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Door Opens for Malpractice Claims to Outlast Preemption Disputes

By Leo T. Crowley and Alan Kahn
October 02, 2003

Until recently, state medical malpractice claims against HMOs were almost universally subject to federal preemption in light of the Supreme Court's expansive interpretation of the preemption provisions of the Employee Retirement Income Security Act of 1974 [ERISA], 29 USC ' 1144[a], which states in sweeping language that ERISA supersedes 'any and all State laws [that] … relate' to benefits plans governed by ERISA. The effects of such preemption include federal subject matter jurisdiction and avoidance of state tort law and tort law damages.

The 'Pegram' Case

The Supreme Court took steps that altered this approach in Pegram v. Herdrich when it held that mixed eligibility and treatment decisions made by HMOs acting through their physician employees are not fiduciary acts within the meaning of ERISA. The Court in Pegram, a unanimous decision, noted that it has already held that 'in the field of health care, a subject of traditional state regulation, there is no ERISA preemption without clear manifestations of congressional purpose.' Seizing on this language, the U.S. Court of Appeals for the Second Circuit in Cicio v. Vytra Healthcare2 has gone a step further, holding that if a state law malpractice action is based on a 'mixed eligibility and treatment decision,' defined in Pegram as a decision with both coverage and medical treatment determinations, it is not subject to ERISA preemption so long as the state law cause of action involves allegations of faulty medical judgment.

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