Moral Justice and Legal Justice in Managed Care: The Ascent of Contributive Justice

On July 4, 1991, Wanglie died after more than a year in PVS, kept alive only by intensive medical life support. Although the HMO did not protest the expenditure, in fact it had no alternative because Minnesota State law forbids HMOs from placing financial limits on HMO policies. See Miles S.H. , “Interpersonal Issues in the Wanglie Case,” Kennedy Institute of Ethics Journal, 2 (1992): At 65. See also Miles S.H. , “Informed Demand for ‘Non-Beneficial’ Medical Treatment,” N. Engl. J. Med., 325 (1991): 512–15; and Angell M. , “The Case of Helga Wanglie: A New Kind of ‘Right to Die’ Case,” N. Engl. J. Med., 325 (1991): 511–12.

Anencephaly is a condition in which the brain is completely absent except for the brainstem. It is defined as “congenital absence of the cranial vault, with cerebral hemispheres completely missing or reduced to small masses attached to the base of the skull.” See Dorland's Illustrated Medical Dictionary (Philadelphia: W.B. Saunders, 26th ed., 1981). Major portions of skull and scalp are likewise missing. Because of these anomalies, the anencephalic infant will never be conscious in any way.

In July 1993, a federal district court relied on antidiscrimination and emergency medical treatment laws to rule that any time the infant presents at the hospital in respiratory distress, the mother's demand for aggressive care must be met. Baby K subsequently resided in a nursing home, but on several occasions developed respiratory distress requiring mechanical ventilation. In its antidiscrimination arguments, the district court invoked § 504 of the Rehabilitation Act and the Americans with Disabilities Act. The district court also invoked the Emergency Medical Treatment and Active Labor Act (EMTALA), which requires hospitals to evaluate and stabilize all patients presenting for emergency care, prior to any transfer to another facility. Although the hospital argued that aggressive treatment for Baby K was futile, since nothing can reverse anencephaly, the district court found that these laws contain no exceptions for futility. See In the Matter of Baby K, 832 F. Supp. 1022 (E.D. Va. 1993). In February 1994, the Fourth Circuit Court of Appeals upheld the district court's ruling, basing its decision exclusively on emergency medical treatment law. The court found that whenever the infant's respiratory distress could only be stabilized with the use mechanical ventilation, such treatment must be provided. Like the district court, the Fourth Circuit ruled that EMTALA grants no exceptions on grounds of futility; such exceptions must be made by Congress. See In the Matter of Baby K, 16 F.3d 590 (4th Cir.), cert. denied, 115 S. Ct. 91 (1994).

Baby K's hospital bills were mainly paid for by Kaiser Permanente. See Gianelli D.M. , “Doctors Argue Futility of Treating Anencephalic Baby,” American Medical News, Mar. 21, 1994, at 5. Baby K died on April 5, 1995, of cardiac arrest. See Tousignant M. Miller B. , “Death of ‘Baby K’ Leaves a Legacy of Legal Precedent,” Washington Post, May 7, 1995, at B3.

Fox eventually raised the money on her own, but died shortly after completing treatment. The jury found that the HMO's denial of funds delayed her treatment long enough to be a substantial cause of her death, and therefore that the refusal constituted bad faith, breach of contract, and reckless infliction of emotional distress. See Pollock E.J. , “Jury Tells HMO to Pay Damages in Dispute over Refused Coverage,” Wall Street Journal, Dec. 28, 1993, at B4; and Meyer M. Murr A. , “Not My Health Care,” Newsweek, 123, no. 2 (1994): 36–38. Rather than being appealed, the case was later settled out of court for a substantially lesser amount.

In a study conducted for Kaiser Permanente, Southern California Region, Dr. David Eddy determined that, if the costly low-osmolar dyes are used for everyone instead of only patients at high risk for adverse reaction, the HMO's additional cost would be about $35 million. He also calculated some hypothetical opportunity costs: This money, instead of being used to enhance comfort and to avoid forty severe but nonfatal reactions, could alternatively avoid thirty-five breast cancer deaths, or 100 deaths from cervical cancer, or thirteen sudden deaths from cardiac disease, if used for improved preventive care and the like. See Eddy D.M. , “Applying Cost-Effectiveness Analysis: The Inside Story,” JAMA, 268 (1992): 2575–82.

See, for example, GUSTO Investigators, “An International Randomized Trial Comparing Four Thrombolytic Strategies for Acute Myocardial Infarction,” N. Engl. J. Med., 329 (1993): 673–82; GUSTO Investigators, “The Effects of Tissue-Plasminogen Activator, Streptokinase, or Both on Coronary-Artery Patency, Ventricular Function, and Survival after Acute Myocardial Infarction,” N. Engl. J. Med., 329 (1993): 1615–22; Farkouh M.E. Land J.D. Sackett D.L. , “Thrombolytic Agents: The Science of the Art of Choosing the Better Treatment,” Annals of Internal Medicine, 120 (1994): 886–88; Lee K.L. , “Holding GUSTO Up to the Light,” Annals of Internal Medicine, 120 (1994): 876–81; Ridker P.M. , “A Response to ‘Holding GUSTO Up to the Light’,” Annals of Internal Medicine, 120 (1994): 882–85; and Terry K. , “Technology: The Biggest Health-Care Cost-Driver of All,” Medical Economics, 71, no. 6 (1994): 124–37.

Daniels N. , “Why Saying No to Patients in the United States is so Hard,” N. Engl. J. Med., 314 (1986): 1380–83.

Weiner J.P. de Lissovoy G. , “Razing a Tower of Babel: A Taxonomy for Managed Care and Health Insurance Plans,” Journal of Health Politics, Policy and Law, 18 (1993): 75–103.

Anders G. , “HMOs Pile Up Billions in Cash, Try to Decide What to Do with It,” Wall Street Journal, Dec. 21, 1994, at A1, A12.

Johnsson J. , “Price Quake Rattles Doctors, Hospitals,” American Medical News, Oct. 24, 1994, at 1, 18; and Mitka M. , “HMO Enrollment Tops 50 Million: Low Premium Costs Fuel Rapid Expansion,” American Medical News, Dec. 26, 1994, at 3.

