § 365:10-5-4 (1996); R. I.
Gen. Laws § 27-39-2 (1998).
384
once §4-10 is seen as something akin to a mandate for
second-opinion practice in order to ensure sound medical judgments,
the preemption argument that arbitration under § 4-10 supplants
judicial enforcement runs out of steam.
Next, Rush argues that §4-10 clashes with a substantive rule
intended to be preserved by the system of uniform enforcement,
stressing a feature of judicial review highly prized by benefit
plans: a deferential standard for reviewing benefit denials.
Whereas
Firestone Tire &
Rubber Co. v.
Bruch, 489 U. S., at 115, recognized that an ERISA plan
could be designed to grant "discretion" to a plan fiduciary,
deserving deference from a court reviewing a discretionary
judgment, § 4-10 provides that when a plan purchases medical
services and insurance from an HMO, benefit denials are subject to
apparently
de novo review. If a plan should continue to balk
at providing a service the reviewer has found medically necessary,
the reviewer's determination could carry great weight in a
subsequent suit for benefits under § 1132(a),14 depriving the plan
of the judicial deference a fiduciary's medical judgment might have
obtained if judicial review of the plan's decision had been
immediate.15
Again, however, the significance of §4-10 is not wholly captured
by Rush's argument, which requires some perspec-
14 See n. 10,
supra.
15 An issue implicated by this case but requiring no resolution
is the degree to which a plan provision for unfettered discretion
in benefit determinations guarantees truly deferential review. In
Firestone Tire itself, we noted that review for abuse of
discretion would home in on any conflict of interest on the plan
fiduciary's part, if a conflict was plausibly raised. That last
observation was underscored only two Terms ago in
Pegram v.
Herdrich, 530
U. S. 211 (2000), when we again noted the potential for
conflict when an HMO makes decisions about appropriate treatment,
see
id., at 219-220. It is a fair question just how
deferential the review can be when the judicial eye is peeled for
conflict of interest. Moreover, as we explained in
Pegram,
"it is at least questionable whether Congress would have had mixed
eligibility decisions in mind when it provided that decisions
administering a plan were fiduciary in nature."
Id., at 232.
Our decision today does not require us to resolve these
questions.
385
tive for evaluation. First, in determining whether state
procedural requirements deprive plan administrators of any right to
a uniform standard of review, it is worth recalling that ERISA
itself provides nothing about the standard. It simply requires
plans to afford a beneficiary some mechanism for internal review of
a benefit denial, 29 U. S. C. § 1133(2), and provides a right to a
subsequent judicial forum for a claim to recover benefits, §
1132(a)(1)(B). Whatever the standards for reviewing benefit denials
may be, they cannot conflict with anything in the text of the
statute, which we have read to require a uniform judicial regime of
categories of relief and standards of primary conduct, not a
uniformly lenient regime of reviewing benefit determinations. See
Pilot Life, 481 U. S., at 56.16
Not only is there no ERISA provision directly providing a
lenient standard for judicial review of benefit denials, but there
is no requirement necessarily entailing such an effect even
indirectly. When this Court dealt with the review standards on
which the statute was silent, we held that a general or default
rule of
de novo review could be replaced
16 Rush presents the alternative argument that § 4-10 is
preempted as conflicting with ERISA's requirement that a benefit
denial be reviewed by a named fiduciary, 29 U. S. C. § 1133(2).
Rush contends that §4-10 interferes with fiduciary discretion by
forcing the provision of benefits over a fiduciary's objection.
Happily, we need not decide today whether § 1133(2) carries the
same preemptive force of § 1132(a) such that it overrides even the
express saving clause for insurance regulation, because we see no
conflict. Section 1133 merely requires that plans provide internal
appeals of benefit denials; § 4-10 plays no role in this process,
instead providing for extra review once the internal process is
complete. Nor is there any conflict in the removal of fiduciary
"discretion"; as described below, ERISA does not require that such
decisions be discretionary, and insurance regulation is not
preempted merely because it conflicts with substantive plan terms.
See
UNUM Life Ins. Co. of America v.
Ward, 526 U. S. 358, 376 (1999)
("Under [Petitioner's] interpretation ... insurers could displace
any state regulation simply by inserting a contrary term in plan
documents. This interpretation would virtually rea[d] the saving
clause out of ERISA" (internal quotation marks and citations
omitted)).
