[Congressional Record (Bound Edition), Volume 145 (1999), Part 16]
[House]
[Pages 23073-23082]
[From the U.S. Government Publishing Office, www.gpo.gov]



                          MANAGED CARE REFORM

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 6, 1999, the gentleman from Iowa (Mr. Ganske) is recognized for 
60 minutes as the designee of the majority leader.
  Mr. GANSKE. Mr. Speaker, we are about 1 week from having at least 1 
day of debate here on the floor of the House of Representatives on 
managed care reform and, hopefully, we will pass the bipartisan 
consensus patient protection bill of 1999.
  There has been a lot of talk about what is in this bill, so I want to 
go over some of the specifics. And then I want to focus a little bit 
about some of the miscommunication that has been put out about the bill 
in regards to its liability section, since I was largely responsible 
for writing the liability section in a previous bill.
  First of all, the bipartisan consensus patient protection bill of 
1999 deals with access to care. I think the opponents to this 
legislation want to focus on one issue, and that is the liability 
provisions. But there is a lot in this bill. This is a comprehensive 
bill that is important to the people of this country, and it is part of 
the reason why over 300 organizations, patient advocacy groups, 
consumer groups, provider groups, have endorsed this bill.
  What are some of the provisions in the bill that make this an 
excellent bill? First of all, access to emergency services. Individuals 
should be assured that if they have an emergency, those services will 
be covered by their plan. The bipartisan consensus bill says that 
individuals must have access to emergency care without prior 
authorization in any situation that a prudent layperson would regard as 
an emergency.
  What does this mean? Well, this means that if, for instance, an 
individual wakes up in the middle of the night and has crushing chest 
pain, is hot and sweaty, and that individual happens to remember an ad 
put on TV by the American Heart Association that these could be signs 
an individual could be suffering from a heart attack, that that 
individual can go to the nearest emergency room, pronto, to be treated. 
That is what a prudent layperson would define as a potentially 
impending fatal heart attack.
  Now, the problem that we have had is that a lot of HMOs will say that 
if the tests show that the patient is actually not having a heart 
attack, even though the symptoms indicated that they were, if the tests 
after the fact show that the electrocardiogram was normal, that maybe 
the individual was suffering severe inflammation of the esophagus or 
the stomach, they say, well, see, the patient was not really having a 
heart attack so they did not really need to go.
  The problem with that is that when that kind of attitude gets around, 
people then start worrying that they are going to be stuck with a big 
bill and they may then delay getting the needed care that they need in 
an expeditious fashion. The next time it happens it may really be a 
heart attack, the individual may delay taking action, and then they may 
not make it to the emergency room.
  That is the type of thing that we are looking at fixing in this bill. 
We did this for Medicare, by the way. This should be a noncontentious 
issue. We have already passed that provision for Medicare. Why can we 
not apply it to everyone in this country who buys insurance? Especially 
those who take up HMO insurance.
  How about the provisions for specialty care? Patients with special 
conditions should have access to providers who have the expertise to 
take care of them. The bipartisan consensus bill allows for referrals 
for people to go outside of the plan's network for specialty care at no 
extra cost for the enrollee, if there is no appropriate provider in 
that health plan. This is really important to a lot of consumer groups, 
a lot of patients with certain types of chronic care that need a 
specialist. A person with rheumatoid arthritis, for instance.
  Chronic care referrals for individuals who are seriously ill or 
require continued care by a specialist. A plan should have a process 
for selecting a specialist who can be the regular doctor for that 
patient, so that every time a patient has to go and see their cancer 
doctor they do not have to get a referral from the health plan.
  How about women's protections? The bipartisan consensus bill provides 
for direct access to obstetricians and gynecologists for services.
  Children's protections. The bipartisan bill ensures that the special 
needs of children are met, including access to pediatric specialists. 
Children are not just little adults. Before I came to Congress, I was a 
reconstructive surgeon. I took care of a lot of children with birth 
defects. They have special needs. If a child has cancer, that child 
ought to have access to a pediatric oncologist.
  Continuity of care. Patients should be protected against disruptions 
in care because of a change in the plan or a change in the provider's 
network status. Let us say a woman is a couple months from delivering. 
She has been followed by her obstetrician for two-thirds of her 
pregnancy. All of a sudden the plan says, well, we are changing the 
plan. This guy or this woman is no longer in the plan. That is a 
significant disruption in care.
  How about somebody who is dying and they have been followed or taken 
care of by a certain physician? There are certain benefits to 
continuity of care in terms of quality of care, and we ought to make 
sure that people who are right in the midst of complicated treatments 
do not have their care disrupted by a plan arbitrarily changing their 
physicians.
  Clinical trials. This is part of the reason why, for instance, the 
American Cancer Society has endorsed the bipartisan consensus managed 
care patient protection bill. Access to clinical trials can be crucial 
for treatment of an illness, especially if it is the only known 
treatment available. Plans under this bill must have a process for 
allowing certain enrollees to participate in approved clinical trials, 
and the plan must pay for the routine patient costs associated with 
those trials. That is in our bill.

                              {time}  1930

  Drug formularies. Prescription medications are not one size fits all. 
For plans that use a formulary, beneficiaries should be able to access 
medications that are not on that formulary when the prescribing 
physician dictates.

[[Page 23074]]

  Choice of plan. Choice is one of the key elements in consumer 
satisfaction with the health system. The bipartisan consensus bill 
would allow individuals to elect a point of service option when their 
health insurance plan did not offer access to non-network providers. 
Any additional costs would be borne by the patient. This is a fair 
compromise.
  People should be informed about decisions about their health plan 
options, and they can only know what their plan is doing if their plan 
provides them with sufficient information. This bill requires managed-
care plans to provide important information so that consumers can 
understand their plan's policies, their plan's procedures, their plan's 
benefits and requirements.
  I mean, a lot of opponents to this legislation say, oh, just let the 
free market work. Well, the free market is not really working, because 
most people do not have a choice for their health plans. Most employers 
will select one plan, most frequently on the basis of cost; and then 
they will say to the employee, take it or leave it. So it is not like 
the employee is getting that choice.
  People who are denied care ought to have a reasonable utilization 
review process. When a plan is reviewing the medical decisions of its 
practitioners, it should do so in a fair and rational manner. This bill 
lays out basic criteria for a good utilization review program with 
physician participation in the development of the review criteria, the 
administration by appropriately qualified professionals, timely 
decisions within 14 days for ordinary care, up to 28 days if the plan 
requests additional information within the first 5 days or 72 hours if 
they need an urgent decision.
  They should have the ability to appeal those decisions, and they 
should be able to appeal in a fair process within the plan. And they 
ought to have an external appeal so that if at the end of their 
utilization review or their internal appeal within their plan and the 
plan is still saying, no, we are not going to give you this care and 
everything you have read about it and your own physician is telling you 
this is prevailing standards of care and you can be harmed without it, 
then an individual ought to have access to an external, independent 
body with the capability and authority to resolve disputes for cases 
involving medical judgment by the plan.
  The plan should pay the costs of that process and any decision should 
be binding on the plan. And that is what is in our bill. If a plan 
refuses to comply with the external reviewer's determination, the 
patient should be able to go to Federal court to enforce that decision. 
And there could be a penalty. And that is in our bill.
  I am going to talk about liability, though, if there is an injury. 
There are certain things in this bill that to me, as a physician, are 
absolutely essential for good health care. Consumers should have the 
right to know all of their treatment options. A few years ago I 
gathered together about 50 examples of contractual language from HMOs. 
Some plans try to limit the amount of information that you can receive 
from your doctor.
  Let me give my colleagues an example of how this can work. Let us say 
a woman would come to me with a lump in her breast. She would give me 
her history. I would examine her breast. Under those types of gag rules 
and those contract clauses that some HMOs have put out, before I could 
tell this woman what her three treatment options were, one of which 
might be more expensive than the other, I would be obligated to first 
phone the health plan and say, Mrs. So-and-so has this problem. Can I 
tell her about all three treatment options?
  I mean, can you think of anything that would be worse in terms of a 
patient wondering whether they are being leveled with by their doctor? 
I mean, I am not saying that a plan cannot write a specific exclusion 
of coverage into their plan.
  Let us say that a plan says we are not going to cover liver 
transplants. Well, that is a decision that that employer and that 
health plan is making. I would hope that an employee would have a 
choice to choose another plan.
  Let us say that a patient comes in to see me as a physician and their 
treatment option is a liver transplant; that is the only thing that 
might save their life. Whether their plan pays for it or not, that 
patient has a right to know that that treatment is available that could 
save their life.
  Now, the plan may not like the patient to know that because a patient 
might be unhappy about that. But the patient has the right to know 
that. That is in our bill.
  There should be prompt payment of claims. Health plans should operate 
efficiently. There should be paperwork simplification. And finally, let 
us get back to the issue of responsibility.
  As a Republican, I have voted many times for legislation that would 
make people and entities responsible for their actions. I know most of 
my Republican colleagues on this side of the aisle feel the same way. 
If a criminal commits a murder, that person should be responsible for 
his actions. We have passed several pieces of legislation that involve 
the death penalty for that type of behavior. That is responsibility.
  We passed the welfare reform bill a few years ago. We said, look, if 
you are able-bodied and you can work, we will give you some help, some 
education. But ultimately it is your responsibility to go out and 
support your family. That is responsibility.
  We have a situation here where, because of a law that was passed by 
Congress 25 years ago, employer health plans are not responsible for 
their medical decisions that can result in injury. That sort of seems 
unbelievable, does it not? I mean, the only health plans in the country 
that have that kind of exemption from liability, from responsibility 
for injury that they can incur on a patient because of their decisions 
are employer group health plans.
  The Members of Congress receive their insurance through what is 
called the Federal Employee Health Benefit Plan. Do you know what? If 
our plans are not providing care, then a Member of Congress could sue 
that health plan if that health plan resulted in injury to a 
Congressman's family. Because it is not an ERISA plan, it is not one of 
those employer plans. Other Government employees have the same right.
  Church groups, for instance, that provide health benefits for their 
employees, those health plans are not free of any responsibility. When 
an insurance company sells a health policy to an individual and is 
under State insurance regulation, they are not free of responsibility 
for injuries that can result from their medical decisions. It is only 
these plans that, by a 25-year-old Federal law, gave an exemption for 
liability that they can cause injury to a patient, they can arbitrarily 
define what ``medical necessity'' is, and you have no recourse other 
than to recover the cost of the treatment that was not provided, which, 
by the time you could get through that procedure might mean that you 
are dead.
  Let me give my colleagues an example of what I am talking about. This 
is a little baby that I have treated before. I treated him for cleft 
lip palate, a birth defect. The standard treatment for this is surgical 
correction, both of the lip and of the palate. There is a functional 
reason for that. Without that surgical correction, if you eat, food 
comes out of your nose and you cannot speak correctly. And speech is an 
absolutely essential part of our culture.
  So all insurance companies that I know of in the past, traditional 
insurance companies, do not consider correction of this birth defect, 
do not consider correction of this birth defect, a cosmetic procedure. 
This is a reconstructive procedure.
  But under this Federal law that I am talking about, the ERISA law, 
the Employee Retirement Income Security Act, from about 5 years ago, an 
employer plan can define ``medical necessity'' as ``the cheapest, least 
expensive care,'' and they could say, no, we are not going to authorize 
a surgical repair for this birth defect. We are just going to give this 
little kid a piece of plastic to shove up into the roof of his mouth, 
something like an upper denture, and maybe that will help keep the food 
from coming out of his nose.
  And do my colleagues know what? They would have no legal recourse to