Many MCOs withhold part of physicians' fees, salary, or capitation payment; many also add bonuses or even pay-back penalties based on resources used through the year. See Hillman A.L. , “Financial Incentives for Physician in HMOs: Is There a Conflict of Interest?,” N. Engl. J. Med., 317 (1987): 1743–48; Hillman A.L. , “Health Maintenance Organizations, Financial Incentives, and Physicians' Judgments,” Annals of Internal Medicine, 112 (1990): 1891–93; and Hillman A.L. , “Managing the Physician: Rules Versus Incentives,” Health Affairs, 10, no. 4 (1991): 138–46. More recently, many MCOs have switched to capitated arrangements that place physicians almost entirely at risk for the care provided.

See Hillman (1991), supra note 12.

See Eddy , supra note 6.

To say that money saved can be used for other patient care does not mean that it will be. Other, less salutary uses might be made. A for-profit HMO might return savings to stockholders in the form of earnings, and virtually any HMO may return some savings to physicians as part of its incentive system. However, the negative is assured: Money spent on one patient within a financially closed system is not available for any other subscriber.

Veatch R.M. , A Theory of Medical Ethics (New York: Basic Books, 1981): At 285. For a useful summary of this line of thought, see Hall M.A. , “The Ethics of Health Care Rationing,” Public Affairs Quarterly, 8 (1994): 33–49.

Levinsky N.G. , “The Doctor's Master,” N. Engl. J. Med., 311 (1984): At 1573.

Veatch R.M. , “DRGs and the Ethical Reallocation of Resources,” Hastings Center Report, 16, no. 3 (1986): At 38. For further discussion of the traditional view, see also Morreim E.H. , Balancing Act: The New Medical Ethics of Medicine's New Economics (Dordrecht: Kluwer, 1991): At 45; and Hall , supra note 16, at 34–35.

Beauchamp T.L. Childress J.F. , Principles of Biomedical Ethics (New York: Oxford University Press, 3rd ed., 1989): At 258–59.

See Morreim , supra note 18; and Morreim E.H. , “Fiscal Scarcity and the Inevitability of Bedside Budget Balancing,” Archives of Internal Medicine, 149 (1989): 1012–15.

See Weiner Lissovoy , supra note 9, at 76–77.

Morreim E.H. , “Redefining Quality by Reassigning Responsibility,” American Journal of Law & Medicine, XX (1994): 79–104.

See Beauchamp Childress , supra note 19, at 259.

Capron A.M. , “Medical Futility: Strike Two,” Hastings Center Report, 24, no. 5 (1994): 42–43.

Emanuel E.J. Emanuel L.L. , “The Economics of Dying: The Illusion of Cost Savings at the End of Life,” N. Engl. J. Med., 330 (1994): 540–44.

Although bone marrow transplant is often used for breast cancer, its safety and effectiveness have still not been proved. Because it is so widely available through insurers, relatively few women are willing to enter a scientific trial in which they might receive standard treatment rather than the transplant. Hence, it is very difficult to recruit enough subjects to complete scientific trials. See Kolata G. , “Women Rejecting Trials for Testing a Cancer Therapy,” New York Times, Feb. 15, 1995, at A1, B7.

Morreim E.H. , “Futilitarianism, Exoticare, and Coerced Altruism: The ADA Meets Its Limits,” Seton Hall Law Review, 25 (1995): 883–926.

See Morreim , supra note 18, at 79–81.

Id. at 74–76.

For an excellent discussion of the role of contract in health care and health reform, see Havighurst C.C. , Health Care Choices: Private Contracts as Instruments of Health Reform (Washington, D.C.: American Enterprise Institute, 1995).

The surgical separation of the Lakeburg Siamese twins provides a poignant example. The procedure cost $1.2 million dollars, and, although Indiana's Medicaid rules expressly forbade paying for such highly experimental treatments, an exception was made for this much publicized case. One twin died, as expected, during the surgery, and the other lived only a few months. See Fleck L.M. , “Just Caring: Health Reform and Health Care Rationing,” Journal of Medicine and Philosophy, 19 (1994): At 438–39. Technically, Medicaid does not represent a contract between patients and the government in the same sense as that between private payers and their beneficiaries. However, these programs closely resemble contracts for managed care or insurance, in that they promise a particular set of services to a defined population, and those who are denied their due have legal recourse.

Contractual vagueness is also partly a function of health plans' historical difficulty in writing their contracts in language that judges are willing to uphold. See Havighurst , supra note 30, at 16, 31ff., 115ff.; and Hall M.A. Anderson G.F. , “Health Insurers' Assessment of Medical Necessity,” University of Pennsylvania Law Review, 140 (1992): 1637–712. Note also that even medical guidelines or practice parameters, which if made explicit could add to contracts' specificity, cannot address every conceivable medical contingency. They, too, must leave room for flexibility and for individuality of care.

This notion somewhat parallels Havighurst's concept of health care contracts as a covenant among subscribers. See Havighurst , supra note 30, at 176ff.

Eddy D.M. , “Connecting Value and Costs: Whom Do We Ask, and What Do We Ask Them?,” JAMA, 264 (1990): 1737–39; and Eddy D.M. , “What Do We Do About Costs?,” JAMA, 264 (1990a): 1161, 1165, 1169, 1170.

Peters W.P. Rogers M.C. , “Variation in Approval by Insurance Companies of Coverage for Autologous Bone Marrow Transplantation for Breast Cancer,” N. Engl. J. Med., 330 (1994): 473–77.

The doctrine is called contra proferentum. See Havighurst , supra note 30, at 182ff.

Leonhardt v. Holden Business Forms Co., 828 F. Supp. 657 (D. Minn. 1993).

Id.; Wilson v. Group Hospitalization, 791 F. Supp. 309 (D.D.C. 1992); and Weaver v. Phoenix Home Life Mut. Ins. Co., 990 F.2d 154 (4th Cir. 1993).

Grumet G.W. , “Health Care Rationing Through Inconvenience: The Third Party's Secret Weapon,” N. Engl. J. Med., 321 (1989): 607–11; and Light D.W. , “Life, Death and the Insurance Companies,” N. Engl. J. Med., 330 (1994): 498–500.