386
by deferential review if the ERISA plan itself provided that the
plan's benefit determinations were matters of high or unfettered
discretion, see
Firestone Tire, supra, at 115. Nothing in
ERISA, however, requires that these kinds of decisions be so
"discretionary" in the first place; whether they are is simply a
matter of plan design or the drafting of an HMO contract. In this
respect, then, §4-10 prohibits designing an insurance contract so
as to accord unfettered discretion to the insurer to interpret the
contract's terms. As such, it does not implicate ERISA's
enforcement scheme at all, and is no different from the types of
substantive state regulation of insurance contracts we have in the
past permitted to survive preemption, such as mandated-benefit
statutes and statutes prohibiting the denial of claims solely on
the ground of untimeliness.17 See
Metropolitan Life Ins. Co.
v.
Massachusetts, 471 U. S. 724 (1985);
UNUM Life Ins. Co. of America v.
Ward, 526 U. S. 358 (1999).
***
In sum, § 4-10 imposes no new obligation or remedy like the
causes of action considered in
Russell, Pilot Life, and
Ingersoll-Rand. Even in its formal guise, the State Act
bears a closer resemblance to second-opinion requirements than to
arbitration schemes. Deferential review in the HMO context is not a
settled given; §4-10 operates before the stage of judicial review;
the independent reviewer's
de novo examination of the
benefit claim mirrors the general or
17We do not mean to imply that States are free to create other
forms of binding arbitration to provide
de novo review of
any terms of insurance contracts; as discussed above, our decision
rests in part on our recognition that the disuniformity Congress
hoped to avoid is not implicated by decisions that are so heavily
imbued with expert medical judgments. Rather, we hold that the
feature of § 4-10 that provides a different standard of review with
respect to mixed eligibility decisions from what would be available
in court is not enough to create a conflict that undermines
congressional policy in favor of uniformity of remedies.
387
default rule we have ourselves recognized; and its effect is no
greater than that of mandated-benefit regulation.
In deciding what to make of these facts and conclusions, it
helps to go back to where we started and recall the ways States
regulate insurance in looking out for the welfare of their
citizens. Illinois has chosen to regulate insurance as one way to
regulate the practice of medicine, which we have previously held to
be permissible under ERISA, see
Metropolitan Life, 471 U.
S., at 741. While the statute designed to do this undeniably
eliminates whatever may have remained of a plan sponsor's option to
minimize scrutiny of benefit denials, this effect of eliminating an
insurer's autonomy to guarantee terms congenial to its own
interests is the stuff of garden variety insurance regulation
through the imposition of standard policy terms. See
id., at
742 ("[S]tate laws regulating the substantive terms of insurance
contracts were commonplace well before the mid-70's"). It is
therefore hard to imagine a reservation of state power to regulate
insurance that would not be meant to cover restrictions of the
insurer's advantage in this kind of way. And any lingering doubt
about the reasonableness of § 4-10 in affecting the application of
§ 1132(a) may be put to rest by recalling that regulating insurance
tied to what is medically necessary is probably inseparable from
enforcing the quintessentially state-law standards of reasonable
medical care. See
Pegram v.
Herdrich, 530 U. S., at
236. "[I]n the field of health care, a subject of traditional state
regulation, there is no ERISA preemption without clear
manifestation of congressional purpose."
Id., at 237. To the
extent that benefit litigation in some federal courts may have to
account for the effects of § 4-10, it would be an exaggeration to
hold that the objectives of § 1132(a) are undermined. The saving
clause is entitled to prevail here, and we affirm the judgment.
It is so ordered.
388
JUSTICE THOMAS, with whom THE CHIEF JUSTICE, JusTICE SCALIA, and
JUSTICE KENNEDY join, dissenting.
This Court has repeatedly recognized that ERISA's civil
enforcement provision, § 502 of the Employee Retirement Income
Security Act of 1974 (ERISA), 29 U. S. C. § 1132, provides the
exclusive vehicle for actions asserting a claim for benefits under
health plans governed by ERISA, and therefore that state laws that
create additional remedies are preempted. See,
e. g., Pilot Life
Ins. Co. v.
Dedeaux, 481 U. S. 41, 52 (1987);
Massachusetts Mut. Life Ins. Co. v.
Russell, 473 U. S. 134, 146-147
(1985). Such exclusivity of remedies is necessary to further
Congress' interest in establishing a uniform federal law of
employee benefits so that employers are encouraged to provide
benefits to their employees: "To require plan providers to design
their programs in an environment of differing state regulations
would complicate the administration of nationwide plans, producing
inefficiencies that employers might offset with decreased
benefits."
FMC Corp. v.
Holliday, 498 U. S. 52, 60
(1990).
Of course, the "expectations that a federal common law of rights
and obligations under ERISA-regulated plans would develop ... would
make little sense if the remedies available to ERISA participants
and beneficiaries under § 502(a) could be supplemented or
supplanted by varying state laws."