[[Page 23075]]

challenge that HMO. That is Federal law that allows them to do that. 
You could say that medical decision you are making, that medical 
judgment of ``medical necessity'' is wrong; it does not fit any of the 
proscribed norms for treatment. And it results in injury to this child. 
Because if he does not get his palate corrected, really, by about the 
age of one, he may have a speech impediment the rest of his life. And 
do my colleagues know what? They would have no legal recourse under 
that Federal law. That is wrong. That is not justice.
  Let me give my colleagues another case. We have here a little boy who 
is tugging on his sister's sleeve. This picture was taken shortly 
before he was 6 months old. When he was 6 months old, one night about 3 
in the morning he had a temperature of about 105 and he was pretty 
sick. And this beautiful little boy, looking so sick, caused his mother 
to phone the HMO and say, my little boy Jimmy is sick. He has a 
temperature of 104, 105. I need to take him to an emergency room.
  She was on a 1-800 number, somebody thousands of miles away, who 
said, well, you know, when we look at your State, this was in Georgia, 
I can authorize you to go to this emergency room. And the mother said, 
well, that is fine. But where is it? Well, I do not know. Look at a 
map.
  It turns out that the authorized emergency room was 70-some miles 
away, clear on the other side of Atlanta, Georgia. The mother knew that 
if she went and took him to another emergency room that is not 
authorized, they would be stuck with a great big hospital bill. So she 
wraps up little Jimmy. Ma and Dad get in the car and they start their 
trip, 3 in the morning. And about halfway there, they pass three 
hospitals that have emergency rooms and great pediatric care 
facilities. But they do not stop because they have not received 
authorization from that HMO reviewer who made a medical judgment over 
the phone. The medical judgment was Jimmy is okay to travel 70 miles on 
a prolonged ride.
  Before they get to the authorized hospital, little Jimmy has a 
cardiac arrest. His heart stops. He is not breathing. Picture Mom 
trying to resuscitate him. Dad is driving like crazy. They finally pull 
into the emergency room entrance. Mom leaps out of the car with little 
Jimmy, screaming, Save my baby. Save my baby.
  A nurse runs out, gives him mouth-to-mouth resuscitation. They start 
the IVs. They pound his chest. They resuscitate him, and they get him 
back and they manage to safe his life.

                              {time}  1945

  Except they cannot quite save all of little Jimmy. Because he had 
that cardiac arrest, he ends up with gangrene of both hands and both 
feet, and both hands and both feet have to be amputated. This is a 
consequence of the medical judgment, the medical decision that that HMO 
reviewer at the end of a thousand-mile, 1-800 number made.
  A judge reviewed this case. Of course under ERISA, the plan is liable 
for nothing other than the cost of the amputations. But a judge 
reviewed the case, and he came to the conclusion that the margin of 
safety for this HMO was, as he put it, ``razor thin.'' I would add to 
that, as razor thin as the scalpel that had to amputate little Jimmy's 
hands and feet.
  The opponents to this legislation who want to maintain this type of 
legal immunity, they refer to cases like James Adams as ``anecdotes.'' 
They say, ``Oh, don't legislate on the basis of anecdotes.'' I look at 
this little boy, and I think, is this an anecdote? I mean, this little 
boy is never going to play basketball. I tell the Speaker of the House, 
this little boy will never be able to get on the wrestling mat. This 
little boy when he grows up and he marries the woman that he loves will 
never be able to caress her face with his hand. This anecdote that the 
HMOs say we should not legislate on, if he had a finger and you pricked 
it, he would bleed.
  This is not just that a health plan can make that type of medical 
judgment and not be responsible for the injury that results. Plans 
should be more careful than that. The liability part is the enforcement 
mechanism to ensure that plans are more careful.
  Now, look. The point of showing little Jimmy Adams is not necessarily 
to say that we need a lawsuit. My point is this: We need a mechanism to 
prevent this type of tragedy from happening. And we need the 
encouragement to the HMOs to follow that process. And the process would 
work like this: If somebody has an illness and they have a denial of 
care by their HMO and they go through that internal appeals process and 
they are still not satisfied, they can take that to an independent 
panel which would make a determination on medical necessity. We know 
from where this type of process has been set up that more than half of 
the time, the independent appeals boards agree with the health plan on 
the denial of care. But 50 percent of the time they agree with the 
patient. And if they agree with the patient and they tell them, the 
health plan, you should provide this treatment and the health plan does 
that, then under our bipartisan, common sense, compromise bill, that 
health plan is free of any punitive damages liability because they are 
simply following the independent external appeals recommendation. That 
is something that would be available for all health plans, whether they 
are ERISA plans or plans that are selling to individuals. That is a 
fair compromise on this issue. But if they do not follow those 
recommendations and you end up with an injury like this, then the plan 
is going to be liable under that State's laws, just as if they had sold 
that policy to the Adams family on their own, as individuals, rather 
than through their employer.
  I hear an awful lot from the opponents to this legislation that you 
are just going to make the employers liable. Well, I would refer 
colleagues from both sides of the aisle to the actual bill, to page 97. 
We say that health plans are not exempted from liability. Health plans 
are not. But as long as the employer has not entered into that 
decision-making by that HMO, then the employer is not liable.
  Madam Speaker, I have here a legal brief from the law firm of 
Gardner, Carton & Douglas which discusses this liability provision in 
some detail for the Norwood-Dingell bill.
  Let me just summarize what this says on the liability provisions.
  This says, ``Managed care industry miscommunications on this 
liability provision do not present an accurate analysis of the plan 
sponsor protections in the bill. The HMO industry claims the bill would 
subject plan sponsors, i.e., the employers, to a flood of lawsuits in 
State courts over all benefits decisions under their group health 
plans, and suggest that plan sponsors would be forced to abandon their 
plans. All of this is incorrect, for the following reasons.''
  This is just a summary.
  First, almost all lawsuits would not be against plan sponsors. Under 
current ERISA preemption law, suits seeking State law remedies for 
injury or wrongful death of group health plan participants are already 
allowed in numerous jurisdictions. Those cases show that these suits 
are normally brought against the HMO, not against the employer. The 
employers are generally not involved in ``treatment'' decisions that 
lead to a plan participant's, to the employee's, injury or death. 
``Ordinary'' benefit decisions, such as whether to reimburse particular 
medical expenses, are not affected by our bill.
  Second, the plan sponsor exposure would be limited. If a plan 
sponsor, i.e., the employer, exercises discretion in making a benefit 
claim decision and that decision results in injury or wrongful death, 
section 302(a) in our bill makes an exception to ERISA to allow a State 
claim. However, to recover, a plaintiff, the patient, or his family 
must first prove that the sponsor exercised discretion which resulted 
in the injury or death and then must prove all elements of a State law 
cause of action based on the sponsor's conduct in making the decision 
on that particular claim. The plaintiff must have a viable State law 
cause of action because our bill only creates an exception to ERISA 
preemption. It does not create a new cause of action.

