Debra C. MORAN, Plaintiff-Appellant, and State of Illinois, Intervenor-Appellant, v. RUSH PRUDENTIAL HMO, INCORPORATED, Defendant-Appellee.
No. 99-2574.
United States Court of Appeals, Seventh Circuit.
Argued April 18, 2000. Decided Oct. 19, 2000.
230 F.3d 959
VACATED AND REMANDED.
Melinda Sue Kollross (argued), Clausen Miller, Chicago, IL, for defendant-appellee.
John P. Schmidt (argued), Office of the Attorney General, Civil Appeals Division, for intervenor-appellant.
Leonard A. Nelson, American Medical Association, Office of the General Counsel, Chicago, IL, for amicus curiae American Medical Association, Illinois State Medical Society, and American College of Legal Medicine.
David E. Manoogian, Epstein, Becker & Green, Washington, DC, for amicus curiae Illinois State Chamber of Commerce and Employment Law Council of Illinois.
Before FLAUM, Chief Judge, and RIPPLE and WILLIAMS, Circuit Judges.
RIPPLE, Circuit Judge.
Section 4-10 of Illinois’ Health Maintenance Organization Act (the HMO Act),
Debra Moran‘s primary care physician recommended a specific surgery for her, but Rush Prudential HMO, Inc. (Rush), the service provider for Ms. Moran‘s ERISA-governed medical benefits plan, denied coverage for that surgery. Rush offered instead to cover a less expensive surgery to be performed by a Rush-affiliated doctor. At her own expense, Ms. Moran underwent the surgery proposed by her physician. She later sought to enforce her rights under
I
BACKGROUND
A.
Ms. Moran is covered by a medical benefits plan sponsored by her husband‘s employer. The plan is governed by ERISA, and it is fully insured. Rush is the HMO provider for the plan. Two aspects of the plan are worth noting. First, the plan‘s member certificate delegates to Rush the broadest possible discretion to interpret the terms of the plan and to determine which benefits the participants are entitled to receive. R.1-1, Ex.A. at 7. Second, the certificate provides that services that are not medically necessary will not be covered by the plan. Id. at 21.2
Starting in 1996, Ms. Moran began experiencing pain, numbness, loss of function, and decreased mobility in her right shoulder. Ms. Moran sought treatment for these symptoms from Dr. Arthur LaMarre, her primary care physician and a Rush-affiliated physician. At first Dr. LaMarre treated Ms. Moran through physiotherapy and other conservative therapies, but these efforts did not relieve her symptoms. While she was undergoing these conservative therapies, Ms. Moran obtained the name of Dr. Julia Terzis, an out-of-network surgeon in Virginia who specializes in micro-reconstructive surgery. After Rush denied Ms. Moran‘s request for a out-of-network referral to consult with Dr. Terzis, Ms. Moran traveled on her own accord to Virginia to be examined by Dr. Terzis. Dr. Terzis diagnosed Ms. Moran with brachial plexopathy and thoracic outlet syndrome (TOS), a nerve compression syndrome caused by the compression of nerves in Ms. Moran‘s brachial plexus.
Most nerve compression syndromes are mild and effectively treated with conservative physiotherapy, and surgery is not indicated unless more conservative measures fail to manage the symptoms. If surgery becomes necessary, the standard procedure for TOS involves decompression by way of first rib resection (the complete removal of the uppermost rib) or first rib resection with scalenectomy (the removal of the rib and the attached muscle). If necessary, a surgeon may use loupe magnification, in which the surgeon wears a goggle-like apparatus to magnify the immediate view, to conduct a neurolysis, which is removal of scar tissue surrounding the injured nerve. Dr. Terzis, however, performs a more complicated surgery for patients with Ms. Moran‘s condition. Dr. Terzis’ surgery consists of rib resection, extensive scalenectomy, and, if indicated, microneurolysis of the lower roots of the brachial plexus under intraoperative microscopic magnification. Dr. Terzis concluded that Ms. Moran was a candidate for the more complicated microneurolysis surgery. She also indicated to Ms. Moran that she had successfully treated other patients with Ms. Moran‘s condition.