Pilot Life, supra, at 56.
Therefore, as the Court concedes, see
ante, at 377, even a
state law that "regulates insurance" may be pre-empted if it
supplements the remedies provided by ERISA, despite ERISA's saving
clause, § 514(b)(2)(A), 29 U. S. C. § 1144(b)(2)(A). See
Silkwood v.
Kerr-McGee Corp., 464 U. S. 238, 248 (1984)
(noting that state laws that stand as an obstacle to the
accomplishment of the full purposes and objectives of Congress are
pre-empted).l Today, however,
1 I would assume without deciding that 215 Ill. Compo Stat., ch.
125, §4-10 (2000) is a law that "regulates insurance." We can begin
and end the pre-emption analysis by asking if § 4-10 conflicts with
the provisions
389
the Court takes the unprecedented step of allowing respondent
Debra Moran to short circuit ERISA's remedial scheme by allowing
her claim for benefits to be determined in the first instance
through an arbitral-like procedure provided under Illinois law, and
by a decisionmaker other than a court. See 215 Ill. Compo Stat.,
ch. 125, § 4-10 (2000). This decision not only conflicts with our
precedents, it also eviscerates the uniformity of ERISA remedies
Congress deemed integral to the "careful balancing of the need for
prompt and fair claims settlement procedures against the public
interest in encouraging the formation of employee benefit plans."
Pilot Life, supra, at 54. I would reverse the Court of
Appeals' judgment and remand for a determination whether Moran was
entitled to reimbursement absent the independent review conducted
under § 4-10.
I
From the facts of this case one can readily understand why Moran
sought recourse under § 4-10. Moran is covered by a medical
benefits plan sponsored by her husband's employer and governed by
ERISA. Petitioner Rush Prudential HMO, Inc., is the employer's
health maintenance organization (HMO) provider for the plan.
Petitioner's Member Certificate of Coverage (Certificate) details
the scope of coverage under the plan and provides petitioner with
"the broadest possible discretion" to interpret the terms of the
plan and to determine participants' entitlement to benefits. 1
Record, Exh. A, p. 8. The Certificate specifically excludes from
coverage services that are not "medically necessary."
Id.,
at 21. As the Court describes,
ante, at 360-362, Moran
underwent a nonstandard surgical procedure.2 Prior to
of ERISA or operates to frustrate its objects. See,
e. g.,
Boggs v.
Boggs, 520 U. S. 833, 841
(1997).
2 While the Court characterizes it as an "unconventional
treatment," the Court of Appeals described this surgery more
clinically as "rib resection, extensive scale-nectomy," and
"microneurolysis of the lower roots of the brachial plexus under
intraoperative microscopic magnification." 230
390
Moran's surgery, which was performed by an unaffiliated doctor,
petitioner denied coverage for the procedure on at least three
separate occasions, concluding that this surgery was not "medically
necessary." For the same reason, petitioner denied Moran's request
for postsurgery reimbursement in the amount of $94,841.27. Before
finally determining that the specific treatment sought by Moran was
not "medically necessary," petitioner consulted no fewer than six
doctors, reviewed Moran's medical records, and consulted
peer-reviewed medicalliterature.3
In the course of its review, petitioner informed Moran that
"there is no prevailing opinion within the appropriate specialty of
the United States medical profession that the procedure proposed
[by Moran] is safe and effective for its intended use and that the
omission of the procedure would adversely affect [her] medical
condition." 1 Record, Exh. E, at 2. Petitioner did agree to cover
the standard treatment for Moran's ailment, see n. 2,
supra;
n. 4,
infra, concluding that peer-reviewed literature
"demonstrates that [the standard surgery] is effective therapy in
the treatment of [Moran's condition]." 1 Record, Exh. E, at 3.
Moran, however, was not satisfied with this option. After
exhausting the plan's internal review mechanism, Moran
F. 3d 959, 963 (CA72000). The standard procedure for Moran's
condition, as described by the Court of Appeals, involves (like the
nonstandard surgery) rib resection with scale-nectomy, but it does
not include "microneurolysis of the brachial plexus," which is the
procedure Moran wanted and her primary care physician recommended.
See
id., at 963-964. In any event, no one disputes that the
procedure was not the standard surgical procedure for Moran's
condition or that the Certificate covers even nonstandard surgery
if it is "medically necessary."
3 Petitioner thus appears to have complied with § 503 of ERISA,
which requires every employee benefit plan to "provide adequate
notice in writing to any participant or beneficiary whose claim for
benefits under the plan has been denied," and to "afford a
reasonable opportunity to any participant whose claim for benefits
has been denied for a full and fair review by the appropriate named
fiduciary of the decision denying the claim." 29 U. S. C. §
1133.