[[Page 23076]]

  Third. The statute's ``plain meaning'' limits plan sponsor liability. 
The provisions in our bill that protect plan sponsors would be 
interpreted under the Supreme Court's well-established ``plain 
meaning'' analysis. Such an analysis supports the bill's clear 
intention to continue to preempt any State law liability suits against 
employers that do not involve an exercise of discretion by them in 
making a decision that results in injury or death. Other types of 
``discretionary'' plan sponsor action would not be affected and would 
not be subject to State law liability claims.
  Finally, the private sector health care would not be destroyed. The 
limited legal exposure of employers under this bill will not cause them 
to abandon group health plans. The experience of retirement plans and 
``non-ERISA'' plans, group health plans, support that conclusion. Plan 
sponsors would not need to abandon all control over group health plans 
to remain protected.
  Madam Speaker, I include the foregoing document in its entirety for 
the Record:

                              [Memorandum]

     From: Gardner, Carton & Douglas.
     Date: September 27, 1999.
     Subject: Liability of Plan Sponsors Under the Norwood-Dingell 
         Bill (H.R. 2723).

       You have asked us to analyze whether Section 302(a) of H.R. 
     2723, the ``Bipartisan Consensus Managed Care Improvement Act 
     of 1999'' (the ``Bill'') could subject employers or others 
     (such as labor organizations) who sponsor group health plans 
     (``plan sponsors'') to potential liability under State law, 
     for injuries or deaths resulting from coverage decisions 
     under group health plans that they sponsor. As part of our 
     analysis, you asked us to consider letters that have been 
     prepared by some law firms for lobbying groups that are 
     opposed to the Bill (the ``managed Care Letters'').
       The Managed Care Letters do not focus on the central 
     purpose of Section 302(a) of the Bill. That purpose is to 
     fill an unintended gap under the Employee Retirement Income 
     Security Act of 1974 (``ERISA''), by creating accountability 
     for managed care organizations (``MCOs'') and others who make 
     treatment decisions or provide services for participants in 
     group health plans subject to ERISA. The gap results from 
     judicial interpretations of ERISA which prevent the 
     application of State law remedies that otherwise would 
     redress an injury or death caused by improper administration 
     of a group health plan. Case law rules which attempt to 
     define the limits of ERISA preemption in these circumstances 
     are complex and differ from jurisdiction to jurisdiction. The 
     Managed Care Letters shift attention from addressing this 
     problem by characterizing Section 302(a) as an ``employer 
     liability'' provision. Based on our analysis of Section 
     302(a), such a characterization is incorrect.

                           Exeuctive Summary

       Protection for plan sponsors. The protection for plan 
     sponsors included as part of Section 302(a) provides a 
     meaningful and workable limitation on the potential State law 
     liabilities otherwise allowed by the Bill.
       Effect on ERISA preemption. Section 302(a) creates a 
     limited exception to ERISA's general ``preemption'' of State 
     laws that relate to employee benefit plans. The exception 
     only applies to State law causes of action against any person 
     based on personal injury or wrongful death resulting from 
     providing or arranging for insurance, administrative services 
     or medical services by such person to or for a group health 
     plan. It does not disturb ERISA preemption of State law 
     actions against a plan sponsor, except for actions based on 
     the sponsor's exercise of discretion on a participant's claim 
     for plan benefits resulted in personal injury or wrongful 
     death of a participant. Other discretion by plan sponsors 
     under a group health plan is not affected by Section 302(a).
       The Bill's limited exception to ERISA preemption is not an 
     ``employer liability'' provision. The Managed Care Letters do 
     not present an accurate analysis of the plan sponsor 
     protections in the Bill. They claim the Bill would subject 
     plan sponsors to a flood of lawsuits in State courts over all 
     benefits decisions under their group health plans, and 
     suggest that plan sponsors would be forced to abandon their 
     plans. All of this is incorrect, for the following reasons:
       1. Most lawsuits would not be against plan sponsors. Under 
     current ERISA preemption law, suits seeking State law 
     remedies for injury or wrongful death of group health plan 
     participants are already allowed in numerous jurisdictions. 
     Those cases show that these suits are normally brought 
     against MCOs--not against plan sponsors. Plan sponsors are 
     generally not involved in ``treatment'' decisions that lead 
     to a plan participant's injury or death. ``Ordinary'' benefit 
     decisions (such as whether to reimburse particular medical 
     expenses) are not affected by the Bill.
       2. Plan sponsor exposure would be limited. If a plan 
     sponsor exercises discretion in making a benefit claim 
     decision under its group health plan, and that decision 
     results in injury or wrongful death, Section 302(a) makes an 
     exception to ERISA preemption to allow a State law claim 
     against the sponsor. To recover, though, a plaintiff must 
     first prove that the sponsor exercised discretion which 
     resulted in the injury or death, then must prove all elements 
     of a State law cause of action, based on the sponsor's 
     conduct in making the decision on that particular claim for 
     benefits. The plaintiff must have a viable State law cause of 
     actions because Section 302(a) only creates an exception to 
     ERISA preemption, and does not create a separate cause of 
     action.
       3. The statute's ``plain meaning'' limits plan sponsor 
     liability. The provisions in Section 302(a) that protect plan 
     sponsors would be interpreted under the Supreme Court's well-
     established ``plain meaning'' analysis. Such an analysis 
     supports the Bill's clear intention to continue to preempt 
     any State law liability suits against plan sponsors that do 
     not involve an exercise of discretion by them in making a 
     benefit claim decision resulting in injury or death. Other 
     types of ``discretionary'' plan sponsor action would not be 
     affected and would not be subject to State law liability 
     claims. Interpretations of Section 302(a) which characterize 
     it as a broad ``employer liability'' provision require one to 
     ignore critical elements of Section 302(a), in violation of 
     ``plain meaning'' analysis.
       4. Private-sector health care would not be destroyed. The 
     limited legal exposure of plan sponsors under Section 302(a) 
     will not cause them to abandon group health plans. The 
     experience of retirement plans and ``non-ERISA'' group health 
     plans supports this conclusion. Plan sponsors would not need 
     to abandon all control over a group health plan to remain 
     protected. Having MCOs or other third parties make all claims 
     decisions (as is often done), and then monitoring the third 
     party preserves the sponsors' control. Or, sponsors could 
     make the claims decisions and insure their exposure.

                               Discussion


                             1. BACKGROUND

       Relevant ERISA provisions. Section 502(a)(1)(B) of ERISA 
     gives participants in an employee benefit plan subject to 
     ERISA (including a group health plan) the right to sue: (i) 
     to recover benefits due to them, (ii) to enforce their rights 
     under the terms of the plan, or (iii) to clarify their rights 
     to future benefits. Section 503 of ERISA and the regulations 
     under that Section require every employee benefit plan to 
     have procedures for notifying plan participants of denials of 
     benefits and for appeals from such denials. Section 514(a) of 
     ERISA states that the provisions of ERISA will supersede 
     (``preempt'') any and all State laws which ``relate to'' 
     employee benefit plans which are covered by ERISA.
       Under these ERISA provisions, the Supreme Court and other 
     federal courts have developed the following rules:
       With limited exceptions, a participant must ``exhaust'' the 
     ERISA claims appeal procedures under Section 503 before 
     bringing a suit under Section 502(a)(1)(B). McGraw v. 
     Prudential Insurance Co., 137 F.3d 1253, 1263-64 (10th Cir. 
     1998); Kennedy v. Empire Blue Cross and Blue Shield, 989 F.2d 
     588, 594-95 (2d Cir. 1993).
       The ERISA causes of action are a participant's exclusive 
     remedy to seek benefits or contest the administration of an 
     employee benefit plan which is covered by ERISA. Pilot Life 
     Insurance Co. v. Dedeaux, 481 U.S. 41, 47-57 (1987).
       State causes of action which seek to mandate benefits 
     structures or administration of plans covered by ERISA are 
     preempted, as are those which seek alternatives to ERISA's 
     enforcement mechanisms. N.Y. State Conference of Blue Cross & 
     Blue Shield Plans v. Travelers Insurance Co., 514 U.S. 645, 
     657-58 (1995).
       Under the ERISA causes of action, a participant or 
     beneficiary can recover benefits to which he or she is 
     entitled and certain other equitable relief. Other 
     compensatory, non-economic or punitive damages are not 
     available. Mertens v. Hewitt Associates, 508 U.S. 248, 255-62 
     (1993).
       Managed care and ERISA. In the traditional ``fee-for-
     service'' group health plan that was prevalent when ERISA was 
     enacted in 1974, a lawsuit based on personal injury or 
     wrongful death arising from treatment under the plan did not 
     implicate ERISA. The participant received the care prescribed 
     by his or her doctor, with payment made or reimbursed by an 
     insurer. If there was a bad medical result, the participant 
     could sue the medical care provider.
       Managed care arrangements, which became prevalent only 
     after ERISA's enactment, place an intermediary between the 
     group health plan participant and the medical care that is 
     provided. MCOs, through their protocols and ``utilization 
     review'' procedures, make decisions affecting every aspect of 
     the patient's treatment, including decisions on medical 
     procedures, facilities utilized, access to specialists, 
     length of stay, and drug prescriptions. The consequence of an 
     improper or negligent decision on any of these matters can be 
     injury or death to the patient.
       Today, an employer that establishes a group health plan 
     often arranges for an MCO