After meeting with Dr. Terzis, Ms. Moran asked Dr. LaMarre to obtain approval from Rush for Dr. Terzis’ proposed surgery. Dr. LaMarre first had Ms. Moran see two Rush-affiliated thoracic surgeons, Dr. Raymond A. Dieter and Dr. William H. Warren. After examining Ms. Moran, both doctors confirmed Dr. Terzis’ diagnosis of TOS and recommended that Ms. Moran undergo the standard TOS surgery. Ms. Moran, however, was not impressed by the prognosis offered by these doctors, and she decided that she wanted to have Dr. Terzis perform her proposed surgery.
On October 14, 1997, Dr. LaMarre asked Rush to approve Dr. Terzis’ microneurolysis surgery for Ms. Moran. In his recommendation letter, Dr. LaMarre stated that, in his opinion, Ms. Moran would be best served by having Dr. Terzis’ procedure performed. R.45, Ex.5. Rush denied approval on the grounds that Dr. Terzis’ surgery was out of network. Ms. Moran appealed the administrator‘s decision. In response to her appeal, Rush requested additional information from Dr. Dieter and Dr. Warren about Dr. Terzis’ proposed surgery and the need for microneurolysis. Both doctors reported that microneurolysis was unnecessary for Ms. Moran. After reviewing the reports of Dr. Dieter and Dr. Warren, and after conducting its own analysis of relevant medical literature, Rush affirmed its denial of coverage for Dr. Terzis’ microneurolysis surgery on the ground that the procedure was not medically necessary as defined by the plan.
The next month, in February 1998, Ms. Moran underwent Dr. Terzis’ microneurolysis surgery. The surgery took nearly 14 hours and, with postoperative care, cost $94,841.27. Ms. Moran paid for the surgery herself. Ms. Moran submitted a copy of the bill for her surgery to Rush, and she and Dr. Terzis also submitted other materials related to the surgery. Rush treated these submissions as a renewed benefits claim, and it opened another investigation into whether Ms. Moran‘s now-completed surgery should be covered.
As part of its investigation, Rush sought the opinions of additional experts, and it provided these experts with Ms. Moran‘s medical records as well as information concerning Dr. Terzis’ microneurolysis surgery. The first two opinions obtained by Rush were from Dr. Gerald Harris and Dr. John C. Alexander. These doctors were skeptical of the need for microneurolysis in Ms. Moran‘s case, but they admitted that they lacked expertise in the area. Rush next consulted with Dr. Susan E. MacKinnon, the Chief of Plastic and Reconstructive Surgery at Washington University School of Medicine in St. Louis. Dr. MacKinnon opined that Dr. Terzis’ microneurolysis was unnecessary.
C.
In January 1998, the month before she underwent surgery, Ms. Moran made a written demand to Rush for it to comply with
The district court remanded the case to the state court. The court noted that preemption is generally a defense and that, under the well-pleaded complaint rule, an anticipated federal defense could not be the basis for removal. Nonetheless, the district court also noted that a completely preempted state law claim could be removed, but the court explained, in the ERISA context, only state law claims that conflicted with ERISA‘s civil enforcement provisions were completely preempted by ERISA. In this case, the district court concluded, Ms. Moran‘s request for specific performance was not a claim under ERISA‘s civil enforcement provisions and therefore was not completely preempted. The district court left open the possibility that a claim for reimbursement under
D.
Upon remand, the state court ordered Rush to submit to the independent physician review mandated by the HMO Act. The state court reserved ruling on whether ERISA preempted the portion of
Rush had completed its independent review, Rush concluded its renewed investigation into whether Ms. Moran‘s surgery should be covered. Rush‘s medical director, after reviewing the reports of Dr. MacKinnon and Dr. Dellon along with the reports of the other doctors, concluded that Dr. Terzis’ surgery had not been medically necessary. In January 1999, Rush again denied Ms. Moran‘s benefits claim.
E.
