June 20, 2002 – The U.S. Supreme Court releases its opinion in Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355 (2002), holding that an Illinois statute which provided recipients of health coverage by such organizations with a right to independent medical review of certain denials of benefits, as applied to health benefits provided by a health maintenance organization under contract with an employee welfare benefit plan, is not preempted by ERISA.
In 1996, Debra Moran had pain and numbness in her right shoulder. After conservative treatment for her condition failed, her physician recommended an unconventional treatment for her condition to be performed by a physician who was not affiliated with her HMO. The HMO denied the request, and her subsequent appeals of their decision denying this treatment, on the grounds that the procedure was not “medically necessary”.
Rush Prudential HMO, Inc. was a health maintenance organization that contracted with employee welfare benefit plans covered by ERISA to provide participants with “medically necessary” services. Ms. Moran participated in such a plan through her husband’s employer. After denying her request for the unconditional treatment recommended by her physician, Rush proposed that Ms. Moran undergo standard surgery performed by a physician affiliated with Rush.
Ms. Moran lived in Illinois, which had a state statute requiring independent medical review in the event of a dispute between the primary care physician and the HMO regarding the medical necessity of a covered service proposed by a primary care physician. If the reviewing physician determined the covered service to be medically necessary, the Illinois statute required the HMO to provide the covered service.
Rush refused to provide the independent review as required by the Illinois statute, and Ms. Moran filed a lawsuit in Illinois state court to compel Rush to comply with the state statute. Rush removed the lawsuit to federal district court on the grounds that ERISA “completely preempted” the cause of action.
While the lawsuit was pending, Ms. Moran had the surgery by the unaffiliated physician, and amended her compliant to include a claim for reimbursement from Rush. Rush treated the amended claim as a renewed request for benefits, and began a new inquiry to determine benefits, consulting with 3 doctors who said the surgery had been medically unnecessary.
The federal district court remanded the lawsuit back to Illinois state court, finding that a request for independent review under the Illinois statute did not require an interpretation of ERISA, so the claim was not “completely preempted” by ERISA permitting removal to federal court. The Illinois state court assigned to this case ordered Rush to submit to review by an independent physician, who decided that Ms. Moran’s treatment was medically necessary. Rush refused to concede that the surgery had been medically necessary, and again denied Ms. Moran’s claim in 1999.
Ms. Moran amended her complaint in state court to include reimbursement for her surgery as “medically necessary” under the Illinois statute, and Rush again removed the lawsuit to federal court, arguing that Ms. Moran’s reimbursement claim stated a claim for ERISA benefits and thus was completely preempted by ERISA. The district court agreed with Rush, and denied Ms. Moran’s claim on the ground that ERISA preempted the Illinois statute.
The U.S. Court of Appeals for the 7th Circuit reversed, finding that the Illinois statute regulated insurance, and therefore was not preempted by ERISA, and Rush appealed to the U.S. Supreme Court.
After a long discussion of the history of ERISA preemption as it relates to HMOs, the Court affirmed the decision of the 7th Circuit, finding that an HMO provides health care and it does so as an insurer, and the Illinois statute regulates insurance, so it was not preempted by ERISA.
John G. Roberts, Jr. argued on behalf of Rush before the U.S. Supreme Court with Clifford D. Stromberg, Craig A. Hoover, Jonathan S. Franklin, Catherine E. Stetson, James T. Ferrini, Michael R. Grimm, Sr. and Melinda S. Kollross joining him on the brief. Melinda Sue Kollross argued on behalf of Rush before the U.S. Court of Appeals for the 7th Circuit.
Daniel P. Albers argued on behalf of Debra Moran before the U.S. Supreme Court with Mark E. Rust and Stanley C. Fickle joining him on the brief. Daniel P. Albers argued on behalf of Ms. Moran before the U.S. Court of Appeals for the 7th Circuit.