[[Page 23077]]

     to provide the benefits to plan participants or 
     beneficiaries. The employer may pay the MCO on a capitated 
     basis or it can ``self-insure'' by paying the cost of 
     treatment provided by the MCO.
       ERISA preemption and MCO accountability. The combination of 
     ERISA preemption and the use of MCOs by group health plans to 
     provide benefits has produced a startling and unintended 
     result. The MCO used by a group health plan may make a highly 
     negligent treatment decision, and a participant may be 
     injured or die as a result. If the MCO's actions are treated 
     as acts of administration of an ERISA-covered plan, and 
     therefore qualify for protection under ERISA preemption, the 
     MCO is not accountable at law for the injury or death which 
     results from its actions.
       This is because the State law remedies are preempted by 
     ERISA, and the only remedies under ERISA are the plan 
     benefits to which the participant is entitled. The ERISA 
     remedy is usually meaningless after the injury or death has 
     occurred. Thus, an ERISA group health plan participant can 
     suffer a ``wrong without a remedy.'' See Corcoran v. United 
     HealthCare, 965 F.2d 1321 (5th Cir. 1992); Kuhl v. Lincoln 
     National Life, 999 F.2d 298 (8th Cir. 1993); Spain v. Aetna 
     Life Insurance Co., 11 F.3d 129 (9th Cir. 1993).
       This result can only occur if the patient is covered by a 
     plan that is subject to ERISA. Group health plans maintained 
     by federal, state and local governments, or by church 
     organizations, are not subject to ERISA--and aggrieved 
     participants in those plans can sue MCOs in state courts. So 
     can individuals covered by Medicare, Medicaid or by insurance 
     coverage that they purchase themselves. Thus, the interplay 
     of ERISA preemption provisions and managed care practices has 
     created a situation where participants in ERISA plans are the 
     only Americans with health care coverage who cannot go to 
     court to hold MCOs accountable for their negligent or 
     wrongful actions.
       Some federal courts have recognized this unintended and 
     illogical situation, and have tried to distinguish MCO 
     activities that involve administration of ERISA-covered plans 
     for MCO activities that inolve medical decision-making and 
     the practice of medicine. See, e.g., Dukes v. U.S. HealthCare 
     Inc., 57 F.3d 350 (3rd Cir. 1995). these decisions have 
     allowed injured patients or survivors of decreased patients 
     to bring state court actions agaisnt MCOs in some 
     jurisdictions, in some circumstances. However, courts taking 
     this approach are forced to engage in a difficult hair-
     splitting analysis of whether the claim at issue involves the 
     ``quantity'' of benefits a patient received or the 
     ``quality'' of those benefits--with preemption in the 
     ``quantity'' case, and no preemption in the ``quality'' 
     cases. Recent cases show how problematic this analysis is, 
     with different results occurring with similar facts. Compare, 
     for example, the decision in Moscovitch V. Danbury Hospital, 
     25 F. Supp. 2d 74 (D. Conn. 1988), with the decision in Huss 
     v. Green Spring Health Services, Inc., 18 F. Supp. 2d 400 (D. 
     Del. 1998). In both cases, an MCO decision was alleged to 
     have led to the suicide of a family's son. In Moscovitch, the 
     State law claims were permitted, but in Huss they were held 
     to be preempted by ERISA.
       MCO accountability to participants in ERISA-covered group 
     health plans should not depend on such hair-splitting. 
     Nothing in ERISA or its legislative history suggests that 
     ERISA-which was passed to protect plan participants--was 
     intended to put plan participants in a worse position than 
     other Americans with health care coverage.
       Section 302(a) of the Bill. Section 302(a) of the Bill 
     addresses this problem by carefully supplementing the ERISA 
     preemption rules, with a new ERISA Section 514(e). The new 
     provision first provides, in Section 514(e)(1)(A), that ERISA 
     will not preempt an action under State law to: recover 
     damages resulting from personal injury or for wrongful death 
     against any person--(i) in connection with the provision of 
     insurance, administrative services, or medical services by 
     such person to or for a group health plan * * * or (ii) that 
     arises out of the arrangement by such person for the 
     provision of such insurance, administrative services, or 
     medical services by other persons.
       Next is Section 514(e)(2)(A), a special rules expressly 
     intended to protect plan sponsors. It fully restores ERISA 
     preemption with respect to: any cause of action against an 
     employer or plan sponsor maintaining the group health plan 
     (or against an employee of such an employer or sponsor acting 
     with the scope of employment).
       Finally, Section 514(e)(2)(B) states that the Section 
     514(e)(2)(A) protection for plan sponsors will not bar State 
     law causes of action otherwise allowed by Section 502(e)(1), 
     if: (i) such action is based on the employer's or other plan 
     sponsor's (or employee's) exercise of discretionary authority 
     to make a decision on a claim for benefits covered under the 
     plan * * * and (ii) the exercise by such employer or other 
     plan sponsor (or employee) of such authority resulted in 
     personal injury or wrongful death. [Emphasis added.]


                              II. ANALYSIS

       A. How likely are lawsuits against plan sponsors?
       the structure of the proposed new ERISA Section 514(e), and 
     the actual case law experience in jurisdictions which have 
     allowed some suits against MCO's by participants in ERISA 
     group health plans, both indicate that the ``flood'' of 
     litigation against plan sponsors predicted in the Managed 
     Care Letters is unlikely to occur.
       Most group health plan benefit claims would be unaffected. 
     New ERISA Section 514(e)(1) would permit state court suits 
     against a person only where there is a personal injury or 
     wrongful death. The vast majority of the ``benefit claims'' 
     under group health plans do not involve personal injury or 
     wrongful death, but instead involve matters such as: whether 
     a person is eligible as a participant under the plan, 
     attempts to secure pre-approval for a particular medical 
     procedure or course of treatment; and claims for 
     reimbursement of medical expenses already incurred by the 
     participant or beneficiary.
       These disputes are untouched by the Bill. They are still 
     subject to the ERISA Section 503 claims and appeals 
     procedures (including the alternative procedures provided by 
     the Bill), and then (following exhaustion of the Section 503 
     procedures) could be pursued only in a suit under ERISA 
     Section 502(a)(1)(B), where the plaintiff could only seek the 
     limited remedies available under ERISA.
       No cause of action available against plan sponsors in many 
     cases. Putting aside the bulk of group health plan disputes, 
     which stay within current ERISA procedures (including the 
     alternative procedures provided by the Bill), we can turn to 
     those which do involve allegations of personal injury or 
     wrongful death. How likely is it that a plan sponsor will be 
     sued in state court if such suits are permitted under new 
     ERISA Section 514(e)(2)(B)?
       Since 1994, a number of jurisdictions have allowed some 
     state lawsuits based on personal injury or wrongful death of 
     ERISA plan participants. Numerous suits like this have been 
     brought, with some allowed to go forward in state court and 
     others found to be preempted by ERISA. We have reviewed every 
     reported opinion involving such a case.
       As we analyzed the facts of these cases, as set out in the 
     reported opinions, we found that the plan sponsor was almost 
     never shown or described as a defendant. Specifically, in 
     only two of the 75 cases we reviewed was there anything to 
     indicate that the plan sponsor was sued, even though the plan 
     sponsor might have selected the MCO and/or retained final 
     discretion on claims appeals. Every other conceivable party 
     seems to have been sued in these cases, including doctors, 
     nurses, hospitals, MCOs and equipment manufactures, but not 
     plan sponsors.
       Why aren't plan sponsors (employees) typically sued? The 
     reason why plan sponsors are not sued in these cases is 
     probably because the personal injury or wrongful death occurs 
     as a result of MCO actions in which the plan sponsor is not 
     involved. The plan sponsor is not a part of the faulty 
     diagnosis, the premature discharge, the use of the 
     inappropriate drug or procedure, the refusal to admit, or the 
     delay in surgery. It is these events which cause the alleged 
     injuries and deaths. These are the well-publicized cases 
     which have led congress to consider managed care reform. 
     However, these are not plan sponsor decisions and are not 
     likely to support a cause of action against the plan sponsor 
     under the Bill's limited exception to ERISA preemption.
       More specifically, the state law causes of action likely to 
     be pleaded in situations like this have specific elements, 
     all of which have to be established against a defendant. Many 
     of the cases brought against MCOs are medical malpractice 
     cases which would be inapplicable to plan sponsors (except, 
     perhaps, where the group health plan actually operated a 
     hospital or clinic). Negligence actions require a duty of 
     care, as established by law, and a breach of that duty which 
     is a proximate cause of the injury. Wrongful death statutes 
     typically require a wrongful act which would have been 
     actionable by the decedent, and which caused his or her 
     death. The MCO actions attacked in the cases we reviewed 
     could support such claims against an MCO, but not a plan 
     sponsor. That is why plan sponsors were not defendants in the 
     cases we reviewed, and why it seems they are not likely to be 
     sued in similar situations if the Bill is enacted.
       ``Emotional distress'' claims. A related point which should 
     be addressed is whether the Bill would permit a suit against 
     a plan sponsor based on ``emotional distress.'' One of the 
     Managed Care Letters suggests that a participant could seek 
     mental health benefits, be denied, then sue in state court 
     for ``denied benefits, emotional distress and lost job 
     opportunities.''
       Such a suit would not survive a motion to dismiss. While 
     state courts may permit recovery for ``emotional distress'' 
     or ``mental anguish'' without an accompanying physical 
     injury, the proposed Section 514(e)(1)(A) requires a suit 
     ``for personal injury or for wrongful death'' before there is 
     any preemption of ERISA. ``Personal injury'' means ``physical 
     injury'' (including physical injury arising out of treatment 
     or non-treatment of mental disease). Therefore, absent 
     physical injury, ``emotional distress'' is not enough to 
     trigger the exception to preemption, and the state law claims 
     are absolutely barred by Pilot Life.
       The preceding analysis actually shows how effectively 
     proposed Section 514(e) would