For a more detailed discussion of judge-made insurance, see, for example, Abraham K.S. , “Judge-Made Law and Judge-Made Insurance: Honoring the Reasonable Expectations of the Insured,” Virginia Law Review, 67 (1981): 1151–91; Ferguson J.H. Dubinsky M. Kirsch P.J. , “Court-Ordered Reimbursement for Unproven Medical Technology: Circumventing Technology Assessment,” JAMA, 269 (1993): 2116–21; Hall Anderson , supra note 32; James F. , “The Experimental Treatment Exclusion Clause: A Tool for Silent Rationing?,” journal of Legal Medicine, 12 (1991): 359–418; Havighurst , supra note 30; Kalb P.E. , “Controlling Health Care Costs by Controlling Technology: A Private Contractual Approach,” Yale Law journal, 99 (1990): 1109–26; Huber P. , Liability: The Legal Revolution and Its Consequences (New York: Basic Books, 1988); Gottsegen S.W. , “A New Approach for the Interpretation of Insurance Contracts—Great American Insurance Co. v. Tate Construction Co.,” Wake Forest Law Review, 17 (1981): 140–52; and Great American Ins. Co. v. C.G. Tate Const., 279 S.E.2d 769 (N.C. 1981).

DiDomenico v. Employers Co-op. Industry Trust, 676 F. Supp. 903, 908 (N.D. Ind. 1987).

Leonhardt v. Holden Business Forms Co., 828 F. Supp. 657,658 (D. Minn. 1993). Sometimes judicial generosity seems to stem from medical confusion. In finding the plaintiff's insurance contract ambiguous, a federal district court declared in Nesseim that autologous bone marrow transplant is just an extension of chemotherapy. See Nesseim v. Mail Handlers Ben. Plan, 792 F. Supp. 674, 675 (D.S.D. 1992), rev'd, 995 F.2d 804 (8th Cir. 1993). Similarly, in Calhoun, the court declared: “The bone marrow transplant, while necessary to avoid a disastrous side effect, is not the procedure designed to treat the cancer.” See Calhoun v. Complete Health Care, Inc., 860 F. Supp. 1494, 1499 (S.C. Ala. 1994). Pirozzi likewise identified an ambiguity in the term experimental in order to award bone marrow transplant to a woman with advanced breast cancer. See Pirozzi v. Blue Cross-Blue Shield of Va., 741 F. Supp. 586 (E.D. Va. 1990). See also Wilson, 791 F. Supp. at 309; and Taylor v. BCBSM, 517 N.W.2d 864 (Mich. App. 1994). Another court asserted that autologous bone marrow transplant (ABMT) is a very minor portion of [the plaintiff's] overall treatment plan…. The record does not preclude the possibility that there may indeed be cases where HDC [high dose chemotherapy] is not accompanied by PSCR [peripheral stem cell rescue] or ABMT. They certainly are different procedures in that they are administered at different times and for different purposes. The purpose of the HDC is to kill the cancer; whereas, the purpose PSCR is to restore the immune system. See Bailey v. Blue Cross/Blue Shield of Va., 866 F. Supp. 277, 281, 282 (E.D. Va. 1994). Such reasoning is dramatically different from medical realities. High-dose chemotherapy cannot be undertaken, given current medical technology, without a reinfusion of healthy bone marrow to restore the patient's ability to produce the vital blood cells. To regard the two as somehow distinct is rather like regarding sutures to close a surgical incision as a separable from the surgery, and potentially optional—as though the surgery is to fix the problem, while the sutures are simply to prevent potential postoperative problems.

Bailey, 866 F. Supp. at 280.

See Arkansas BCBS v. Long, 792 S.W.2d 602 (1990); and Blue Cross and Blue Shield v. Brown, 800 S.W.2d 724 (Ark. App. 1990) (each overrules the insurer's provision that all coverage would be forfeit if the patient left the hospital against medical advice).

See commentators on judge-made insurance law, supra note 40.

In the words of the statute, Congress set out to protect … participants in employee benefit plans and their beneficiaries, by requiring the disclosure and reporting to participants and beneficiaries of financial and other information with respect thereto, by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts. See 29 U.S.C. § 1001(b) (1974). See also Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 44 (1987); and Ingersoll-Rand Co. v. McClendon, 111 S. Ct. 478, 482 (1990). See also Wiehl J.G. , “Legal Issues Related to Systems Integration,” in Fine A. , ed., Integrated Health Care Delivery Systems (New York: Thompson, 1993): At 23–25; and Younger P.A. Conner C. Cartwright K.K. , Managed Care Law Manual (Gaithersburg: Aspen, 1994): Ch. on “ERISA.”

Holmes v. Pacific Mut. Life Ins. Co., 706 F. Supp. 733, 735 (C.D. Cal. 1989). See also Mertens: Concerned that many pension plans were being corruptly or ineptly mismanaged and that American workers were losing their financial security as a result, Congress in 1974 enacted ERISA, “declar[ing] [it] to be the policy of [the statute] to protect … the interest of participants in employee benefit plans and their beneficiaries, by requiring the disclosure and reporting to participants and beneficiaries of financial and other information with respect [to the plans], by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts” (29 U.S.C. § 1001(b)). See Mertens v. Hewitt Associates, 113 S. Ct. 2063, 2072 (1993).

ERISA distinguishes in certain ways between pension plans and welfare benefit plans such as health insurance. Congress has distinguished between “employee pension plans” and “employee welfare benefit plans,” exempting the latter from much of ERISA's panoply of requirements including its vesting provisions. “Welfare benefits such as medical insurance … are not subject to the rather strict vesting, accrual, participation, and minimum funding requirements that ERISA imposes on pension plans.” See Pitman v. Blue Cross & Blue Shield, 24 F.3d 118, 121 (10th Cir. 1994). For our purposes, however, this difference will not play a role.

Firestone Tire & Rubber Co. v Bruch, 489 U.S. 101 (1989). See also Wiehl , supra note 46, at 23; Younger Conner Cartwright , supra note 46, at 11; and Johnson v. Dist. 2 Marine Eng. Ben. Ass'n, 857 F.2d 514, 517 (9th Cir. 1988).

