Aetna Health Inc. v. Davila: The Supreme Court Rules That ERISA Completely Pre-Empts State-Law Claims by Plan Participants
Against HMO

John M. Russell¹

In Davila, two participants in an employee welfare benefit plan governed by ERISA sued their health maintenance organizations (HMOs) for alleged failures to exercise ordinary care in the handling of coverage decisions, in violation of Texas law. The plan participants both suffered injuries allegedly arising from the plan administrators’ decisions not to provide coverage for certain treatment and services recommended by the treating physicians.

The patients brought separate lawsuits inTexas state court, arguing that the plan administrators’ refusal to cover the requested medical services violated a “duty to exercise ordinary care when making health care treatment decisions” and that these refusals “proximately caused” their injuries. The plan administrators removed the cases to federal court on the basis that ERISA completely pre-empted the causes of action. The district courts refused to remand the cases to state court. The Fifth Circuit Court of Appeals reversed, ruling that the state-law claims fell outside the scope of ERISA, 502(a)(1)(B) and 502(a)(2).

The Supreme Court reversed the court of appeals, ruling that ERISA completely pre-empted the participants’ state-law claims under the Texas Health Care Liability Act. The Court began its analysis by noting that any state-law cause of action that “duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive” and is therefore pre-empted. Causes of action which fall within the scope of ERISA’s civil enforcement provisions of 502(a) are completely pre-empted and removable to federal court.

The Court had little difficulty concluding that the plan participants were complaining about denials of coverage promised under the terms of ERISA-regulated employee benefit plans. The Court rejected the plan participants’ argument that the administrators’ actions violated legal duties that arose independently of ERISA or the terms of the plans. According to the Davila Court, the duties imposed by theTexas law “do not arise independently of ERISA or the plan terms.” The Court reached this conclusion because “if a managed care entity correctly concluded that, under the terms of the relevant plan, a particular treatment was not covered, the managed care entity’s denial of coverage would not be a proximate cause of any injuries arising from the denial. Rather, the failure of the plan itself to cover the requested treatment would be the proximate cause.” Accordingly, an HMO could not be subject to liability under theTexas law if it denied coverage for any treatment not covered by the health care plan that it administered.

Since the plan participants brought suit only to rectify a wrongful denial of benefits promised under ERISA-regulated plans, the state-law claims fell within the scope of ERISA’s civil enforcement provision, 502(a)(1)(B). The claims were therefore completely pre-empted by ERISA and removable to federal court.

[1]John M. Russell is a partner in theMemphis,Tennessee law firm of Lawrence & Russell, LLP, and represents health plans and insurers in healthcare subrogation and other employee benefits and employment matters and related litigation in state and federal courts throughout theUnited States. He can be reached by telephone at 901.844.4433 or by e-mail at johnr@lawrencerussell.com .