[[Page 23078]]

     work. First, the requirements for the exception to ERISA 
     preemption (including the plan sponsor exercising discretion 
     which results in personal injury or wrongful death) must be 
     met; then all the elements of an applicable State law cause 
     of action must be satisfied.
       Where State law suit against plan sponsor would not be 
     preempted. Without question, a plan sponsor could engage in 
     conduct where it could be sued under the proposed new Section 
     502(e). For example, a participant could seek a cutting-edge 
     cancer treatment, be denied and appeal to the plan sponsor's 
     ``Benefits Committee.'' If that Committee denied the appeal 
     and the participant died, a wrongful death action could be 
     brought. But the plaintiff would have to prove the state law 
     claim--showing, for example, that the Committee decision was 
     in violation of a legal ``duty of care'' owed to the 
     participant, and that it was the ``proximate cause'' of the 
     participant's death. Cases like this occur, but they are not 
     everyday matters, even in a large group health plan. The plan 
     sponsor can insure against such liability, and can establish 
     claims appeal procedures to build a record which can 
     withstand scrutiny. In the alternative, it can transfer the 
     appeals function to a third party with medical expertise, and 
     monitor that entity's performance.
       Once the scope and operation of the Bill's exception to 
     ERISA preemption is examined, and once the characteristics of 
     current suits against MCOs are reviewed, concerns about a 
     ``flood'' of lawsuits against plan sponsors under the Bill 
     should greatly diminish.
       B. How likely is an interpretation of the Bill allowing 
     broad plan sponsor liability?
       Arugments in the Managed Care Letters. Ignoring both the 
     limited scope of the proposed changes to ERISA and the 
     detailed plan sponsor protection, the Managed Care Letters 
     predict dire consequences from the Bill. They argue that the 
     plan sponsor protections will be illusory, and that the Bill 
     would subject plan sponsors to potential State court 
     litigation over every coverage decision under a group health 
     plan. The Managed Care Letters go on to state that this broad 
     liability for plan sponsors would put them in an untenable 
     position and make group health plans unworkable. Several 
     arguments are made in support of these assertions.
       ``Discretion''. The Managed Care Letters suggest that, 
     because ``discretionary action'' can occur in many contexts 
     under ERISA, virtually any plan sponsor action regarding a 
     group health plan will involve an ``exercise of discretionary 
     authority'' that would make the plan sponsor subject to State 
     law actions.
       Imputed actions. The next argument is that under general 
     agency concepts, the actions of a decision-maker, such as an 
     MCO third party would be ``imputed'' to the employer, and the 
     employer would thereby be deemed to have made an ``exercise 
     of discretionary authority to make a decision on a claim for 
     benefits covered under the plan.''
       Retained control. Similarly, it is argued that, in reality, 
     a plan sponsor will always retain some control over the 
     actions of the MCO, and therefore will always be deemed to 
     have exercised discretionary authority to make a decision on 
     a claim for benefits covered under the plan.
       Each of these objections can be addressed by applying the 
     ``plain meaning'' rule of statutory construction to the 
     proposed new ERISA Section 514(e).
       Plain meaning--overview. The new ERISA Section 514(e) 
     contained in the Bill, if enacted, would be subject to a 
     well-established rule of statutory interpretation which 
     focuses on the ``plain meaning.'' This rule would strongly 
     support the Bill's clear intention to prevent State law 
     liability for plan sponsors that do not directly exercise 
     discretion in making a benefit claim decision under their 
     group health plan. Other types of ``discretionary'' plan 
     sponsor actions would be well outside of the scope of the 
     plain meaning of proposed Section 514(e)(2)(B).
       The Supreme Court has repeatedly confirmed that the 
     starting point to determine the meaning of a federal statute 
     is the plain language of the statute itself. See, e.g., 
     Central Bank of Denver v. First Interstate Bank of Denver, 
     511 U.S. 164, 171 (1994). If a court finds that this 
     statutory language is unambiguous, the inquiry should be 
     complete. See, e.g., Ardestani v. Immigration and 
     Naturalization Service, 502 U.S. 129, 135 (1991).
       Most importantly, with regard to the overbroad, 
     hypothetical interpretations of proposed Section 514(e) found 
     in the Managed Care Letters, the Supreme Court has confirmed 
     that ``assertions of ambiguity do not transform a clear 
     statute into an ambiguous provision,'' and that courts must 
     be skeptical of clever readings of a statute that are based 
     on ``ingenuity.'' United States v. James, 478 U.S. 597, 604 
     (1986). The Supreme Court has similarly stated that a statute 
     can be viewed as unambiguous ``without addressing every 
     interpretative theory offered by a party.'' Salinas v. United 
     States, 118 S. Ct. 469 (1997).
       This ``plain meaning'' approach has been used by the 
     Supreme Court in a number of recent cases reviewing disputes 
     involving federal employment laws. See, e.g., Hughes Aircraft 
     Company v. Jacobson, 199 S. Ct. 755 (1999) (dispute under 
     ERISA); Sutton v. United Air Lines, 119 S. Ct. 2139 (1999) 
     (dispute under the Americans with Disabilities Act); Murphy 
     v. United Parcel Service, 119 S. Ct. 2133 (1999) (same).
       Plain meaning--applied to ``discretion.'' The Bill contains 
     clear, straightforward language that allows State law actions 
     otherwise allowed by the Bill to apply to a plan sponsor only 
     when it engages in a direct exercise of discretionary 
     authority to make a decision ``on a claim for benefits 
     covered under the plan.''
       To begin, the structure of proposed Section 514(e) is 
     straightforward. New Section 514(e)'s structure of (1) rule, 
     (2) exception, and (3) exception-to-the-exception, is orderly 
     and understandable.
       The Managed Care Letters argue that, under ERISA Section 
     3(21)(A), many types of ``discretion'' can create a fiduciary 
     status for a person administering an employee benefit plan. 
     This is true, but it is irrelevant to the plan sponsor 
     protection provided by the Bill. Under the bill's literal 
     language, plan sponsor protection is not lost whenever there 
     is some exercise of discretion by a plan sponsor. It is only 
     lost when there is plan sponsor discretion on ``a decision on 
     a claim for benefits covered under the plan.''
       The Managed Care Letters argue that, even with respect to 
     discretion on claims for benefits, the Bill will be construed 
     to broadly allow suits against plan sponsors under State law, 
     because the plan sponsor may be viewed as ``indirectly'' 
     exercising this discretion, for instance, by appointing the 
     MCO which actually exercises discretion. Such an 
     interpretation would read the words of Section 514(e)(2)(B) 
     right out of the statute. This is precisely what is 
     prohibited by the ``plain meaning'' rule.
       In addition, the Bill carves out, in new Section 
     514(e)(2)(C), several specific plan sponsor activities which 
     will not, in any event, constitute an exercise of 
     discretionary authority on a benefit claim. They are: (i) 
     decisions to include or exclude any specific benefit from the 
     plan; (ii) decisions to provide extra-contractual benefits 
     outside of the plan; and (iii) decisions not to consider the 
     provision of a benefit while an internal or external review 
     of the claim is being conducted. These carve-outs further 
     insulate plan sponsors from State law actions in ``close 
     call'' situations.
       Plain meaning--applied to ``imputed actions'' and 
     ``retained control.'' It is unrealistic to argue, as the 
     Managed Care Letters do, that under general ``agency law'' 
     concepts, actions of a third party decision-maker, such as an 
     MCO, would be ``imputed'' to the plan sponsor, who would then 
     be deemed to have made an ``exercise of discretionary 
     authority'' on a claim for benefits covered under the plan, 
     through the appointment or under some notion of ``ultimate 
     control'' of the group health plan.
       There are two flaws in this argument. First, proposed ERISA 
     in Section 514(e)(2)(A) clearly shields plan sponsors from 
     the exception to ERISA preemption in Section 514(e)(1). If 
     proposed Section 514(e)(2)(B)--which is set up as an 
     exception to that shield--made plan sponsors subject to State 
     law suits for the acts of others, plan sponsors would be in 
     the same place as MCOs and others against whom State law 
     suits would be allowed under Section 514(e)(1). This 
     interpretation found in the Managed Care Letters would 
     impermissibly read the exception right out of the statute and 
     make the clear language of Section 514(e)(1)(A) meaningless. 
     This is exactly what is prohibited by the ``plain meaning'' 
     rule of statutory construction--as well as by common sense.
       In addition, the Managed Care Letters cite no relevant 
     legal authority to support this interpretation. We reviewed 
     the list of cases which one Managed Care Letter cites as a 
     ``solid common law basis'' for its argument. What these cases 
     deal with is an MCO's liability for the acts of health care 
     providers which it employs or supervises. They have nothing 
     to do with the relationship between plan sponsor and a 
     service provider to its group health plan.
       Therefore, we think that use of an ``agency'' or similar 
     argument to expand the scope of plan sponsor exposure would 
     be fundamentally at odds with the structure and plain meaning 
     of Section 302(a).
       C. How likely is it that plan sponsors would terminate 
     group health plans under the Bill?
       A perennial argument. The perennial argument against 
     changes to employee benefits laws is that the changes will 
     cause plan sponsors to abandon their plans. (Opponents to 
     ERISA predicted that it would destroy the entire private-
     sector retirement plan system. It did not.) With regard to 
     the Bill, the experience of ``non-ERISA'' group health plans 
     and of retirement plans subject to ERISA indicates that new 
     ERISA Section 514(e) would not cause wholesale terminations 
     of group health plans.
       What experience shows. ``Church plans'' provide a good 
     reference. Under ERISA Sections 4(b)(2) and 3(33), an 
     employee benefit plan sponsored by a church organization is 
     not subject to ERISA. Church organizations routinely sponsor 
     group health plans, and many utilize MCOs. With ERISA 
     preemption unavailable to them, these church-sponsors are 
     always potential targets for the kind of suits the Managed 
     Care Letters direly predict. Yet churches continue to sponsor 
     group health plans.