The deference accorded to fiduciary administrators is reduced if those administrators are in a conflict of interest, as is the case when they represent both the individual beneficiaries' interests and the plan's profitability interests. See Firestone Tire, 489 U.S. at 101; Brown v. Blue Cross & Blue Shield of Ala., 898 F.2d 1556 (11th Cir. 1990); Pitman, 24 F.3d at 118; and Doe v. Group Hospitalization & Med. Serv., 3 F.3d 80 (4th Cir. 1993).

Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724 (1984).

The relevant clauses in ERISA law are the “saving clause” and the “deemer clause.” The “pre-emption clause” (§ 514(a)) [of ERISA] provides that ERISA supersedes all state laws insofar as they “relate to any employee benefit plan,” but ERISA's “saving clause” (§ 514(b)(2)(A)) excepts from the pre-emption clause any state law that “regulates insurance.” ERISA's “deemer clause” (§ 514(b)(2)(B)) provides that no employee benefit plan shall be deemed to be an insurance company for purposes of any state law “purporting to regulate insurance.” See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 41 (1987).

See Butler S.M. , “A Tax Reform Strategy to Deal with the Uninsured,” JAMA, 265 (1991): At 2543; and Goodman J.C. Musgrave G.L. , Patient Power (Washington, D.C.: Cato Institute, 1992): At 197–98, 340–50.

“The ‘pre-emption clause’ (§ 514(a)) [of ERISA] provides that ERISA supersedes all state laws insofar as they ‘relate to any employee benefit plan.”’ See Pilot Life Ins. Co. , 481 U.S. at 41.

Mertens v. Hewitt Associates, 113 S. Ct. 2063 (1993); Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134 (1985); and Novak v. Andersen Corp., 962 F.2d 757, 760 (8th Cir. 1992). See also Younger Conner Cartwright , supra note 46, at 6.

Holmes v. Pacific Mut. Life Ins. Co., 706 F. Supp. 733, 735 (C.D. Cal. 1989). See also Johnson: “Plan trustees are required to discharge their duties ‘solely in the interest of the participants and beneficiaries.’… At the same time, however, they have a duty to keep the Fund financially stable. ‘[T]he purpose of a Fund is to provide benefits to as many intended beneficiaries as is economically possible while protecting the financial stability of the Fund’ (Johnson v. Dist. 2 Marine Eng. Ben. Ass'n, 857 F.2d 514, 517 (9th Cir. 1988)). See also Chittenden W.A. , “Malpractice Liability and Managed Health Care: History and Prognosis,” Tort and Insurance Law Journal, 26 (1991): At 489. Thus, ERISA is designed to protect employee-beneficiaries, partly by protecting the various plans on which they depend.

Dearmass v. Av-Med, Inc., 814 F. Supp. 1103 (S.D. Fla. 1993). The district court in this case preempted claims based on a theory that the HMO had violated federal “anti-dumping” laws. In a subsequent suit, the same court also preempted claims regarding negligent administration of the plan, but did not rule out a claim for vicarious liability. See Dearmass v. Av-Med, Inc., 865 F. Supp. 816 (S.D. Fla. 1994). See also Exbom v. Central States Health and Welfare Fund, 900 F.2d 1138 (7th Cir. 1990) (preempting claim of morbidly obese patient protesting denial of coverage for gastroplasty); Rollo v. Maxicare of La., Inc., 695 F. Supp. 245 (E.D. La. 1988) (preempting claim against HMO for poor care after an auto accident); Pomeroy v. Johns Hopkins Med. Serv., Inc., 868 F. Supp. 110 (D. Md. 1994) (preempting claim against HMO for failure to cover treatment for diplopia, chronic back pain, facial tic, severe depression, and addiction to prescription pain medications); and Hemphill v. Unisys Corp., 855 F. Supp. 1225 (D. Utah 1994) (preempting various tort claims related to insurer's failure to cover certain benefits after auto accident).

Johnson, 857 F.2d at 514.

Kuhl v. Lincoln Nat. Health Plan, 999 F.2d 298 (8th Cir. 1993).

Spain v. Aetna Life Ins. Co., 11 F.3d 129 (9th Cir. 1993), cert. denied, 61 U.S.L.W. 3705 (U.S. Apr. 25, 1994); and Sweeney v. Gerber Products Co. Med. Ben. Plan, 728 F. Supp. 594 (D. Neb. 1989). Numerous other cases also preempt common law claims against ERISA plans.

Corcoran v. United Healthcare, Inc., 965 F.2d 1321, 1338 (5th Cir.), cert. denied, 113 S. Ct. 812 (1992).

DiDomenico v. Employers Co-op. Industry Trust, 676 F. Supp. 903 (N.D. Ind. 1987).

Leonhardt v. Holden Business Forms Co., 828 F. Supp. 657 (D. Minn. 1993); Nesseim v. Mail Handlers Ben. Plan, 792 F. Supp. 674, 675 (D.S.D. 1992); Pirozzi v. Blue Cross-Blue Shield of Va., 741 F. Supp. 586 (E.D. Va. 1990); and Wilson v. Group Hospitalization, 791 F. Supp. 309 (D.D.C. 1992).

Brown v. Blue Cross & Blue Shield of Ala., 898 F.2d 1556, 1561–62 (11th Cir. 1990). See also Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989).

Wilson, 791 F. Supp. at 309; Bailey v. Blue Cross/Blue Shield of Va., 866 F. Supp. 277 (E.D. Va. 1994); Calhoun v. Complete Health Care, Inc., 860 F. Supp. 1494 (S.C. Ala. 1994); Pitman v. Blue Cross & Blue Shield, 24 F.3d 118 (10th Cir. 1994); and Doe v. Group Hospitalization & Med. Serv., 3 F.3d 80 (4th Cir. 1993).

Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 147 (1985) (cited with approval in Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54 (1987)). See also Harsch v. Eisenberg, 956 F.2d 651 (7th Cir. 1992); and Novak v. Andersen Corp., 962 F.2d 757 (8th Cir. 1992).