Following the independent review by Dr. Dellon, Ms. Moran asked the state court to require Rush to reimburse her for the surgery. The state court requested that Ms. Moran amend her complaint to clarify the relief she was seeking. Ms. Moran then filed an amended complaint, the First Amended Complaint, seeking enforcement of
After Ms. Moran filed her First Amended Complaint, Rush removed the suit to federal court once again. This time, Rush argued that Ms. Moran‘s suit was a claim for benefits that was completely preempted and that her claim, therefore, had to be made under ERISA‘s civil enforcement provision,
Turning to the merits, the district court then addressed Rush‘s contention that ERISA preempted
Ms. Moran subsequently moved for reconsideration of the district court‘s ruling. Ms. Moran argued that the district court should reconsider its previous decision in light of the Supreme Court‘s opinion in UNUM Life Insurance Co. v. Ward, 526 U.S. 358, 119 S.Ct. 1380, 143 L.Ed.2d 462 (1999). In Ward, the Supreme Court held that a state law need not satisfy all three McCarran-Ferguson factors in order for the law to fall within ERISA‘s saving clause. See id. at 374. The district court denied Ms. Moran‘s motion for reconsideration on the ground that, even if the saving clause saved
F.
Ms. Moran amended her complaint a second time in April 1999, ostensibly to
II
DISCUSSION
A.
A district court‘s preemption ruling is a question of law that we review de novo. See Carpenters Local Union No. 26 v. United States Fidelity & Guar. Co., 215 F.3d 136, 139 (1st Cir.2000); Burlington N. & Santa Fe Ry. v. Doyle, 186 F.3d 790, 794 (7th Cir.1999). We also review de novo the propriety of the removal of a state action to federal court. See Tylka v. Gerber Prods. Co., 211 F.3d 445, 447 (7th Cir.2000). Likewise, we review de novo a district court‘s grant of summary judgment. See Anstett v. Eagle-Picher Indus., Inc., 203 F.3d 501, 503 (7th Cir.2000). It is appropriate to grant summary judgment only when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
B.
A defendant may remove to federal court actions originally brought in a state court only when those actions fall within the federal court‘s original jurisdiction, see
As we explained in Speciale v. Seybold, 147 F.3d 612 (7th Cir.), cert. denied, 525 U.S. 1017 (1998) [t]he determination of jurisdiction on removal involving an ERISA issue is based upon the well-pleaded complaint rule, the ERISA complete preemption exception to that rule and the defense of conflict preemption under ERISA. Id. at 614. Under the well-pleaded complaint rule, we look to the state court complaint and not to the defendant‘s response to determine whether the plaintiff‘s claim falls under federal question jurisdiction. See, e.g., Jass v. Prudential Health Care Plan, Inc., 88 F.3d 1482, 1486 (7th Cir.1996). It is long settled law that a cause of action arises under federal law only when the plaintiff‘s well-pleaded complaint raises issues of federal law. Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63 (1987). A defendant‘s federal defense to a claim arising under state law, therefore, does not create federal jurisdiction and
There exists, however, an exception to the well-pleaded complaint rule for state law claims that have been completely preempted by Congress. See Speciale, 147 F.3d at 615. This so-called complete preemption doctrine really is not a preemption doctrine but rather a federal jurisdiction doctrine. Lister v. Stark, 890 F.2d 941, 943 n. 1 (7th Cir.1989). Even though a complaint may not mention a federal basis of jurisdiction, the complete preemption doctrine permits recharacterization of a plaintiff‘s state law claim as a federal claim so that removal is proper. Speciale, 147 F.3d at 615 (quoting Lister, 890 F.2d at 943).
In Metropolitan Life, the Supreme Court held that the civil enforcement provision of ERISA,
In Jass, we identified three factors to be used to determine whether a state law claim should be recharacterized as an ERISA claim under
We agree with the district court that Ms. Moran‘s state law claims are properly recharacterized as claims for benefits under
C.