[[Page 23079]]

       Sponsors of retirement plans subject to ERISA can be 
     subject to suits over the use or investment of plan assets, 
     with huge potential liabilities for breaches of ERISA 
     fiduciary duty. For example, a major bank was recently sued 
     for over $100 million in alleged losses to participants in 
     its ``401(k)'' retirement plan, based on the fee structure 
     and other issues related to the plan's investment options. 
     Franklin v. First Union Corp., Civil Action No. 3-99CV610, 
     E.D. Virginia (September 7, 1999). To our knowledge, no one 
     is suggesting that employers will now abandon their 
     ``401(k)'' or other retirement plans in the face of such 
     potential liabilities.
       Maintaining plan sponsor control. Nor do plan sponsors need 
     to ``abandon all control'' of the retirement plans to avoid 
     fiduciary liability. The investment management of retirement 
     plan assets is a good example. More and more, sponsors of 
     retirement plans have put the management of plan assets in 
     the hands of banks, insurance companies and other 
     professional investment managers. Plan sponsors engage in 
     careful manager searches, establish investment policies and 
     review the performance of the investment managers and, where 
     they deem it appropriate, change managers. The plan sponsor 
     then does not make day-to-day investment decisions, but it 
     certainly does not abandon control over this plan function.
       In the same say, a group health plan sponsor can choose an 
     MCO, and provide for it to have final authority over benefit 
     claims. The plan sponsor monitors the MCO's performance, 
     including its medical outcomes, and can change MCOs if it is 
     dissatisfied with the care provided by the MCO. In such a 
     situation, the plan sponsor would not have potential 
     liability under proposed ERISA Section 514(e), but would 
     certainly retain control over the operation of its group 
     health plan.
       Therefore, based on the experience of ``non-ERISA'' group 
     health plans and ERISA retirement plans, it seems highly 
     unlikely that the Bill's State law liability provisions would 
     mean the end of employer-sponsored group health plans, or 
     that employers would be forced to abandon control of those 
     plans.

                               Conclusion

       Our analysis shows that Section 302(a) of the Bill, if 
     enacted, would not expose plan sponsors to State law 
     liability in most situations. Only to the extent that a plan 
     sponsor directly exercised discretion in making a benefit 
     claim decision under its group health plan, and to the extent 
     that an improper decision then resulted in injury or wrongful 
     death, would there be an exception to ERISA preemption which 
     allowed a State law claim to be brought. This potential 
     liability is consistent with general principles of tort law, 
     where parties are liable for the consequences of their 
     negligent actions.
       Most benefits decisions in which plan sponsors participle 
     are outside the scope of proposed new ERISA Section 514(e). A 
     personal injury or wrongful death is required before a state 
     law claim is allowed. Thus, claims seeking prior approval of 
     specific benefits, or seeking reimbursement of medical costs 
     already incurred, or seeking to clarify a person's status as 
     a plan participant would continue to be handled through the 
     existing ERISA claim and appeal procedures.
       Where there is personal injury or wrongful death, and a 
     State law suit against an employer is permitted, there must 
     be an applicable state law cause of action--nothing in 
     Section 302(a) creates an independent cause of action. If 
     there is a potential state law claim, it will still be 
     preempted by ERISA unless the plaintiff can show (1) that the 
     plan sponsor exercised discretionary authority over a claim 
     for benefits in the case at issue, and (2) the exercise of 
     discretion resulted in personal injury of wrongful death.
       Our review of the cases where ERISA plan participants have 
     filed suit for personal injury or wrongful death indicates 
     that, most commonly, patients are injured or die in 
     circumstances where the plan sponsor is not involved. It is 
     not the plan sponsor's Benefits Committee which sends the 
     mother home from the hospital with her sick newborn child, or 
     refuses to scheduled urgent surgery. Speculation that plan 
     sponsors will ``somehow'' face broad State law liability is 
     inconsistent with an analysis of relevant case law and the 
     ``plain meaning'' of the proposed statue.
       In sum, Section 302(a) of the Bill is a carefully-drafted 
     provision which addresses what many perceive as an 
     unfortunate and unintended gap in ERISA, without disturbing 
     the ERISA preemption rules applicable to most State law 
     claims against plan sponsors of group health plans.

  What is the real life experience to bear that out? I refer my 
colleagues to the front page story in the Washington Post today. 
``Patients' Rights Case Study: So Far, Benign. In Texas, Ability to Sue 
HMOs Has Prompted Little Litigation.''
  Why is that? Because whereas they say that plans that make decisions, 
medical decisions that result in injury are going to legally be liable, 
they also set up that dispute resolution process that is in our bill, a 
dispute resolution so that you can fix a problem before you end up with 
the injury.
  It says here in this article:
  ``The insurance industry and its business allies have spent millions 
of dollars warning legislators in Washington that it would be dangerous 
to give patients the right to sue health maintenance organizations, 
arguing that the courts would be deluged with baseless litigation.
  ``But since the Texas legislature made managed care plans liable for 
malpractice, there have only been five known lawsuits from among the 4 
million Texans who belong to HMOs.
  ``And despite insurers' arguments that such a law would force them to 
practice an expensive brand of defensive medicine, there is no sign 
that medical costs are rising faster in Texas than anywhere else in the 
country.''
  It talks a little bit in this article about how this bill became law 
in Texas. But then it goes on to say:
  ``The bill passed with overwhelming support from both Republicans and 
Democrats in Texas. Governor Bush, now a Republican presidential 
candidate, had opposed the idea of allowing HMOs to be sued. But this 
time, in a position that puts him at odds with GOP leaders in Congress, 
he let the law take effect.
  ``Two years later, a Bush spokesman said the governor believes the 
law has `worked well,' primarily because of a grievance system included 
in the legislation that has ruled on about 600 cases and sided with 
patients about half the time. `We have not seen an explosion of 
lawsuits,' said Governor Bush's spokesman Ray Sullivan. `That's what 
the governor wanted.' ''
  Madam Speaker, because this is a comprehensive bill that includes so 
many good provisions to help patients get the kind of care that they 
need, it is not just a liability bill, it is a bill that because of 
these other provisions that will allow patients who are not getting a 
fair shake from their HMOs to have a process to get that fixed, we have 
300 organizations who have endorsed the bipartisan consensus bill, H.R. 
2723.
  Madam Speaker, I include this list for the Congressional Record.

                 300 Organizations Endorsing H.R. 2723

       Adapted Physical Activity Council.
       AIDS Action.
       Allergy and Asthma Network--Mothers of Asthmatics, Inc.
       Alliance for Children and Families.
       Alliance for Rehabilitation Counseling.
       American Academy of Allergy and Immunology.
       American Academy of Child and Adolescent Psychiatry.
       American Academy of Emergency Medicine.
       American Academy of Facial Plastic and Reconstructive 
     Surgery.
       American Academy of Family Physicians.
       American Academy of Neurology.
       American Academy of Opthamology.
       American Academy of Otolaryngology--Head and Neck Surgery.
       American Academy of Pain Medicine.
       American Academy of Pediatrics.
       American Academy of Physical Medicine & Rehabilitation.
       American Association for Hand Surgery.
       American Association for Holistic Health.
       American Association for Marriage and Family Therapy.
       American Association for Mental Retardation.
       American Association for Psychosocial Rehabilitation.
       American Association for Respiratory Care.
       American Association for the Study of Headache.
       American Association for Clinical Endocrinologists.
       American Association of Clinical Urologists.
       American Association of Hip and Knee Surgeons.
       American Association of Neurological Surgeons.
       American Association of Nurse Anesthetists.
       American Association of Oral and Maxillofacial Surgeons.
       American Association of Orthopaedic Foot and Ankle 
     Surgeons.
       American Association of Orthopaedic Surgeons.
       American Association of Pastoral Counselors.
       American Association of People with Disabilities.
       American Association of Private Practice Psychiatrists.
       American Association of University Affiliated Programs for 
     Persons with DD.
       American Association of University Women.
       American Association on Health and Disability.