Mertens v. Hewitt Associates, 113 S. Ct. 2063 (1993).

Haywood v. Russell Corp., 584 So. 2d 1291, 1297 (Ala. 1991) (citing House Education and Labor Committee, regarding ERISA's intent).

Relevant text reads as follows. The majority candidly acknowledges that it is plausible to interpret the phrase “appropriate equitable relief” … as meaning that relief which was available in the courts of equity for a breach of trust…. The majority also acknowledges that the relief petitioners seek here—a compensatory monetary award—was available in the equity courts under the common law of trusts, not only against trustees for breach of duty but also against nonfiduciaries knowingly participating in a breach of trust…. Finally, there can be no dispute that ERISA was grounded in this common-law experience and that “we are [to be] guided by principles of trust law” in construing the terms of the statute…. Nevertheless, the majority today holds that in enacting ERISA Congress stripped ERISA trust beneficiaries of a remedy against trustees and third parties that they enjoyed in the equity courts under common law. See Mertens, 113 S. Ct. at 2072.

Relevant text reads as follows. Moreover, while the majority of courts adhere to the view that equity courts, even in trust cases, cannot award punitive damages,… a number of courts in more recent decades have drawn upon their “legal” powers to award punitive damages even in cases that historically could have been brought only in equity. While acknowledging the traditional bar against such relief in equity, these courts have concluded that the merger of law and equity authorizes modern courts to draw upon both legal and equitable powers in crafting an appropriate remedy for a breach of trust. The dissenters go on to cite a number of cases supporting the conclusion that the “present day Chancery Division can ‘afford the full range of equitable and legal remedies for breach of trust,’ including punitive damages.” They then conclude that [b]ecause some forms of “legal” relief in trust cases were thus not available at equity, limiting the scope of relief under § 502(a)(3) to the sort of relief historically provided by the equity courts for a breach of trust provides a meaningful limitation and, if one is needed, a basis for distinguishing “equitable” from “legal” relief. Accordingly, the statutory text does not compel the majority's rejection of the reading of “appropriate equitable relief” advanced by petitioners and the Solicitor General—a reading that the majority acknowledges is otherwise plausible…. Id. at 2076–77 (emphasis added).

See, for example, Insinga v. LaBella, 543 So. 2d 209 (Fla. 1989); and Clark v. Southview Hosp. & Family Health Ctr., 628 N.E.2d 46 (Ohio 1994).

Boyd v. Albert Einstein Med. Center, 547 A.2d 1229 (Pa. Super. 1988); and Independence HMO, Inc. v. Smith, 733 F. Supp. 983 (E.D. Pa. 1990).

Albain v. Flower Hosp., 553 N.E.2d 1038 (Ohio 1990).

Elsesser v. Hospital of Philadelphia College, 802 F. Supp. 1286 (E.D. Pa. 1992); and Independence HMO, Inc., 733 F. Supp. at 983; and McClellan v. Health Insurance, 604 A.2d 1053 (Pa. Super. 1992) (reinstating claims against HMO for ostensible agency, though raising health plan's ERISA status as a question of fact for the jury. If applicable, ERISA could preempt the suit); DeGenova v. Ansel, 555 A.2d 147 (Pa. Super. 1988) (against an insurer); Kearney v. U.S. Healthcare, 859 F. Supp. 182 (E.D. Pa. 1994); and Paterno v. Albuerne, 855 F. Supp. 1263 (S.D. Fla. 1994). It should be noted that a number of the decisions ascribing ostensible agency for HMOs do not involve ERISA law: Schleier v. Kaiser Foundation Health Plan, 876 F.2d 174 (D.C. Cir. 1989); Dunn v. Praiss, 606 A.2d 862 (N.J. Super. A.D. 1992); Sloan v. Metro. Health Council, 516 N.E.2d 1104 (Ind. App. 1 Dist. 1987); Albain, 553 N.E.2d at 1038; and Boyd, 547 A.2d at 1229.

Blue Cross and Blue Shield v. Brown, 800 S.W.2d 724 (Ark. App. 1990); Elsesser, 802 F. Supp. at 1286; Clark , 628 N.E.2d at 46; DeGenova, 555 A.2d at 147; McClellan, 604 A.2d at 1053; and Independence HMO, Inc., 733 F. Supp. at 983.

Cases finding that ERISA preempts ostensible agency include Pomeroy v. Johns Hopkins Medical Services, Inc. (868 F. Supp. 110 (D. Md. 1994)) and Rice v. Panchal (875 F. Supp. 471 (N.D. Ill. 1994)). In McClellan (604 A.2d at 1053), the court ruled that it was unclear whether the plan in question was an ERISA plan, and thus a question of fact for a jury to determine; if the plan is governed by ERISA, the ostensible agency claim would be preempted. In Dukes, the district court likewise found a claim of ostensible agency to be ERISA-preempted: I note a serious reservation about the policy implications of holding an HMO liable for state law claims arising from the negligence of physicians and hospitals. If an HMO such as USHC is obliged to act as a malpractice insurer for health care providers, higher costs will invariably be passed along to health care consumers. I do not comment on whether this spreading of risk and costs is desirable. Rather, I simply hesitate to approve such a potentially widesweeping policy. Congress spent considerable timeand effort in debating and passing ERISA, and may soon put similar efforts into so-called health care “reform.” If the legislature wishes to examine the scope of ERISA pre-emption so as to extend malpractice liability to health benefit plans, now may be an appropriate time for it to do so. It does not follow that I should do so. See Dukes v. U.S. Health Care Systems of Pennsylvania, 848 F. Supp. 39, 43 (E.D. Pa. 1994). However, on appeal, the Third Circuit held that the case could not be automatically removed from state to federal courts as a “complete preemption.” The court distinguished between removal and preemption issues, and focusing exclusively on the former, held that suits against HMOs for the quality of care do not present a federal question on their face, do not fall under ERISA's § 502(a)(1)(B), and thus are not completely preempted. State courts must first address this question. The court noted, however, that state courts could still hold that the claim for ostensible agency was preempted by ERISA. The Third Circuit did not rule whether ERISA actually preempts claims of ostensible agency, but in dicta did offer guidance to state courts: ERISA claims concerning the quality of care should not be preempted because claims concerning quality of benefits, as distinct from the straight granting or denying of benefits, traditionally fall under state law. See Dukes v. U.S. Healthcare, Inc., 57 F.3d 350 (3d Cir. 1995). See also Pacificare of Oklahoma v. Burrage, 59 F.3d 151 (10th Cir. 1995); and Lupo v. Human Affairs Int'l, Inc., 28 F.3d 269 (2d Cir. 1994). It is unclear at this time whether other courts will replicate the Dukes ruling, or how state courts will rule regarding ERISA preemption.