Now that we have determined that removal of Ms. Moran‘s state court claims based on
The comprehensive scope of ERISA extends to the regulation of employee welfare benefit plans providing medical, surgical, or hospital care or benefits for plan participants through the purchase of insurance or otherwise.
As provided by
1.
For purposes of
To determine whether
Each Health Maintenance Organization shall provide a mechanism for the timely review by a physician holding the same class of license as the primary care physician, who is unaffiliated with the Health Maintenance Organization, jointly selected by the patient (or the patient‘s next of kin or legal representative if the patient is unable to act for himself), primary care physician and the Health Maintenance Organization in the event of a dispute between the primary care physician and the Health Maintenance Organization regarding the medical necessity of a covered service proposed by a primary care physician. In the event that the reviewing physician determines the covered service to be medically necessary, the Health Maintenance Organization shall provide the covered service.
State laws that risk subjecting [ERISA] plan administrators to conflicting state regulations undoubtedly have a connection with ERISA plans within the meaning of
2.
As we already have noted, however, a state law that relates to ERISA plans may nonetheless avoid preemption if that law regulates insurance within the meaning of ERISA‘s saving clause,
We conclude that
Section 4-10 of the HMO Act further regulates insurance under a common sense understanding because the Act‘s provisions go to the core of the relationship between the insurer and the insured. It is fundamental insurance law that ‘existing and valid statutory provisions enter into and form a part of all contracts of insurance to which they are applicable, and, together with settled judicial constructions thereof, become a part of the contract as much as if they were actually incorporated therein.’ Plumb, 124 F.3d at 861 (quoting 2 Lee R. Russ & Thomas F. Segalla, Couch on Insurance 3d § 19:1, at 19-2 to 19-4 (1996)). The provisions of
Having determined that
3.
The deemer clause,
The deemer clause is inapplicable to this case. In FMC Corp., the Supreme Court explained that the deemer clause exempts self-funded ERISA plans from state laws that ‘regulate insurance’ within the meaning of the saving clause. Id. The ERISA plan at issue before us, however, is not a self-funded plan; it is an insured plan. The Supreme Court‘s interpretation of the deemer clause makes clear that if a plan is insured, a State may regulate it indirectly through regulation of its insurer and its insurer‘s insurance contracts. Id. at 64. Rush is the insurer to the ERISA plan at issue in our case, and therefore the deemer clause does not apply. See Ward, 526 U.S. at 367 n. 2 (stating that, because the plan at issue in that case was not self-insured, the deemer clause was not at issue); Plumb, 124 F.3d at 859 n. 6 (explaining that, because the plan at issue was an insured plan, the deemer clause was inapplicable).
4.
A state law that falls within the saving clause nevertheless may be preempted if that law conflicts with a substantive provision of ERISA. See Pilot Life, 481 U.S. at 57. Rush argues that
The Texas independent review statute, like
Our colleagues in the Fifth Circuit took the view that the Texas law conflicted with ERISA‘s civil enforcement scheme and therefore was preempted. The court concluded that Texas’ independent review statute was preempted, even though it regulated insurance within the meaning of the saving clause, because the statute‘s provisions were contrary to the civil enforcement scheme established in
In denying the petition for rehearing, the court further explained that, in its view, the Texas’ independent review provision substitutes the medical judgment of a third party physician for the HMO‘s, or treating physician‘s, judgment as to medical necessity. Corporate Health Insurance, Inc. v. Texas Dep‘t of Ins., 220 F.3d 641, 644 (5th Cir.2000). In the view of the court, the law is clear that Texas cannot provide a supplementary claims process by binding the HMO to pay for a treatment that is simply a second opinion on medical necessity about which reasonable doctors might reach differing conclusions. Id. at 645.4
Although the court left open the possibility that an independent review statute might not run afoul of the exclusivity of ERISA‘s civil enforcement provisions if the independent review mechanism regulate[d] the minimal quality level of medical care provided for covered conditions, the court explained that the Texas statute was plainly a state regime for reviewing benefit decisions and not a system for implementing a mandated term of insurance regulating a minimal standard of care. Id.