[[Page 23080]]

       American Bar Association, Commission on Mental & Physical 
     Disability Law.
       American Board of Examiners in Clinical Social Work.
       American Cancer Society.
       American Chiropractic Association.
       American College of Allergy and Immunology.
       American College of Cardiology.
       American College of Emergency Physicians.
       American College of Foot and Ankle Surgeons.
       American College of Gastroenterology.
       American College of Nuclear Physicians.
       American College of Nurse-Midwives.
       American College of Obstetricians and Gynecologists.
       American College of Osteopathic Family Physicians.
       American College of Osteopathic Surgeons.
       American College of Physicians.
       American College of Radiation Oncology.
       American College of Radiology.
       American College of Rheumatology.
       American College of Surgeons.
       American Council for the Blind.
       American Counseling Association.
       American Dental Association.
       American Diabetes Association.
       American EEG Society.
       American Family Foundation.
       American Federation of HomeCare Providers, Inc.
       American Federation of State, County, and Municipal 
     Employees.
       American Federation of Teachers.
       American Foundation for the Blind.
       American Gastroenterological Association.
       American Group Psychotherapy Association.
       American Heart Association.
       American Liver Foundation.
       American Lung Association/American Thoracic Society.
       American Medical Association.
       American Medical Rehabilitation Providers Association.
       American Medical Student Association.
       American Medical Women's Association, Inc.
       American Mental Health Counselors Association.
       American Music Therapy Association.
       American Network of Community Options And Resources.
       American Nurses Association.
       American Occupational Therapy Association.
       American Optometric Association.
       American Orthopaedic Society for Sports Medicine.
       American Orthopsychiatric Association.
       American Orthotic and Prosthetic Association.
       American Osteopathic Academy of Orthopedics.
       American Osteopathic Association.
       American Osteopathic Surgeons.
       American Pain Society.
       American Physical Therapy Association.
       American Podiatric Medical Association.
       American Psychiatric Association.
       American Psychiatric Nurses Association.
       American Psychoanalytic Association.
       American Psychological Association.
       American Public Health Association.
       American Society for Dermatologic Surgery.
       American Society for Gastrointestinal Endoscopy.
       American Society for Surgery of the Hand.
       American Society for Therapeutic Radiology and Oncology.
       American Society of Anesthesiology.
       American Society of Bariatric Surgery.
       American Society of Cataract and Refractive Surgery.
       American Society of Clinical Oncology.
       American Society of Dermatology.
       American Society of Echocardiography.
       American Society of Foot and Ankle Surgery.
       American Society of General Surgeons.
       American Society of Hand Therapists.
       American Society of Hematology.
       American Society of Internal Medicine.
       American Society of Nephrology.
       American Society of Nuclear Cardiology.
       American Society of Pediatric Nephrology.
       American Society of Plastic and Reconstructive Surgeons, 
     Inc.
       American Society of Transplant Surgeons.
       American Society of Transplantation.
       American Speech-Language-Hearing Association.
       American Therapeutic Recreation Association.
       American Urological Association.
       Americans for Better Care of the Dying.
       Amputee Coalition of America.
       Anxiety Disorders Association of America.
       Arthritis Foundation.
       Arthroscopy Association of North America.
       Association for Ambulatory Behavioral Healthcare.
       Association for Education and Rehabilitation Of the Blind 
     and Visually Impaired.
       Association for Persons in Supported Employment.
       Association for the Advancement of Psychology.
       Association for the Education of Community Rehabilitation 
     Personnel.
       Association of American Cancer Institutes.
       Association of Education for Community Rehabilitation 
     Programs.
       Association of Freestanding Radiation Oncology Centers.
       Association of Maternal and Child Health Programs.
       Association of Subspecialty Professors.
       Association of Tech Act Projects.
       Association of Women's Health Obstetric and Neonatal 
     Nurses.
       Asthma & Allergy Foundation of America.
       Austism Society of America.
       Bazelon Center for Mental Health Law.
       California Access to Specialty Care Coalition.
       California Congress of Dermatological Societies.
       Cancer Leadership Council.
       Center for Patient Advocacy.
       Center on Disability and Health.
       Child Welfare League of America.
       Children & Adults with Attention Deficit/Hyperactivity 
     Disorder.
       Children's Defense Fund.
       Citizens United for Rehabilitation of Errants.
       Clinical Social Work Federation.
       Communication Workers of America.
       Conference of Educational Administrators of Schools and 
     Programs for the Deaf.
       Congress of Neurological Surgeons.
       Consortium of Developmental Disabilities Councils.
       Consumer Action Network.
       Consumer Federation of America.
       Consumers Union.
       Cooley's Anemia Foundation.
       Corporation for the Advancement of Psychiatry.
       Council for Exceptional Children.
       Council for Learning Disabilities.
       Crohn's and Colitis Foundation of America.
       Diagenetics.
       Digestive Disease National Coalition.
       Disability Rights Education and Defense Fund.
       Division for Early Childhood of the CEC.
       Easter Seals.
       Epilepsy Foundation of America.
       Evangelical Lutheran Church in America.
       Eye Bank Association of America.
       Families USA.
       Family Service America.
       Family Voices.
       Federated Ambulatory Surgery Association.
       Federation of Behavioral, Psychological & Cognitive 
     Sciences.
       Federation of Families for Children's Mental Health.
       Florida Breast Cancer Coalition.
       Friends Committee on National Legislation.
       Goodwill Industries International, Inc.
       Gullain-Barre Syndrome Foundation.
       Helen Keller National Center.
       Higher Education Consortium for Special Education.
       Human Rights Campaign.
       Huntington's Disease Society of America.
       Infectious Disease Society of America.
       Inter/National Association of Business, Industry and 
     Rehabilitation.
       International Association of Jewish Vocational Services.
       International Association of Psychosocial Rehabilitation 
     Services.
       International Dyslexia Association.
       Joseph P. Kennedy, Jr. Foundation.
       League of Women Voters.
       Learning Disabilities Association.
       Leukemia Society of America.
       Linda Creed Breast Cancer Foundation.
       Lupus Foundation of America, Inc.
       Massachusetts Breast Cancer Coalition.
       Medical College of Wisconsin.
       Michigan State Medical Society.
       Minnesota Breast Cancer Coalition.
       National Alliance for the Mentally Ill
       National Association for Medical Equipment Services.
       National Association for Rural Mental Health.
       National Association for State Directors of Developmental 
     Disabilities Services.
       National Association for the Advancement of Orthotics and 
     Prosthetics.
       National Association of Children's Hospitals.
       National Association of Developmental Disabilities 
     Councils.
       National Association of Medical Directors of Respiratory 
     Care.
       National Association of Nurse Practitioners in Women's 
     Health.
       National Association of People with AIDS.
       National Association of Physicians Who Care.
       National Association of Private Schools for Exceptional 
     Children.
       National Association of Protection and Advocacy Systems.
       National Association of Psychiatric Treatment Centers for 
     Children.
       National Association of Public Hospitals and Health Systems 
     (Qualified Support).
       National Association of Rehabilitation Research and 
     Training Centers.
       National Association of School Psychologists.
       National Association of Social Workers.
       National Association of State Directors of Special 
     Education.
       National Association of State Mental Health Program 
     Directors.
       National Association of the Deaf.

[[Page 23081]]