Cases in which district courts' judge-made insurance was overturned at the circuit level include: Harris v. Blue Cross Blue Shield of Mo., 995 F.2d 877 (8th Cir. 1993); Fuja v. Benefit Trust Life Ins. Co., 18 F.3d 1405 (7th Cir. 1994); Nazay v. Miller, 949 F.2d 1323 (3d Cir. 1991); and Nesseim v. Mail Handlers Ben. Plan, 995 F.2d 804 (8th Cir. 1993).

Loyola University of Chicago v. Humana Ins. Co., 996 F.2d 895 (7th Cir. 1993).

Id. at 903.

Fuja, 18 F.3d at 1412.

McGee v. Equicor-Equitable HCA Corp., 953 F.2d 1192 (10th Cir. 1992) (citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989)). The Tenth Circuit did require the HMO to pay for some benefits that, in fact, met their utilization requirements.

In Gee, the Utah Court of Appeals upheld an insurer's denial of coverage for removal of breast implants, holding that the policy was not ambiguous. “Insurance policies are contracts, and are interpreted under the same rules governing ordinary contracts…. [A] policy term is not ambiguous simply because one party ascribes a different meaning to it to suit his or her own interests” (Gee v. Utah State Retirement Bd., 842 P.2d 919, 920–21 (Utah App. 1992)). Other courts have expressed similar views. “Moreover, because of the plain language of the contract, we would have no choice but to affirm the denial of coverage even if, arguendo, we were to review that decision de novo” (Harris v. Mutual of Omaha Cos., 992 F.2d 706, 713 (7th Cir. 1993)). “The plan is clear and not ambiguous…. The contract is clear. HDC-ABMT is not covered under the 1992 Plan. Accordingly, Blue Cross/Blue Shield's decision denying coverage and OPM's review and affirmance of that decision are rational. Denial of coverage is clearly not an arbitrary and capricious decision; indeed, because of the plain language of the contract, the Court would affirm denial of coverage even if that decision were reviewed de novo” (Arrington v. Group Hospitalization & Med. Serv., 806 F. Supp. 287, 290 (D.D.C. 1992)). For similar cases upholding payers' denial of funding based on the plain language of the contract, see Barnett v. Kaiser Foundation Health Plan, Inc., 32 F.3d 413 (9th Cir. 1994); Goepel v. Mail Handlers Ben. Plan, No. 93–3711, 1993 WL 384498 (D.N.J. Sept. 24, 1993); Nesseim v. Mail Handlers Ben. Plan, 995 F.2d 804 (8th Cir. 1993); Farley v. Benefit Trust Life Ins. Co., 979 F.2d 653 (8th Cir. 1992); Harris v. Blue Cross Blue Shield of Mo., 995 F.2d 877 (8th Cir. 1993); McLeroy v. Blue Cross/Blue Shield of Ore., Inc., 825 F. Supp. 1064 (N.D. Ga. 1993); Thomas v. Gulf Health Plan, Inc., 688 F. Supp. 590 (S.D. Ala. 1988); and Doe v. Group Hospitalization & Med. Serv., 3 F.3d 80 (4th Cir. 1993). See also: Madden v. Kaiser Foundation Hospitals, 552 P.2d 1178 (Cal. 1976) (holding that an employee who had chosen his HMO from among several options, negotiated on his behalf by a state agency, was bound by the arbitration clause to which he had agreed; and noting that “[o]ne who assents to a contract is bound by its provisions and cannot complain of unfamiliarity with the language”). Also see Sarchett v. Blue Shield of Cal., 729 P.2d 267 (Cal. 1987) (upholding insurer's right to deny payment, based on its own judgment of medical necessity). Two other cases upholding contracts are of interest. In Adnan Varol, M.D. v. Blue Cross & Blue Shield (708 F. Supp. 826 (E.D. Mich. 1989)), a district court informed a group of psychiatrists that they were expected to adhere to their contract with an insurer, even though they now disagreed with its cost-containment provisions. In Williams v. HealthAmerica (535 N.E.2d 717 (Ohio App. 1987)), an Ohio appellate court ruled that, although a malpractice action against an HMO physician should go to arbitration, the patient could also pursue separately a breach of contract action against that physician.

Loyola University of Chicago v. Humana Ins. Co., 996 F.2d 895, 903 (7th Cir. 1993).

Fuja (18 F.3d at 1407–08, n.2) cites Judge Tinder in Harris v. Mutual of Omaha—another case in which the plaintiff's request for autologous bone marrow transplant for her advanced breast cancer was rejected on the ground that the treatment was experimental and therefore not covered by the insurance contract. The judge goes on to pose the broad question: “Perhaps the question most importantly raised about this case, and similar cases, is who should pay for the hopeful treatments that are being developed in this rapidly developing area of medical science?” (id. at 1408, n.2). A similar view was expressed in Arrington: “The Court has sympathy for plaintiff's situation, but this consideration cannot be material to a decision on the merits of this case” (Arrington, 806 F. Supp. at 290).

Fuja, 18 F.3d at 1407.

McGee v. Equicor-Equitable HCA Corp., 953 F.2d 1192, 1207 (10th Cir. 1992) (emphasis added).

Nazay v. Miller, 949 F.2d 1323, 1336 (3d Cir. 1991). The court went on to note that it is legitimate for those who pay for health care to attempt to contain their rising costs (id. at 1328). In this case, a corporation gave teeth to their precertification requirement by imposing a 30 percent penalty on those who failed to comply. Were this requirement overruled, the corporation “and its employees would be deprived of an important weapon in their joint battle against rising healthcare costs” (id. at 1338).