391
chose to bypass the relief provided by ERISA. She invoked § 4-10
of the Illinois HMO Act, which requires HMOs to provide a mechanism
for review by an independent physician when the patient's primary
care physician and HMO disagree about the medical necessity of a
treatment proposed by the primary care physician. See 215 Ill.
Compo Stat., ch. 125, § 4-10 (2000). While Moran's primary care
physician acknowledged that petitioner's affiliated surgeons had
not recommended the unconventional surgery and that he was not "an
expert in this or any other area of surgery," 1 Record, Exh. C, he
nonetheless opined, without explanation, that Moran would be "best
served" by having that surgery,
ibid.
Dr. A. Lee Dellon, an unaffiliated physician who served as the
independent medical reviewer, concluded that the surgery for which
petitioner denied coverage "was appropriate," that it was "the same
type of surgery" he would have done, and that Moran "had all of the
indications and therefore the medical necessity to carry out" the
nonstandard surgery. Appellant's Separate App.
(CA7), pp.
A42-A43.4 Under § 410, Dr. Dellon's determination conclusively
established Moran's right to benefits under Illinois law. See 215
Ill. Compo Stat., ch. 125, § 4-10 ("In the event that the reviewing
physician determines the covered service to be medically necessary,
the [HMO]
shall provide the covered service" (emphasis
added)).
230 F.3d
959, 972-973
(CA7 2000).
Nevertheless, petitioner again denied benefits, steadfastly
maintaining that the unconventional surgery was not medically
necessary. While the Court of Appeals recharacterized Moran's claim
for reimbursement under § 4-10 as a claim for benefits under ERISA
§ 502(a)(1)(B), it reversed the judg-
4 Even Dr. Dellon acknowledged, however, both that "[t]here is
no particular research study" to determine whether failure to
perform the nonstandard surgery would adversely affect Moran's
medical condition and that the most common operation for Moran's
condition in the United States was the standard surgery that
petitioner had agreed to cover. Appellant's Separate App.
(CA7), p. A43.
392
ment of the District Court based solely on Dr. Dellon's judgment
that the surgery was "medically necessary."
II
Section 514(a)'s broad language provides that ERISA "shall
supersede any and all State laws insofar as they ... relate to any
employee benefit plan," except as provided in § 514(b). 29 U. S. C.
§ 1144(a). This language demonstrates "Congress's intent to
establish the regulation of employee welfare benefit plans 'as
exclusively a federal concern.'"
New York State Conference of
Blue Cross &
Blue Shield Plans v.
Travelers Ins.
Co., 514 U. S.
645, 656 (1995) (quoting
Alessi v.
Raybestos-Manhattan, Inc., 451 U. S. 504, 523
(1981)). It was intended to "ensure that plans and plan sponsors
would be subject to a uniform body of benefits law" so as to
"minimize the administrative and financial burden of complying with
conflicting directives among States or between States and the
Federal Government" and to prevent "the potential for conflict in
substantive law ... requiring the tailoring of plans and employer
conduct to the peculiarities of the law of each jurisdiction."
Ingersoll-Rand Co. v.
McClendon, 498 U. S. 133, 142
(1990). See also
Egelhoff v.
Egelhoff, 532 U. S. 141, 148
(2001).
To be sure, this broad goal of uniformity is in some tension
with the so-called "saving clause," which provides that ERISA does
not "exempt or relieve any person from any law of any State which
regulates insurance, banking, or securities." § 514(b)(2)(A) of
ERISA, 29 U. S. C. § 1144(b)(2)(A). As the Court has suggested on
more than one occasion, the pre-emption and saving clauses are
almost antithetically broad and" 'are not a model of legislative
drafting.'"
John Hancock Mut. Life Ins. Co. v.
Harris
Trust and Sav. Bank, 510 U. S. 86, 99 (1993)
(quoting
Pilot Life, 481 U. S., at 46). But because there is
"no solid basis for believing that Congress, when it designed
ERISA, intended fundamentally to alter traditional pre-emption
analysis," the Court has con-
393
cluded that federal pre-emption occurs where state law governing
insurance "'stands as an obstacle to the accomplishment of the full
purposes and objectives of Congress.'"
Harris Trust, supra,
at 99 (quoting
Silkwood, 464 U. S., at 248).
Consequently, the Court until today had consistently held that
state laws that seek to supplant or add to the exclusive remedies
in § 502(a) of ERISA, 29 U. S. C. § 1132(a), are preempted because
they conflict with Congress' objective that rights under ERISA
plans are to be enforced under a uniform national system. See,
e. g., Ingersoll-Rand Co., supra, at 142-145;
Metropolitan Life Ins. Co. v.
