It’s not just lawyers like myself, and ripped-off claimants, who are frustrated with ERISA’s patent unfairness. Many of the federal judges who are called upon to apply this unjust law have expressed their own frustration. Indeed, this outcry has been referred to more than once as the “rising judicial chorus” against ERISA and its malignant consequences.
Today we hear from the Honorable Edward Roy Becker of the Third Circuit Court of Appeals, who passed away in 2006. In 2003, Judge Becker issued a heartfelt concurrence in an ERISA case in which he made the following comments.
“Congress enacted ERISA in 1974 ‘to promote the interest of employees and their beneficiaries in employee benefit plans.’ … However, with the rise of managed care and the Supreme Court’s series of decisions holding preempted any action for damages against HMOs, ERISA has evolved into a shield that insulates HMOs from liability for even the most egregious acts of dereliction committed against plan beneficiaries, a state of affairs that I view as directly contrary to the intent of Congress. Indeed, existing ERISA jurisprudence creates a monetary incentive for HMOs to mistreat those beneficiaries, who are often in the throes of medical crises and entirely unable to assert what meager rights they possess.
“ERISA generally, and § 514(a) particularly, have become virtually impenetrable shields that insulate plan sponsors from any meaningful liability for negligent or malfeasant acts committed against plan beneficiaries in all too many cases. This has unfolded in a line of Supreme Court cases that have created a ‘regulatory vacuum’ in which virtually all state law remedies are preempted but very few federal substitutes are provided.
“…at the same time as ERISA makes it inordinately difficult to bring an injunction to enforce a participant’s rights, it creates strong incentives for HMOs to deny claims in bad faith or otherwise ‘stiff’ participants. ERISA preempts the state tort of bad-faith claim denial, … so that if an HMO wrongly denies a participant’s claim even in bad faith, the greatest cost it could face is being compelled to cover the procedure, the very cost it would have faced had it acted in good faith. Any rational HMO will recognize that if it acts in good faith, it will pay for far more procedures than if it acts otherwise, and punitive damages, which might otherwise guard against such profiteering, are no obstacle at all. Not only is there an incentive for an HMO to deny any particular claim, but to the extent that this practice becomes widespread, it creates a ‘race to the bottom’ in which, all else being equal, the most profitable HMOs will be those that deny claims most frequently.”
The case is DiFelice v. Aetna U.S. Healthcare, et al., and the citation is 346 F.3d 442 (3rd Cir. 2003).