Loyola University of Chicago v. Humana Ins. Co., 996 F.2d 903 (7th Cir. 1993). In the same vein, in Free, a Maryland district court held that an insurer was not obligated to pay for the patient's laetrile: [T]he plaintiff's unfettered right to select a physician and follow his advice does not create a corresponding responsibility in the defendant to pay for every treatment so chosen. As one court noted, “it is simply not enough to show that some people, even experts, have a belief in [the] safety and effectiveness [of a particular drug]. A reasonable number of Americans will sincerely attest to the worth of almost any product or even idea.”… Finally, the Court notes that the plaintiff, by his own admission, was well aware that laetrile and nutritional therapy are disapproved of by the majority of cancer specialists. He was equally well informed of the accepted alternative, chemotherapy. See Free v. Travelers Ins. Co., 551 F. Supp. 554, 560 (D. Md. 1982). Similarly, in McLeroy, a district court in Georgia pointed out that it was “well within the bargaining rights of the parties” to determine the conditions under which special alternative services might be provided. See McLeroy v. Blue Cross/Blue Shield of Ore., Inc., 825 F. Supp. 1064, 1071 (N.D. Ga. 1993). In Goepel, a New Jersey district court held that the plaintiffs' written policy was clearly written, with adequate notice of policy changes, and enabled the plaintiffs to make an informed purchase. Significantly, the court also expressed an interest in the responsibilities of subscribers. This Court is also troubled by the invitation to recognize a cause of action, not based on the fact that the policy was unclear, but rather, as plaintiffs suggest, on the premises that insureds (1) do not read the full brochure detailing policy coverage and (2) do not heed the admonition in the section on “How the Plan Changes” to review the entire policy. See Goepel v. Mail Handlers Ben. Plan, No. 93–3711, 1993 WL 384498 (D.N.J. Sept. 24, 1993). This decision was subsequently overturned by the Third Circuit, but not on grounds of its substance. Rather, the issue was jurisdictional: The preemption from state to federal court should not have been done automatically. The preemption question required further adjudication. See Goepel v. National Postal Mail Handlers Union, 36 F.3d 306 (3d. Cir. 1994).

New York Life Ins. Co. v. Johnson, 923 F.2d 279, 284 (3d Cir. 1991).

King v. Collagen Corp., 983 F.2d 1130, 1137–38 (1st Cir. 1993). Along a similar line, a Maryland district court noted that “[b]ecause ERISA cases frequently touch ‘our human sympathies,’ courts of appeals have cautioned judges ‘to take care, for the general good of the community, that hard cases do not make bad law.”’ See Adelson v. GTE Corp., 790 F. Supp. 1265, 1274 (D. Md. 1992).

Barnett v. Kaiser Foundation Health Plan, Inc., 32 F.3d 413 (9th Cir. 1994).

Id. at 414.

The criteria were taken largely from other medical centers, including the University of California at San Francisco and the University of Pittsburgh. Id. at 417.

The court explicitly noted that “[t]here is no evidence that the decision was motivated by financial concerns for cost savings to the Kaiser Health Plan” (id.) and “that the decision was made … that the procedure was not medically appropriate for Barnett, rather than a cost savings to the Kaiser Plan” (id. at 416). However, although it noted that the decision was based on medical rather than financial criteria, the court did not actually reject financial considerations.

In Goepel, a New Jersey district court openly acknowledged financial resource constraints. Noting that new technologies not only save lives but also drive the cost of medical care beyond some citizens' reach, the court pointed out that “rationing … already is, and may well remain, a reality until further technological, scientific, or social advances reduce, rather than escalate, health care costs.” The court went on to uphold a denial of coverage for bone marrow transplant for breast cancer, based on an unambiguous policy exclusion. See Goepel v. Mail Handlers Ben. Plan, No. 93–3711, 1993 WL 384498 (D.N.J. Sept. 24, 1993). The case was reversed and remanded on appeal, but, for reasons of jurisdiction, not of substance. See Goepel v. Mail Handlers Ben. Plan, 36 F.3d 306 (3d Cir. 1994).

Johnson v. Dist. 2 Marine Eng. Ben. Ass'n, 857 F.2d 514, 517 (9th Cir. 1988). Likewise, the Corcoran court noted that “in any plan benefit determination, there is always some tension between the interest of the beneficiary in obtaining quality medical care and the interest of the plan in preserving the pool of funds available to compensate all beneficiaries.” See Corcoran v. United Healthcare, Inc., 965 F.2d 1321, 1338 (5th Cir.), cert. denied, 113 S. Ct. 812 (1992).

Brown v. Blue Cross & Blue Shield of Ala., 898 F.2d 1556, 1567 (11th Cir. 1990) (emphasis added).

Ricci v. Gooberman, 840 F. Supp. 316, 317 (D. N.J. 1993). See also Dukes v. U.S. Health Care Systems of Pennsylvania, 848 F. Supp. 39, 43 (E.D. Pa. 1994), as quoted supra note 77.

Mertens v. Hewitt Associates, 113 S. Ct. 2063, 2072 (1993).

Relevant text reads as follows. In sum, the detailed provisions of § 502(a) set forth a comprehensive civil enforcement scheme that represents 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. The 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…. The deliberate care with which ERISA's civil enforcement remedies were drafted and the balancing of policies embodied in its choice of remedies argue strongly for the conclusion that ERISA's civil enforcement remedies were intended to be exclusive. See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54 (1987). In Holmes, a California district court saw a trade-off between the interests of particular aggrieved individuals and the needs of the wider group, as it explained that ERISA helps to ensure that employees can count on receiving their retirement and other benefits, partly by shielding plans from the unforeseen expenses that widespread litigation could cause. See Holmes v. Pacific Mut. Life Ins. Co., 706 F. Supp. 733, 735 (C.D. Cal. 1989).

Similarly, after recognizing that rapidly rising health care costs inevitably require rationing of resources, the New Jersey district court ruling in Goepel concluded that “in the final analysis, the pain of health care rationing must be dealt with in the political arena, not the courts.” See Goepel v. Mail Handlers Ben. Plan, No. 93–3711, 1993 WL 384498 (D.N.J. Sept. 24, 1993).

