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Rush Prudential HMO, Inc. v. Moran - 536 U.S. 355

Rule:

In deciding whether a law "regulates insurance" under the saving clause of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.S. §§ 1001 et seq., courts start with a common-sense view of the matter under which a law must not just have an impact on the insurance industry, but must be specifically directed toward that industry. A court then tests the results of the common-sense enquiry by employing the three factors used to point to insurance laws spared from federal preemption under the McCarran-Ferguson Act, 15 U.S.C.S. §§ 1011 et seq.

Facts:

Petitioner Rush Prudential HMO, Inc.(Rush), a health maintenance organization (HMO) that contracts to provide medical services for employee welfare benefits plans covered by the Employee Retirement Income Security Act of 1974 (ERISA), denied respondent Debra Moran's request to have surgery by an unaffiliated specialist on the ground that the procedure was not medically necessary. Moran made a written demand for an independent medical review of her claim, as guaranteed by § 4-10 of Illinois's HMO Act, which further provides that "in the event that the reviewing physician determines the covered service to be medically necessary," the HMO "shall provide" the service. Rush refused her demand, and Moran sued in state court to compel compliance with the Act. That court ordered the review, which found the treatment necessary, but Rush again denied the claim. While the suit was pending, Moran had the surgery and amended her complaint to seek reimbursement. Rush removed the case to federal court, arguing that the amended complaint stated a claim for ERISA benefits. The District Court treated Moran's claim as a suit under ERISA and denied it on the ground that ERISA preempted § 4-10. The Seventh Circuit reversed. It found Moran's reimbursement claim preempted by ERISA so as to place the case in federal court, but it concluded that the state Act was not preempted as a state law that "relates to" an employee benefit plan, 29 U.S.C. §§ 1144(a), because it also "regulates insurance" under ERISA's saving clause, §§ 1144(b)(2)(A). The United States Supreme Court granted Rush's petition for certiorari review.

Issue:

Did ERISA preempt Illinois' independent review statute?

Answer:

No

Conclusion:

The Court held that the Illinois statute was a law "directed toward" the insurance industry, and an insurance regulation under a commonsense view, thus it was not preempted by ERISA. The Court rejected Rush’s arguments holding that the state statute did not enlarge a claim beyond the benefits available in any action brought under 29 U.S.C.S. § 1132(a). The Court noted that the state statute bore a closer resemblance to second-opinion requirements than to arbitration schemes. The state law operated before the stage of judicial review and its effect was no greater than that of mandated-benefit regulation.

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