Taylor, 481 U. S. 58, 64-66
(1987);
Pilot Life, supra, at 52-57. The Court has explained
that § 502(a) creates an "interlocking, interrelated, and
interdependent remedial scheme," and that a beneficiary who claims
that he was wrongfully denied benefits has "a panoply of remedial
devices" at his disposal.
Russell, 473 U. S., at 146. It is
exactly this enforcement scheme that
Pilot Life described as
"represent[ing] a careful balancing of the need for prompt and fair
claims settlement procedures against the public interest in
encouraging the formation of employee benefit plans," 481 U. S., at
54. Central to that balance is the development of "a federal common
law of rights and obligations under ERISA-regulated plans."
Id., at 56.
In addressing the relationship between ERISA's remedies under §
502(a) and a state law regulating insurance, the Court has observed
that "[t]he policy choices reflected in the inclusion of certain
remedies and the exclusion of others under the federal scheme would
be completely undermined if ERISA-plan participants and
beneficiaries were free to obtain remedies under state law that
Congress rejected in ERISA."
Id., at 54. Thus, while the
preeminent federal interest in the uniform administration of
employee benefit plans yields in some instances to varying state
regulation of the business of insurance, the exclusivity and
uniformity of
394
ERISA's enforcement scheme remains paramount. "Congress intended
§ 502(a) to be the exclusive remedy for rights guaranteed under
ERISA."
Ingersoll-Rand Co., supra, at 144. In accordance
with ordinary principles of conflict preemption, therefore, even a
state law "regulating insurance" will be pre-empted if it provides
a separate vehicle to assert a claim for benefits outside of, or in
addition to, ERISA's remedial scheme. See,
e. g., Pilot Life,
supra, at 54 (citing
Russell, supra, at 146);
Harris
Trust, supra, at 99 (citing
Silkwood, supra, at
248).
III
The question for the Court, therefore, is whether §4-10 provides
such a vehicle. Without question, Moran had a "panoply of remedial
devices,"
Russell, supra, at 146, available under § 502 of
ERISA when petitioner denied her claim for benefits.5 Section
502(a)(1)(B) of ERISA provided the most obvious remedy: a civil
suit to recover benefits due under the terms of the plan. 29 U. S.
C. § 1132(a)(1)(B). But rather than bring such a suit, Moran sought
to have her right to benefits determined outside of ERISA's
remedial scheme through the arbitral-like mechanism available under
§4-10.
Section 4-10 cannot be characterized as anything other than an
alternative state-law remedy or vehicle for seeking benefits. In
the first place, § 4-10 comes into play only if the HMO and the
claimant dispute the claimant's entitlement to benefits; the
purpose of the review is to determine whether a claimant is
entitled to benefits. Contrary to the majority's characterization
of § 4-10 as nothing more than a state law
5 Commonly included in the panoply constituting part of this
enforcement scheme are: suits under § 502(a)(1)(B) (authorizing an
action to recover benefits, obtain a declaratory judgment that one
is entitled to benefits, and to enjoin an improper refusal to pay
benefits); suits under §§ 502(a)(2) and 409 (authorizing suit to
seek removal of the fiduciary); and a claim for attorney's fees
under § 502(g). See
Russell, 473 U. S., at 146
147; Pilot
Life Ins. Co. v.
Dedeaux, 481 U. S. 41, 53
(1987).
395
regarding medical standards,
ante, at 383-384, it is in
fact a binding determination of whether benefits are due: "In the
event that the reviewing physician determines the covered service
to be medically necessary, the [HMO]
shall provide the
covered service." 215 Ill. Compo Stat., ch. 125, § 4-10 (2000)
(emphasis added). Section 4-10 is thus most precisely characterized
as an arbitration-like mechanism to settle benefits disputes. See
Brief for United States as
Amicus Curiae 23 (conceding as
much).
There is no question that arbitration constitutes an alternative
remedy to litigation. See,
e. g., Air Line Pilots v.
Miller, 523 U.
S. 866, 876, 880 (1998) (referring to "arbitral remedy" and
"arbitration remedy");
DelCostello v.
Teamsters,
462 U. S. 151,
163 (1983) (referring to "arbitration remedies");
Great American
Fed. Sav. &
Loan Assn. v.
Novotny, 442 U. S. 366, 377-378
(1979) (noting that arbitration and litigation are "alternative
remedies"); 3 D. Dobbs, Law of Remedies § 12.23 (2d ed. 1993)
(explaining that arbitration "is itself a remedy"). Consequently,
although a contractual agreement to arbitrate-which does not
constitute a "State law" relating to "any employee benefit plan"-is
outside § 514(a) of ERISA's pre-emptive scope, States may not
circumvent ERISA pre-emption by mandating an alternative
arbitral-like remedy as a plan term enforceable through an ERISA
action.