       National Black Women's Health Project.
       National Breast Cancer Coalition.
       National Center for Learning Disabilities.
       National Coalition on Deaf-Blindness.
       National Committee to Preserve Social Security and 
     Medicare.
       National Community Pharmacists Association.
       National Consortium of Phys. Ed. And Recreation For 
     Individuals with Disabilities.
       National Consumers League.
       National Council for Community Behavioral Healthcare.
       National Depressive and Manic-Depressive Association.
       National Down Syndrome Society.
       National Foundation for Ectodermal Dysplasias.
       National Hemophilia Foundation.
       National Medical Association.
       National Mental Health Association.
       National Multiple Sclerosis Society.
       National Organization of Physicians Who Care.
       National Organization of Social Security Claimants' 
     Representatives.
       National Organization on Disability.
       National Parent Network on Disabilities.
       National Partnership for Women & Families.
       National Patient Advocate Foundation.
       National Psoriasis Foundation.
       National Rehabilitation Association.
       National Rehabilitation Hospital.
       National Therapeutic Recreation Society.
       NETWORK: National Catholic Social Justice Lobby.
       New York State Nurses Association.
       NISH.
       North American Brain Tumor Coalition.
       North American Society of Pacing and Electrophysiology.
       North American Spine Society.
       Opticians Association of America.
       Oregon Dermatology Society.
       Orthopaedic Trauma Association.
       Outpatient Ophthalmic Surgery Society.
       Pain Care Coalition.
       Paralysis Society of America.
       Paralyzed Veterans of America.
       Patient Advocates for Skin Disease Research.
       Patients Who Care.
       Pediatric Orthopaedic Society of North America.
       Pediatrix Medical Group: Neonatology and Pediatric 
     Intensive Care Specialist.
       Physicians for Reproductive Choice and Health.
       Physicians Who Care.
       Pituitary Tumor Network.
       Public Citizen (Liability Provisions Only).
       Rehabilitation Engineering and Assistive Technology Society 
     of N. America.
       Renal Physicians Association.
       Resolve: The National Infertility Clinic.
       Scoliosis Research Society.
       Self Help for Hard of Hearing People, Inc.
       Service Employees International Union.
       Sjogren's Syndrome Foundation Inc.
       Society for Excellence in Eyecare.
       Society for Vascular Surgery.
       Society of Cardiovascular & Interventional Radiology.
       Society of Critical Care Medicine.
       Society of Gynecologic Oncologists.
       Society of Nuclear Medicine.
       Society of Thoracic Surgeons.
       Spina Bifida Association of America.
       St Louis Breast Cancer Coalition.
       Taconic Resources for Independence, Inc.
       The Alexandria Graham Bell Association for the Deaf, Inc.
       The American Society of Dermatophathology.
       The Arc of the United States.
       The Council on Quality and Leadership in Supports for 
     People with Disabilities (The Council).
       The Endocrine Society.
       The Paget Foundation for Paget's Disease of Bone and 
     Related Disorders.
       The Society for Cardiac Angiography and Interventions.
       The TMJ Associations, Ltd.
       Title II Community AIDS National Network.
       United Auto Workers.
       United Cerebral Palsy Association.
       United Church of Christ.
       United Ostomy Association.
       Very Special Arts.
       World Institute on Disability.

  Finally, let me just briefly talk about access to medical care, 
because I think it is important. We have about 40 million Americans 
that do not have health insurance. A large percentage of those people 
are poor, a large percentage are children. We can do a lot more to get 
those children and those poor people enrolled in the programs that they 
qualify for than what we are doing now. Fully half of the children in 
this country that are uninsured qualify for either Medicaid or for the 
CHIP program. And we ought to make a better effort to do that. But when 
we look at providing better access for all Americans to health 
insurance, we need to be careful that we do not make the situation 
worse.
  There are some ideas that are in a bill that may come to the floor 
that relate to expanding what are called association health plans or 
geographic association type health plans, called health marts, that we 
need to be careful of.
  Madam Speaker, I have two letters here from the Blue Cross/Blue 
Shield organization and the Health Insurance Association of America 
that I will include for the Record.

                                              BlueCross BlueShield


                                                  Association,

                                    Washington, DC, July 13, 1998.
     Hon. Greg Ganske,
     House of Representatives,
     Washington, DC.
       Dear Representative Ganske: We are writing to express our 
     deep concerns about exempting Association Health Plans (AHPs) 
     and certain Multiple Employer Welfare Arrangements (MEWAs) 
     from state law.
       This unwise proposal has surfaced again, this time as part 
     of a package of recommendations from the House Republican 
     health care quality working group. BCBSA is concerned about 
     many of the working group's recommendations, but we are 
     particularly troubled by the AHP/MEWA provision.
       For good reason, exempting AHPs/MEWAs from state law is 
     strongly opposed by governors and other state officials, 
     consumer groups, health professionals, major health insurance 
     organizations and some small businesses. This proposal would:
       Transfer regulation of these entities from states to an 
     unprepared federal government. The Department of Labor has 
     already testified that it does not now have the resources 
     needed to adequately oversee the ERISA plans already under 
     its purview. Consequently, exempting AHPs/MEWAs from state 
     law would necessitate a substantial increase in federal 
     regulators in order to set and enforce solvency standards and 
     other consumer protections
       Increase premiums for many small employers and dramatically 
     hike rates for individuals who purchase their own coverage. 
     By exempting AHPs/MEWAs from state law, the proposal would 
     undermine state reforms that have improved the accessibility 
     and affordability of health coverage, such as risk-spreading 
     laws that assure cross-subsidization between low- and high-
     cost groups.
       Decrease health coverage for those who use the most medical 
     services. The proposal would give AHPs/MEWAs a strong 
     incentive to cover only the healthiest people. As a result, 
     sicker people--who are most in need of coverage--would be 
     left in state-regulated insurance pools. Their premiums would 
     increase as more health people joined AHPs/MEWAs, causing 
     many to lose their health coverage.
       Reduce funding for state programs to improve access to 
     health coverage. Because AHPs/MEWAs would be exempt from 
     state law, they would not have to contribute to state 
     programs to improve access (e.g., high-risk pools), which are 
     typically funded by assessments on small group health 
     insurance premiums.
       BCBSA shares the concerns of AHP/MEWA supporters who want 
     to make health coverage more affordable for small businesses 
     and others. But this proposal would undermine successful 
     state reforms, increase premiums for many and decrease health 
     coverage for those who need it the most.
       When Congress considers the working group's proposal this 
     summer, we urge you to oppose exempting AHPs/MEWAs from state 
     law.
           Sincerely,
     Mary Nell Lehnhard,
                                            Senior Vice President.
     Jack Ericksen,
         Executive Director, Congressional Relations.
                                  ____

                                                     June 4, 1998.
     Hon. Greg Ganske,
     House of Representatives,
     Washington, DC.
       Dear Representative Ganske: We are writing to express our 
     opposition to proposals that would exempt certain health 
     insurance arrangements, such as association health plan 
     (AHPs) and multiple employer welfare arrangements (MEWAs), 
     from state insurance law and regulatory authority.
       We remain very concerned about proposals to preempt state 
     regulatory of federally certified association health plans, 
     including many MEWAs (e.g., H.R. 1515/S. 729). These 
     proposals would undermine the most volatile segments of the 
     insurance market--the individual and small group markets. 
     AHPs could siphon off the healthy (e.g., through selective 
     marketing or by eliminating coverage of certain benefits 
     required by individuals with expensive illnesses), thus 
     leading to significant premium increases for those who remain 
     in the state-regulated pool. The ultimate result: an increase 
     in the uninsured and only the sickest and highest risk 
     individuals remaining in the states' insured market.
       We have similar concerns regarding a proposal to create a 
     new type of purchasing entity, called HealthMarts, which has 
     not been reviewed via the committee hearing process. This 
     proposal would exempt health plans offered through a 
     HealthMart from state benefit standards and requirements to 
     pool all

[[Page 23082]]

     small groups for rating purposes. As with AHPs, this proposal 
     raises serious concerns regarding market segmentation and the 
     ability of states to protect their residents. The combination 
     of these two proposals could lead to massive market 
     segmentation and regulatory confusion.
       Moreover, these proposals, over time, would lead our nation 
     toward increased federalization of health insurance 
     regulation. Preemption of state regulatory authority would 
     create a regulatory vacuum that would necessitate an 
     exponential increase in federal bureaucracy and federal 
     regulatory authority.
       As representatives of the health insurance and health plan 
     community, we are concerned about the issue of access to 
     health coverage for small firms. However, we urge legislators 
     to avoid legislation that unravels the market by helping a 
     limited group of small employers at the expense of other 
     individuals and small groups.
       We look forward to an opportunity to work with you 
     regarding proposals that expand coverage without damaging the 
     small group and individual markets.
           Sincerely,
     Blue Cross and Blue Shield Association,
     Health Insurance Association of America.

  Sometimes I agree with the insurance industry. In this situation I 
do. I think that association health plans can siphon off the healthy. 
They can thus lead to significant premium increases for those that 
remain in State-regulated insurance pools.

                              {time}  2000

  The ultimate result could be an increase in the uninsured, and only 
the sickest and highest risk individuals remaining in the State's 
insurance market. We have to be very careful about those types of 
provisions.
  Finally, Madam Speaker, let me just say that I appreciate the Speaker 
of the House, the gentleman from Illinois (Mr. Hastert), sticking to 
his word that we are going to have a debate on patient protection 
legislation next week. I hope that we will have a clean and fair rule 
that will allow the majority of the House to have its say on passing 
good, strong patient protection legislation.
  I think that we have been working on this for about 4 years. It is a 
struggle when you are going up against an industry as powerful as the 
HMO industry. But despite the fact that they have spent about $100 
million lobbying against this, money that should, in my opinion, have 
been spent on care for patients, the public overwhelmingly wants to see 
Congress pass a strong Patient Bill of Rights, strong patient 
protection legislation. They have heard from their friends, they have 
heard from family members, they have heard from fellow employees about 
problems with people in HMOs getting the kind of care that they should 
be getting, and they are scared that that could happen to their own 
family and their own children. They just want a fair chance at 
reversing an arbitrary denial of care because some of those decisions, 
as I pointed out in my speech tonight, and countless hundreds or 
thousands of others that I could talk about have resulted in injury to 
people, and it is occurring every day that goes by without our having 
this debate, Madam Speaker.
  I encourage my colleagues on both sides of the aisle to join with the 
300 endorsing organizations, support H.R. 2723, avoid believing the 
distortions that the industry is putting out about this bill. The sky 
will not fall, HMOs will continue. In fact, they will be better HMOs if 
we pass this legislation.

                          ____________________