The Shea Case
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.