Aetna Health Inc. v. Davila

Supreme Court of the United States
Argued March 23, 2004 Decided June 21, 2004
Full case name	Aetna Health Inc., fka Aetna U. S. Healthcare Inc. and Aetna U. S. Healthcare of North Texas Inc., Petitioner v. Juan Davila
Holding
Court membership
Chief Justice William Rehnquist Associate Justices John P. Stevens · Sandra Day O'Connor Antonin Scalia · Anthony Kennedy David Souter · Clarence Thomas Ruth Bader Ginsburg · Stephen Breyer
Case opinions
Majority	Thomas
Concurrence	Ginsburg, joined by Breyer

Aetna Health Inc. v. Davila, 542 U.S. 200 (2004) United States Supreme Court case that limited the scope of the Texas Healthcare Liability Act.

The effective result of this decision was that the "Texas Healthcare Liability Act" (THCLA) that held utilization review decisions by Managed Care entities to a legal duty of care according to the laws of Medical practice in Texas, could not be enforced in the case of Health Benefit plans provided through private employers, because the Texas statute allowed compensatory or punitive damages to redress losses or deter future transgressions, which were not available under ERISA § 1132. The ruling still allows Texas to enforce the THCLA in the case of government-sponsored, church-sponsored, or individual health plan policies, which are saved from preemption by ERISA.

Ruling

In CIGNA HealthCare of Texas, Inc. v. Calad et al., together with Aetna Health Inc. v. Davila, the Supreme court ruled that Mr. Davila's and Ms. Calad's (the Respondents) state of Texas Causes of Action, (both involving utilization review decisions by Managed Care entities that were alleged to adversely affect patient care, where in both cases Utilization review decisions contradicted the advice of the Respondents' personal physicians), fell within ERISA § 1132(a)(1)(B). The Court therefore ruled these complaints were completely pre-empted by ERISA § 1132 (Implied Preemption), and removable to Federal Court, therefore giving federal court jurisdiction over resolution of the complaints and defining ERISA as the law to be followed, superseding the applicable Texas statute (the THCLS). Consequently, the limited (in this case) Equitable Remedies available under ERISA § 1132 must be the exclusive remedies available to redress damage alleged to be suffered as a result of these utilization review decisions.

History

The Supreme Court decision reversed a decision of the U.S. Court of Appeals for the 5th Circuit that ERISA did not preempt the state causes of action and could be Remanded to Texas state court to be tried there under Texas law.

The ruling was informed largely by ERISA judicial precedent (judge-made, or common law), as established early in ERISA's judicial history, especially Pilot Life v. Dedeaux, 1987. In the latter case, the language of ERISA and other evidence of congressional intent, including ERISA's legislative history; the expansive interpretation of ERISA's preemption clause (i.e. ERISA supersedes state laws that "relate to" private employer-sponsored benefit plans, with no specific guidance in the wording of the clause as to how Congress intended "relate to" to be interpreted); coupled with ERISA's enforcement scheme, which includes Equitable Remedies but not Legal Remedies, led to the conclusion that state law Causes of action for legal remedies under Mississippi common law for Bad faith denial of insurance claims, including compensatory and punitive damages, were not allowed by ERISA.

As Pilot Life challenged a disability insurance claim denial, the equitable remedies that are provided by ERISA might still have been available to Mr. Dedeaux despite this ruling, as ERISA provides several equitable Injunctive remedies to challenge denials of benefit claims, such mandating that the wrongfully denied benefit be provided.

The biggest distinguishing factor from Pilot Life in the case of "CIGNA v. Calad" was the fact that it was too late for ERISA's powerful injunctive remedies to benefit the Respondents, who had already suffered damages for which equitable relief could not compensate them for their loss or suffering.

Essentially, this Supreme Court decision placed the Respondents' Complaints, in the status known as "Failure to state a claim upon which relief could be granted" and had to be Dismissed on their faces. The facts of the case were never elucidated either by Discovery or Trial, but the cases were Dismissed by Motion, as a matter of law, whereby even examining the facts in the most favorable light in favor of the Respondents, the relief they were seeking could not be granted.

As an example, if the Utilization review nurse had negligently applied the discharge protocol for Hemorrhoidectomy rather than Total Abdominal Hysterectomy, and if Calad had died from Complications resulting from the treatment decision to treat her on an outpatient basis with discharge instructions after only 1 day of hospitilization, the case would still have had to be dismissed; the law does not recognize monetary Damages for negligent actions in Managed Care "administration" of Employer Medical Benefit Plans but does acknowledge that state malpractice laws do apply to treating physicians deciding or administrating the course of a patient's care. Cigna and Aetna both pointed out in oral arguments what has been referred to in ERISA's judicial history as the "Panoply" of remedies that Calad and Davila might have evoked under ERISA to prevent the damage suffered, to include appeals of the adverse decisions, judicial Injunction to compel Utilization Review to approve treatment, and a new Texas law that allowed for independent arbitration over Managed Care Utilization Review decisions based on Medical necessity.

Under the concepts of Torts under Anglo-American common law (which do not inform the current interpretations of ERISA), these points might best be described as a defense of contributory negligence.

Perhaps future decisional law modeled after the instant court ruling might inform future laws to ensure that patients not simply "have" legal rights under ERISA to challenge Managed Care Utilization review decisions, but to put the burden on the Managed Care entities to make sure patients are aware of them and have the opportunity to invoke them before life, safety, or health-threatening medical treatment choices governed by Utilization review can cause irreparable damage or death for which ERISA provides no Remedy. Such law might be guided by the wording of the statute, that a patient must be "afforded" the opportunity for full and fair review of benefit claim denial or adverse Utilization review decisions.

