Killing the Fatted Calf: Managed Care Liability in a Post-Pegram World
Boos, Karene M.
Boos, Eric J.
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Over one hundred million Americans receive their health care benefits under some kind of managed care plan. At the heart of every managed care plan is an emphasis on cost containment. The courts traditionally protected the proprietary economic interests of managed care by holding that claims against managed care organizations and plan directors were preempted under the Employee Retirement Income Security Act (ERISA). This was done as a means of facilitating a better health care delivery system for Americans and in spite of the number of patients who suffered poor health consequences as a result of decisions by managed care insurers to deny requested benefits. However, by holding that "mixed eligibility decisions" by medical directors are not preempted by ERISA, and that claims against managed care plans for the denial of benefits should proceed under state malpractice law, the United States Supreme Court in Pegram v. Herdrich may have paved the way to reverse that trend. For Pegram's full effect, states will either have to reconsider premising malpractice on the traditional patient-physician relationship, or take a more novel approach like Wisconsin and require that medical directors be licensed physicians who must carry medical malpractice insurance.