In our view,
Nor does the addition of this statutorily mandated provision in the contract alter impermissibly the deferential standard of review required by the language of the plan. Certainly, the administrator‘s failure to abide by the decision of the outside medical consultant on the issue of medical necessity would constitute an abuse of discretion. The statutorily required provision of the plan requires that the decision of the independent review physician be followed, and it would be an abuse of discretion on the part of the administrator not to observe the command of this provision. However, the different outcome is not because of a change in the standard of review but because of a change in the provisions of the contract.6
We also believe that it is inaccurate to say that
In sum,
D.
In this case, there no longer remains a question of material fact that would preclude judgment as a matter of law. As we already have explained, Ms. Moran‘s claim for reimbursement really is a claim for benefits made under
Conclusion
For the foregoing reasons, we reverse the judgment of the district court.
REVERSED.
RIPPLE
CIRCUIT JUDGE
POSNER, Circuit Judge, with whom Circuit Judges COFFEY, EASTERBROOK, and DIANE P. WOOD join, dissenting from denial of hearing en banc.
This case is well worth the attention of the full court. The panel‘s decision creates a square conflict with another circuit, is very probably unsound, and will affect an enormous number of cases. It is also a single-issue case, and the issue is one of law, so that en banc consideration would be unlikely to create a fractured result or bog the court down in factual questions. Rarely have we had so strong a candidate for en banc review.
The decision holds that ERISA does not preempt an Illinois statute that requires HMOs to submit to review by an independent physician the decision by the HMO not to cover a treatment deemed medically necessary by the patient‘s physician.
The law in this case, like the materially identical law held preempted by the Fifth Circuit, is not a general regulation of insurance, or even of health insurance; it is a regulation of HMOs, which are the service providers under a great many ERISA medical-benefits plans. The law establishes a system of appellate review of benefits decisions that is distinct from the provision in ERISA for suits in federal court to enforce entitlements conferred by ERISA plans.
Although the panel‘s opinion is long, it does not respond to the concerns just expressed, although they were forcefully argued in the HMO‘s brief and in an amicus brief supporting the HMO. All that the panel can find to say in defense of its startling decision, except that it thinks it supported by Ward, yet without appreciating the force of the Fifth Circuit‘s distinction of that case, is that the Illinois law makes the physician-review provision a part of the ERISA plan and so does not disturb the exclusivity of ERISA‘s scheme for the enforcement of the rights that ERISA plans confer on participants and beneficiaries. Under the panel‘s view, then, if the plan does not submit a disagreement to review by the independent physician, the participant can sue the plan for a violation of its terms. This is just a facon de parler. It invites states to evade the preemptive force of ERISA simply by deeming its regulations of ERISA plans to be plan terms. It would authorize a state to require ERISA plans to double their benefits. I am sure the panel would not go so far as to permit so transparent an evasion of ERISA‘s preemption clause, but the opinion contains nothing that would enable the panel to distinguish that case. Far from being compelled by Ward, the panel‘s opinion is in tension with Pegram v. Herdrich, 530 U.S. 211 (2000), which it does not cite. Although Pegram held that combined treatment-eligibility decisions by an HMO are not fiduciary decisions under ERISA, it did not doubt that ERISA applied to HMO-managed ERISA plans; the panel, by contrast, seems to think ERISA inapplicable to such plans.
There is another unresolved tension in the panel‘s opinion. The opinion appears to depend on two propositions: first, that the Illinois law regulates insurance rather than ERISA plans and thus is not preempted; second, that by virtue of Illinois law the requirement of independent physician review is written not only into an insurance contract but also into the plan itself, which makes the requirement enforceable in federal court. The two propositions are incompatible. If the statute merely regulates insurance and therefore is not preempted, how can it be part of an ERISA plan and enforceable in federal court? If, on the other hand, the requirement imposed by the statute is and must be incorporated into the plan, then Illinois has done more than merely regulate the contents of an insurance policy. It has regulated the contents of an ERISA plan—which means that its law is preempted.
RICHARD A. POSNER
CIRCUIT JUDGE