As in "Miranda", which involves a similar Fifth Amendment constitutional question of being deprived of Life, Liberty, or Property without Due process of law, "affording the opportunity" for appeal might be enforced not only by the existence of a such statutory rights but by ensuring that the patients are informed of those rights and are given the reasonable opportunity to invoke them.

The ERISA claims procedure laws detailed by the Secretary of Labor (29 CFR 2560.503-1) require written notice for any "Adverse Determination" such as a Utilization review decision not to extend an approved course of treatment, and must provide a reasonable opportunity for a claimant or a representative (in Calad's case, her treating physician) an opportunity to appeal the decision in a timeframe appropriate to the urgency of the situation—in Calad's case, prior to her discharge. These regulations also require that the claims procedure not "contain any provision, and are not administered in a way, that unduly inhibits or hampers the initiation or processing of claims for benefits; a provision or practice that requires payment of a fee or costs as a condition to making a claim or to appealing an adverse benefit determination would be considered to unduly inhibit the initiation and processing of claims for benefits." For example, requiring a patient to agree to pay for a potentially costly medical treatment up front out of pocket to preserve the right to challenge the adverse determination later in court, with no guarantee that the challenge would be successful, and with a high risk of incurring expensive legal costs as well, would be considered "hampering the initiation or processing of claims for benefits", for obvious reasons.

Unfortunately, the claims procedure laws are not always followed, in part because the only recourse set forth by these laws for failure to provide such an appeal process is the right for the patient to consider the appeals process to be exhausted and bring a Civil action under ERISA. Such an action might in theory be applied for patients like Calad if the patient had a lawyer prepared to file an emergency ex parte Motion for a Temporary restraining order in US District Court, perhaps even by phone to a Magistrate, to compel the Utilization review nurse to approve treatment to protect the patient from imminent danger to life or health that might occur from discharging the patient against medical advice.

As lower Courts are bound by the Precedents of higher Courts, as is the Supreme Court bound in large part to its own precedents, there has been great frustrations by the Courts in lawsuits brought by Plaintiffs who under state common law would be entitled to monetary relief for damages or death suffered as a result of Utilization review nurses breaching a Duty of care or the laws of the practice of Medicine by prescribing the treatment plan for a Diagnosis, as in Calad's case, as complex as "status post total abdominal hysterectomy with vaginal, bladder, and bowel repair", presumptively, before the surgery is even performed, as 1 day of inpatient care with 8 weeks of outpatient care, on the basis of a discharge protocol to be followed that hinges not on the Clinical judgment of the physician who performed the surgery but the single question, "were there any Complications of the procedure?"

This frustration was well stated by Justice Becker of the US Court of Appeals for the Third Circuit in his concurring opinion in Defelice v. Aetna, et al., a frustration succinctly summarized in his quote from a previous decision in "Andrews-Clarke v. Travelers Ins. Co.," (a Complaint by a widow for the death of her husband as a consequence of a Managed Care Utilization review decision that cut short her husband's physician's recommended in-hospital treatment plan) as follows:

"Under traditional notions of justice, the harms alleged—if true—should entitle [plaintiff] to some legal remedy on behalf of herself and her children against Travelers and Greenspring. Consider just one of her claims—breach of contract. This cause of action—that contractual promises can be enforced in the courts—pre-dates Magna Carta. It is the very bedrock of our notion of individual autonomy and property rights. It was among the first precepts of the common law to be recognized in the courts of the Commonwealth and has been zealously guarded by the state judiciary from that day to this. Our entire capitalist structure depends on it.

"Nevertheless, this Court had no choice but to pluck [plaintiff's] case out of the state court in which she sought redress (and where relief to other litigants is available) and then, at the behest of Travelers and Greenspring, to slam the courthouse doors in her face and leave her without any remedy."

Also, Supreme Court Justice Ginsburg, in her concurring opinion in CIGNA v. Calad, in which Justice Breyer joined, expressed the sentiments held by many that either Congress or the Courts revisit the law as currently enforced by statute and precedent:

"The Court today holds that the claims respondents asserted under Texas law are totally preempted by §502(a) of the Employee Retirement Income Security Act of 1974 (ERISA or Act), 29 U. S. C. §1132(a). That decision is consistent with our governing case law on ERISA's preemptive scope. I therefore join the Court's opinion. But, with greater enthusiasm, as indicated by my dissenting opinion in Great-West Life & Annuity Ins. Co. v. Knudson, 534 U. S. 204 (2002), I also join "the rising judicial chorus urging that Congress and this Court revisit what is an unjust and increasingly tangled ERISA regime." DiFelice v. AETNA U. S. Healthcare, 346 F. 3d 442, 453 (CA3 2003) (Becker, J., concurring)."

Cigna stated in their Brief for Petitioner a position shared by many advocates of Universal health care, namely, that by rationing Health Care Plan monetary expenditures by Managed Care entities such as Aetna and CIGNA (through Utilization review), the monetary expenditure (funded through taxes or private employer compensation/benefit packages and employee payroll deductions) for Health Benefit Plans will also be reduced, providing greater health care access to more Americans: "Employers, of course, do not have unlimited funds to pay for employee health benefits. As health benefit costs inevitably increase, employers will inevitably provide fewer benefits to fewer employees. The necessary result will be more Americans without any health care coverage at all—a guaranteed prescription for lower quality overall care."

See also

• List of United States Supreme Court cases, volume 542

References

• Ruger, Theodore W., The Supreme Court Federalizes Managed Care Liability (2004) JOURNAL OF LAW, MEDINCE AND ETHICS

External links

• Text of Aetna Health Inc. v. Davila, 542 U.S. 200 (2004) is available from: Justia · Findlaw · LII

• Section $1132, ERISA Civil Enforcement