The Lancaster court distinguished its holding from the decision in
Shea v.
Esensten. [Shea v. Esensten, 107 F.3d 625 (8th Cir. 1997).] Although the
technical grounds, based on the plaintiff’s pleadings, for distinguishing the
cases may be sound, the courts reach profoundly different results, which
cannot be reconciled on the facts.
Shea also involved a secret incentive plan
and a patient who was denied even marginally competent care. The court’s
summary of Mr. Shea’s medical care is poignant:
After being hospitalized for severe chest pains during an overseas
business trip, Patrick Shea made several visits to his long-time family
doctor. During these visits, Mr. Shea discussed his extensive family
history of heart disease, and indicated he was suffering from chest
pains, shortness of breath, muscle tingling, and dizziness. Despite all
the warning signs, Mr. Shea’s doctor said a referral to a cardiologist was
unnecessary. When Mr. Shea’s symptoms did not improve, he offered to
pay for the cardiologist himself. At that point, Mr. Shea’s doctor
persuaded Mr. Shea, who was then forty years old, that he was too
young and did not have enough symptoms to justify a visit to a
cardiologist. A few months later, Mr. Shea died of a heart attack.
Mrs. Shea brought a state law tort action under the Minnesota wrongful death
statute. She filed against the treating physician, his medical group, and Medica,
the health plan. The district court dismissed the plaintiff’s complaint for failure
to state a claim. The plaintiff appealed, resulting in the instant case. The
appeals court found that ERISA preempted the plaintiff’s state law claims
against the plan because these clearly involved the administration of benefits.
Unlike the Lancaster court, the
Shea court found that the plaintiff was entitled
to relief under ERISA itself.
ERISA allows a plan participant to bring an action for breach of the plan’s
fiduciary duty. This right extends only to plan participants. Medica argued that,
because Mr. Shea was dead, he was no longer a plan participant and thus had
no standing under ERISA. The court found that standing under ERISA continued
if it was the plan’s breach of duty that terminated the member’s participation:
We are persuaded that Mrs. Shea, as the representative of Mr. Shea’s
estate, has standing to assert her husband’s ERISA claims. Any other
result would reward Medica for giving its preferred doctors an incentive
to make more money by delivering cheaper care to the detriment of
patients like Mr. Shea, and “ERISA should not be construed to permit
the fiduciary to circumvent [its] ERISA- imposed fiduciary duty in this
manner.” [Shea at 628.]
Having established that plaintiff had standing, the court considered whether
Medica had a duty to disclose its incentive plan. ERISA itself has detailed
disclosure requirements, but, with the exception of the rules for reporting on
plans with Medicare and Medicaid subscribers, these are not specific to health
plans and do not unambiguously answer the question. In the key case on the
extent of an ERISA plan’s fiduciary duties, the U.S. Supreme Court read ERISA
as incorporating common law fiduciary duties: “In general, trustees’
responsibilities and powers under ERISA reflect Congress’ policy of ‘assuring
the equitable character’ of the plans. Thus, rather than explicitly enumerating
all of the powers and duties of trustees and other fiduciaries, Congress invoked
the common law of trusts to define the general scope of their authority and
responsibility.” [Central States, Southeast & Southwest Areas Pension Fund v.
Central Transp., Inc., 472 U.S. 559 (1985).] A common law fiduciary clearly has
the duty to disclose all material information to the patient, including an
incentive plan that would affect the physicians’ decision making:
From the patient’s point of view, a financial incentive scheme put in
place to influence a treating doctor’s referral practices when the patient
needs specialized care is certainly a material piece of information. This
kind of patient necessarily relies on the doctor’s advice about treatment
options, and the patient must know whether the advice is influenced by
self-serving financial considerations created by the health insurance
provider. [Shea, 107 F.3d at 628.]
This is the first major case to find that a health plan, as an ERISA fiduciary, has
a duty to disclose incentive plans to the subscribers. The
Shea case provides
little benefit to the plaintiff in her claims against the plan because the
statutory recovery under ERISA has not been litigated and may be limited to
the value of the insurance premiums. For medical care practitioners, however,
Shea sends a clear message: medical care practitioners, especially physicians,
as fiduciaries, have a duty to disclose incentive plans that may negatively
influence their decision making for individual patients’ care.