Pereira by Pereira v. Kozlowski, 996 F.2d 723, 727 (4th Cir. 1993).

Id. The court noted that “[o]ur responsibility, and the limit of our authority, however, is to interpret the law as it has been enacted by the Congress” (id. at 727). In a concurring opinion, Judge Hamilton noted that “[t]he attendant drain that such expensive and elaborate procedures would have on the finite Medicaid resources would be astounding and arguably inconsistent with the intent and purpose of the Medicaid stat ute…. Whether a state would be required to pay for such ser vices presents a profoundly troubling question” (id. at 728). In Goepel, a New Jersey district court explicitly stated that the judiciary should not formulate health care policy, and deferred to the legislature the task of addressing the “pain of health care rationing.” See “Selected Recent Court Decisions,” American Journal Law & Medicine, XIX (1993): 352, summarizing Goepel v. Mail Handlers Ben. Plan, No. 93–3711, 1993 U.S. Dist. LEXIS 13346 (D.N.J. Sept. 23, 1993).

The Fourth Circuit acknowledged this principle of formal justice quite explicitly. The plaintiff contended that, because two consulting physicians within the plan had disagreed about what length of psychiatric hospitalization should be granted, the plan was arbitrary in opting for one physician's recommendation over the other. The court rejected this argument. The charge of inconsistency applies not to this situation, but to “inconsistent applications of the Plan to members suffering from the same or similar ailments.” See Sheppard & Enoch Pratt Hasp. v. Travelers Ins. Co., 32 F.3d 120, 126 (4th Cir. 1994). In other words, the court identified judicially unacceptable inconsistency in terms of formal (in)justice: Treating similar patients differently.

Eighty-four percent of businesses that provide health insurance for their employees only provide one choice—take it or leave it—and many of the remaining businesses provide only a few options. See Blendon R.J. Brodie M. Benson J. , “What Should be Done Now that National Health System Reform is Dead?,” JAMA, 273 (1995): At 243.

See Morreim E.H. , “Diverse and Perverse Incentives of Managed Care,” Widener Law Symposium Journal, (1995): Forthcoming.

Morreim E.H. , “Rationing and the Law,” in Strosberg M.A. , eds., Rationing America's Medical Care: The Oregon Plan and Beyond (Washington, D.C.: Brookings Institution, 1992): At 162–63; Morreim E.H. , supra note 18, at 58–60, 89–90, 143–47; and Havighurst , supra note 30.

See Havighurst , supra note 30, at 222ff.

See Kalb , supra note 40, at 1121–24.

See Hall Anderson , supra note 32.

See Harrell v. Total Health Care, Inc., 781 S.W.2d 58, 61 (Mo. banc 1989).

Hall and Anderson, for instance, lay out a fairly specific set of procedures by which a health plan might adjudicate which interventions are covered and which experimental. See Hall Anderson , supra note 32.

In the current situation, unfortunately, adequate disclosure is not always made, and deficiencies in contracting procedures are not limited to ambiguities in contractual language. Many MCOs, for instance, do not disclose their cost-containment policies, such as incentive systems that reward physicians for conservative care, or therapeutic substitution protocols that replace brand name medications with cheaper pharmacologic equivalents. Although at present no statutory requirements for such disclosure exist, there are strong reasons based in both fiduciary law and contract law for believing that they should be made. See Morreim E.H. , “Economic Disclosure and Economic Advocacy: New Duties in the Medical Standard of Care,” Journal of Legal Medicine, 12 (1991): 275–329; Hirshfeld E.B. , “Should Third Party Payors of Health Care Services Disclose Cost Control Mechanisms to Potential Beneficiaries?,” Seton Hall Legislative Journal, 14 (1990): 115–50; Figa S.F. Tag H.M. , “Redefining Full and Fair Disclosure of HMO Benefits and Limitation,” Seton Hall Legislative Journal, 14 (1990): 151–57; Tiano L.V. , “The Legal Implications of HMO Cost Containment Measures,” Seton Hall Legislative Journal, 14 (1990): 79–102; Chittenden , supra note 56; Glover G.J. Kuhlik B.N. , “Potential Liability Associated with Restrictive Drug Policies,” Seton Hall Legislative Journal, 14 (1990): 103–13; and Havighurst , supra note 30, at 27, 122, 143–47, 185, 311.

See also Havighurst: “By treating certain rights and duties as extracontractual (and therefore not subject to alteration by contract) and by refusing to interpret health care contracts with due regard for their cost-saving intent, the courts have effectively undermined the freedom of consumers to specify prospectively the nature and content of the services that they purchase” ( Havighurst , supra note 30, at 6, also 28, 104, 328).

Madden v. Kaiser Foundation Hosps., 552 P.2d 1178 (Cal. 1976).

See Eddy (1990), supra note 34; Eddy (1990a), supra note 34; Leahy R.E. , “Rational Health Policy and the Legal Standard of Care: A Call for Judicial Deference to Medical Practice Guidelines,” California Law Review, 77 (1989): 1483–528; Menzel P.T. , Strong Medicine (New York: Oxford University Press, 1990): At 10ff.; Hall , supra note 16, at 39; Kalb , supra note 40, at 1125; Hall Anderson , supra note 32, at 1676; and Havighurst , supra note 30, at 28, 159.

“Interpreting insurance contracts as mutual contracts rather than as contracts of adhesion would by no means require that courts abandon their equitable responsibilities. It would require, however, that they refuse to honor unreasonable expectations and refuse to find advantages where none exist. It would require, in short, the curtailment of judge-made insurance.” See Kalb , supra note 40, at 1125.

Madden, 552 P.2d at 1178.

Such a reevaluation, of course, must not open the doors to a flood of lawsuits that could destroy the integrity of health plans or permit the interests of lone individuals to thwart the legitimate claims of the larger group—another infringement on contributive justice. Recognizing broader damage allowances within existing ERISA litigation is one option, or, perhaps, as implied by the Corcoran court, the ERISA law itself may need revision.