Facts of the Case

Rush Prudential HMO, Inc., a health maintenance organization that provides medical services for employee welfare benefits plans covered by the Employee Retirement Income Security Act of 1974 (ERISA), denied Debra Moran's request to have surgery by an unaffiliated specialist. Under the Illinois HMO Act (Act), which provides that "in the event that the reviewing physician determines the covered service to be medically necessary," the HMO "shall provide" the service, Moran made a written demand for an independent medical review of her claim. After Rush refused her demand, Moran sued in state court to compel compliance with the Act. The court ordered the review, which found the treatment necessary. 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. Ultimately, the Court of Appeals found Moran's reimbursement claim preempted by ERISA so as to place the case in federal court, but it concluded that the Act was not preempted as a state law that "relates to" an employee benefit plan because it also "regulates insurance" under ERISA's saving clause.

Question

Is the Illinois Health Maintenance Organization Act, as applied to health benefits provided by a health maintenance organization under contract with an employee welfare benefit plan, preempted by the Employee Retirement Income Security Act of 1974?

Conclusion

No. In a 5-4 opinion delivered by Justice David H. Souter, the Court held that ERISA does not preempt the Illinois HMO Act. Under its common-sense view of the matter, the Court reasoned that, because HMOs are risk-bearing organizations subject to state insurance regulation and almost universally regulated as insurers under state law, "the Illinois HMO Act is a law 'directed toward' the insurance industry and an 'insurance regulation'" and is, thus, saved from preemption under ERISA's saving clause. Justice Clarence Thomas, with whom Chief Justice William H. Rehnquist and Justices Antonin Scalia and Anthony M. Kennedy joined, dissented. Justice Thomas argued that ERISA's civil enforcement provision provides the exclusive means for actions asserting a claim for benefits under health plans governed by ERISA and therefore state laws that create additional remedies are preempted.