To be sure, the majority is correct that §4-10 does not mirror
all procedural and evidentiary aspects of "common arbitration."
Ante, at 381-383. But as a binding decision on the merits of
the controversy the § 4-10 review resembles nothing so closely as
arbitration. See generally 1 1. MacNeil, R. Spediel, & T.
Stipanowich, Federal Arbitration Law § 2.1.1 (1995). That the
decision of the § 4-10 medical reviewer is ultimately enforceable
through a suit under § 502(a) of ERISA further supports the
proposition that it tracks the arbitral remedy. Like the decision
of any arbitrator, it is enforceable through a subsequent judicial
action, but judicial
396
review of an arbitration award is very limited, as was the Court
of Appeals' review in this case. See,
e. g., Paperworkers v.
Misco, Inc., 484 U. S. 29, 36-37 (1987)
(quoting
Steelworkers v.
American Mfg. Co., 363 U. S. 564, 567-568
(1960)). Although the Court of Appeals recharacterized Moran's
claim for reimbursement under §4-10 as a claim for benefits under §
502(a)(1)(B) of ERISA, the Court of Appeals did not interpret the
plan terms or purport to analyze whether the plan fiduciary had
engaged in the "full and fair review" of Moran's claim for benefits
that § 503(2) of ERISA, 29 U. S. C. § 1133(2), requires. Rather, it
rubberstamped the independent medical reviewer's judgment that
Moran's surgery was "medically necessary," granting summary
judgment to Moran on her claim for benefits solely on that basis.
Thus, as Judge Posner aptly noted in his dissent from the denial of
rehearing en banc below, §4-10 "establishes a system of appellate
review of benefits decisions that is distinct from the provision in
ERISA for suits in federal court to enforce entitlements conferred
by ERISA plans." 230 F. 3d, at 973.
IV
The Court of Appeals attempted to evade the pre-emptive force of
ERISA's exclusive remedial scheme primarily by characterizing the
alternative enforcement mechanism created by § 4-10 as a "contract
term" under state law.6
Id., at 972. The Court saves §4-10
from pre-emption in a somewhat different manner, distinguishing it
from an alternative enforcement mechanism because it does not
"enlarge the
6The Court of Appeals concluded that §4-10 is saved from
pre-emption because it is a law that "regulates insurance," and
that it does not conflict with the exclusive enforcement mechanism
of § 502 because § 4-10's independent review mechanism is a
state-mandated contractual term of the sort that survived ERISA
pre-emption in
UNUM Life Ins. Co. of America v.
Ward,
526 U. S. 358,
375-376 (1999). In the Court of Appeals' view, the independent
review provision, like any other mandatory contract term, can be
enforced through an action brought under § 502(a) of ERISA, 29 U.
S. C. § 1132(a), pursuant to state law. 230 F. 3d, at 972.
397
claim beyond the benefits available in any action brought under
§ 1132(a)," and characterizing it as "something akin to a mandate
for second-opinion practice in order to ensure sound medical
judgments."
Ante, at 379-380, 384. Neither approach is
sound.
The Court of Appeals' approach assumes that a State may impose
an alternative enforcement mechanism through mandated contract
terms even though it could not otherwise impose such an enforcement
mechanism on a health plan governed by ERISA. No party cites any
authority for that novel proposition, and I am aware of none. Cf.
Fort Halifax Packing Co. v.
Coyne, 482 U. S. 1, 16-17 (1987)
(noting that a State cannot avoid ERISA pre-emption on the ground
that its regulation only mandates a benefit plan; such an approach
would "permit States to circumvent ERISA's pre-emption provision,
by allowing them to require directly what they are forbidden to
regulate"). To hold otherwise would be to eviscerate ERISA's
comprehensive and exclusive remedial scheme because a claim to
benefits under an employee benefits plan could be determined under
each State's particular remedial devices so long as they were made
contract terms. Such formalist tricks cannot be sufficient to
bypass ERISA's exclusive remedies; we should not interpret ERISA in
such a way as to destroy it.
With respect to the Court's position, Congress' intention that §
502(a) be the exclusive remedy for rights guaranteed under ERISA
has informed this Court's weighing of the pre-emption and saving
clauses. While the Court has previously focused on ERISA's
overall enforcement mechanism and remedial scheme, see
infra, at 393-394, the Court today ignores the
"interlocking, interrelated, and interdependent" nature of that
remedial scheme and announces that the relevant inquiry is whether
a state regulatory scheme "provides [a] new cause of action" or
authorizes a "new form of ultimate relief."
