Form, Function, and Managed Care Torts: Achieving Fairness and Equity in Erisa Jurisprudence

Houston Law Review, Vol. 35, 1998

Posted: 5 Jan 1999

See all articles by Peter D. Jacobson

Peter D. Jacobson

University of Michigan School of Public Health

Scott D. Pomfret

Ropes & Gray LLP - Boston

Abstract

The preemption jurisprudence of the Employee Retirement Income Security Act of 1974 ("ERISA") begs for the clarity that could be provided by a few simple rules, particularly in light of the fact that congressional attempts to amend the statute seem destined for failure. As ERISA jurisprudence now stands, formalism is the guiding light. The Supreme Court has exalted form over function in three ways: (1) by letting talismanic mention of the word "plan" dictate its analysis; (2) by failing to distinguish operational realities of modern health care delivery from largely obsolete models; and (3) by letting dictionary definitions substitute for reasoned analysis.

In this article, we propose an alternative, functional analysis of ERISA preemption. Our approach is "functional" because it asks courts to analyze the functions of health care delivery in a managed care environment rather than relying on formal structures when interpreting ERISA.

This approach entails a two-part ERISA preemption analysis. First, courts should ask whether the state law governs a choice Congress could reasonably have intended to delegate exclusively to a plan sponsor or administrator. The central question is whether it is conceivable that a Congress with the avowed purpose of protecting participants could possibly have intended for health care actors to be insulated from legal accountability. Second, courts should determine whether the state law substantially restricts a plan administrator's choices, such that failure to preempt the law would result in a lack of uniformity that would prevent an employer from offering a chosen plan nationwide. The burden of proof in each case should be on the party seeking to have the cause of action preempted the MCO.

Our approach has clear advantages over a formalistic analysis. First, the functional analysis is better suited to a rapidly changing field such as health care delivery because it focuses on, and requires expert knowledge of, operational realities rather than formal structures. This is particularly important in an era of integrated health care financing and delivery entities. Second, the outcomes under a functional analysis, at least with regard to managed care torts, appear more in line with the issues that motivated passage of ERISA, traditional expectations of the legal system, and other commentators' understandings of justice. Finally, the functional approach provides a better measure of doctrinal stability and predictability, as well as a certain definitional rigor that may give more guidance to courts facing ERISA preemption decisions.

The Supreme Court's formalist ERISA doctrine presents a barrier to sound health policy formulation. Because current preemption doctrine is tantamount to creating a regulatory vacuum and insulating MCOs from liability, this formalist approach has greatly constrained policymakers' ability to hold MCOs accountable for their economic and clinical decisions. Functional analysis restores the courts to the role of assuring equitable outcomes. It provides results more in line with commentators' consensus regarding equitable outcomes and preemption in general, and with courts' wistful musings regarding just outcomes. To be sure, our approach will not result in a wholesale rejection of preemption doctrine, particularly with regard to state regulation of managed care. It will, however, result in a more equitable and rational consideration of these issues.

Suggested Citation

Jacobson, Peter D. and Pomfret, Scott D., Form, Function, and Managed Care Torts: Achieving Fairness and Equity in Erisa Jurisprudence. Houston Law Review, Vol. 35, 1998, Available at SSRN: https://ssrn.com/abstract=144148

Peter D. Jacobson (Contact Author)

University of Michigan School of Public Health ( email )

109 Observatory
Ann Arbor, MI 48109-2029
United States
734-936-0928 (Phone)
734-764-4338 (Fax)

HOME PAGE: http://www.sph.umich.edu/~pdj/

Scott D. Pomfret

Ropes & Gray LLP - Boston ( email )

One International Place
Boston, MA 02110
United States

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