Ante, at 379.
These newly created principles have no roots in the precedents of
this Court. That §4-10
also
398
effectively provides for a second opinion to better ensure sound
medical practice is simply irrelevant to the question whether it,
in fact, provides a binding mechanism for a participant or
beneficiary to pursue a claim for benefits because it is on this
latter basis that § 4-10 is pre-empted.
The Court's attempt to diminish §4-10's effect by characterizing
it as one where "the reviewer's determination would
presumably replace that of the HMO,"
ante, at 380
(emphasis added), is puzzling given that the statute makes such a
determination conclusive and the Court of Appeals treated it as a
binding adjudication. For these same reasons, it is troubling that
the Court views the review under §4-10 as nothing more than a
practice "of obtaining a second [medical] opinion."
Ante, at
383. The independent reviewer may, like most arbitrators, possess
special expertise or knowledge in the area subject to arbitration.
But while a second medical opinion is nothing more than that-an
opinion-a determination under § 4-10 is a conclusive determination
with respect to the award of benefits. And the Court's reference to
Pegram v.
Herdrich, 530 U. S. 211 (2000), as
support for its Alice in Wonderland-like claim that the §4-10
proceeding is "far removed from any notion of an enforcement
scheme,"
ante, at 383, is equally perplexing, given that the
treatment is long over and the issue presented is purely an
eligibility decision with respect to reimbursement.7
7 I also disagree with the Court's suggestion that, following
Pegram v.
Herdrich, 530 U. S. 211 (2000),
HMOs are exempted from ERISA whenever a coverage or reimbursement
decision relies in any respect on medical judgment.
Ante, at
383, 386, n. 17.
Pegram decided the limited question whether
relief was available under § 1109 for claims of fiduciary breach
against HMOs based on its physicians' medical decisions. Quite
sensibly, in my view, that question was answered in the negative
because otherwise, "for all practical purposes, every claim of
fiduciary breach by an HMO physician making a mixed decision would
boil down to a malpractice claim, and the fiduciary standard would
be nothing but the malpractice standard traditionally applied in
actions against physicians." 530 U. S., at 235.
399
As we held in
Metropolitan Life Ins. Co. v.
Massachusetts, 471 U. S. 724 (1985), a
State may, of course, require that employee health plans provide
certain substantive benefits. See
id., at 746 (holding that
a state law mandating mental health benefits was not within ERISA's
pre-emptive reach). Indeed, were a State to require that insurance
companies provide all "medically necessary care" or even that it
must provide a second opinion before denying benefits, I have
little doubt that such
substantive requirements would
withstand ERISA's pre-emptive force. But recourse to those
benefits, like all others, could be sought only through an action
under § 502 and not, as is the case here, through an
arbitration-like remedial device. Section 4-10 does not, in any
event, purport to extend a new substantive benefit. Rather, it
merely sets up a procedure to conclusively determine whether the
HMO's decision to deny benefits was correct when the parties
disagree, a task that lies within the exclusive province of the
courts through an action under § 502(a).
By contrast, a state law regulating insurance that merely
affects whether a plan participant or beneficiary may
pursue
the remedies available under ERISA's remedial scheme, such as
California's notice-prejudice rule, is not pre-empted because it
has nothing to do with § 502(a)'s exclusive enforcement scheme. In
UNUM Life Ins. Co. of America v.
Ward, 526 U. S. 358 (1999), the
Court evaluated California's socalled notice-prejudice rule, which
provides that an insurer cannot avoid liability in cases where a
claim is not filed in a timely fashion absent proof that the
insurer was actually prejudiced because of the delay. In holding
that it was not pre-empted, the Court did not suggest that this
rule provided a substantive plan term. The Court expressly declined
to address the Solicitor General's argument that the saving clause
saves even state law "conferring causes of action or affecting
remedies that regulate insurance." See
id., at 376-377, n. 7
(internal quotation marks omitted). While
400
a law may "effectively creat[e] a mandatory contract term,"
id., at 374 (internal quotation marks omitted), and even
provide the rule of decision with respect to whether a claim is
out of time, and thus whether benefits will ultimately be
received, such laws do not create an
alternative enforcement
mechanism with respect to recovery of plan benefits. They
merely allow the participant to proceed via ERISA's enforcement
scheme. To my mind, neither
Metropolitan Life nor
UNUM addresses, let alone purports to answer, the question
before us today.
***
Section 4-10 constitutes an arbitral-like state remedy through
which plan members may seek to resolve conclusively a disputed
right to benefits. Some 40 other States have similar laws, though
these vary as to applicability, procedures, standards, deadlines,
and consequences of independent review. See Brief for Respondent
State of Illinois 12, n.4 (citing state independent review
statutes); see also Kaiser Family Foundation, K. Politz, J.
Crowley, K. Lucia, & E. Bangit, Assessing State External Review
Programs and the Effects of Pending Federal Patients' Rights
Legislation (May 2002) (comparing state program features). Allowing
disparate state laws that provide inconsistent external review
requirements to govern a participant's or beneficiary's claim to
benefits under an employee benefit plan is wholly destructive of
Congress' expressly stated goal of uniformity in this area.
Moreover, it is inimical to a scheme for furthering and protecting
the "careful balancing of the need for prompt and fair claims
settlement procedures against the public interest in encouraging
the formation of employee benefit plans," given that the
development of a federal common law under ERISA-regulated plans has
consistently been deemed central to that balance.8
Pilot
Life, 481 U. S., at 54, 56. While
8 The Court suggests that a state law's impact on cost is not
relevant after
New York State Conference of Blue Cross &
Blue Shield Plans
401
it is true that disuniformity is the inevitable result of the
congressional decision to save local insurance regulation, this
does not answer the altogether different question before the Court
today, which is whether a state law "regulating insurance"
nonetheless provides a separate vehicle to assert a claim for
benefits outside of, or in addition to, ERISA's remedial scheme.
See,
e. g., id., at 54 (citing
Russell,
473 U. S., at 146);
Harris Trust, 510 U. S., at 99 (citing
Silkwood, 464 U. S., at 248). If it does, the exclusivity
and uniformity of ERISA's enforcement scheme must remain paramount
and the state law is pre-empted in accordance with ordinary
principles of conflict pre-emption.9
v.
Travelers Ins. Co., 514 U. S. 645, 662
(1995), which holds that a state law providing for surcharges on
hospital rates did not, based solely on their indirect economic
effect, "bear the requisite 'connection with' ERISA plans to
trigger pre-emption." But
Travelers addressed only the
question whether a state law "relates to" an ERISA plan so as to
fall within § 514(a)'s broad pre-emptive scope in the first place
and is not relevant to the inquiry here. The Court holds that "[i]t
is beyond serious dispute,"
ante, at 365, that § 4-10 does
"relate to" an ERISA plan; § 4-10's economic effects are
necessarily relevant to the extent that they upset the object of §
1132(a). See
Ingersoll-Rand Co. v.
McClendon,
498 U. S. 133,
142 (1990) ("Section 514(a) was intended to ensure that plans and
plan sponsors would be subject to a uniform body of benefits law;
the goal was to minimize the administrative and financial burden of
complying with conflicting directives among States or between
States and the Federal Government. Otherwise, the inefficiencies
created could work to the detriment of plan beneficiaries").
9 The Court isolates the "plan" from the HMO and then concludes
that the independent review provision does not "threaten the object
of 29 U. S. C. § 1132" because it does not affect the plan, but
only the HMO.
Ante, at 381, n. 11. To my knowledge such a
distinction is novel. Cf.
Pegram, 530 U. S., at 223
(recognizing that the agreement between an HMO and an employer may
provide elements of a plan by setting out the rules under which
care is provided). Its application is particularly novel here,
where the Court appears to view the HMO as the plan administrator,
leaving one to wonder how the myriad state independent review
procedures can help but have an impact on plan administration.
Ante, at 363, n.3.
402
For the reasons noted by the Court, independent review
provisions may sound very appealing. Efforts to expand the variety
of remedies available to aggrieved beneficiaries beyond those set
forth in ERISA are obviously designed to increase the chances that
patients will be able to receive treatments they desire, and most
of us are naturally sympathetic to those suffering from illness who
seek further options. Nevertheless, the Court would do well to
remember that no employer is required to provide any health benefit
plan under ERISA and that the entire advent of managed care, and
the genesis of HMOs, stemmed from spiraling health costs. To the
extent that independent review provisions such as §4-10 make it
more likely that HMOs will have to subsidize beneficiaries'
treatments of choice, they undermine the ability of HMOs to control
costs, which, in turn, undermines the ability of employers to
provide health care coverage for employees.
As a consequence, independent review provisions could create a
disincentive to the formation of employee health benefit plans, a
problem that Congress addressed by making ERISA's remedial scheme
exclusive and uniform. While it may well be the case that the
advantages of allowing States to implement independent review
requirements as a supplement to the remedies currently provided
under ERISA outweigh this drawback, this is a judgment that,
pursuant to ERISA, must be made by Congress. I respectfully
dissent.
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