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Aetna Health Inc. v. Davila

Supreme Court of United States
542 U.S. 200 (2004)
ELI5:

Rule of Law:

A state-law cause of action complaining about the denial of medical coverage under an ERISA-regulated benefit plan is completely preempted by ERISA § 502(a) if the individual could have brought the claim under § 502(a)(1)(B) and no legal duty independent of ERISA or the plan terms is violated.


Facts:

  • Juan Davila and Ruby Calad were participants in employee benefit plans regulated by the Employee Retirement Income Security Act of 1974 (ERISA).
  • Davila's plan was administered by Aetna Health Inc.; Calad's was administered by CIGNA Healthcare of Texas, Inc.
  • Davila's treating physician prescribed the drug Vioxx for his arthritis, but Aetna refused to pay for it based on the plan's terms.
  • Instead of Vioxx, Davila took Naprosyn, from which he allegedly suffered a severe reaction that required hospitalization.
  • Calad underwent surgery, and her treating physician recommended an extended hospital stay for recovery.
  • CIGNA determined that Calad did not meet the plan's criteria for a continued stay and denied coverage for the additional hospital time.
  • After being discharged, Calad suffered post-surgery complications that required her to be re-hospitalized.

Procedural Posture:

  • Juan Davila and Ruby Calad filed separate lawsuits in Texas state court against Aetna and CIGNA, respectively, alleging violations of the Texas Health Care Liability Act.
  • The defendants (Aetna and CIGNA) removed both cases to their respective U.S. District Courts, arguing that the claims were completely preempted by ERISA.
  • The plaintiffs (Davila and Calad) filed motions to remand the cases back to state court, which both District Courts denied.
  • After the plaintiffs refused to amend their complaints to state claims under ERISA, the District Courts dismissed their lawsuits with prejudice.
  • The plaintiffs (appellants) appealed to the U.S. Court of Appeals for the Fifth Circuit, which consolidated the cases.
  • The Fifth Circuit Court of Appeals reversed the District Courts' rulings, holding that the claims were not preempted and should be remanded to state court.
  • Aetna and CIGNA (petitioners) were granted a writ of certiorari by the U.S. Supreme Court.

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Issue:

Does the Employee Retirement Income Security Act of 1974 (ERISA), specifically § 502(a)(1)(B), completely preempt state-law medical malpractice claims brought under the Texas Health Care Liability Act against a health maintenance organization (HMO) for refusing to cover medical services, thereby making those claims removable to federal court?


Opinions:

Majority - Justice Thomas

Yes, ERISA completely preempts state-law claims that are, in essence, claims for benefits denied under an ERISA-regulated plan. If an individual could have brought their claim under ERISA § 502(a)(1)(B) to recover benefits, and there is no independent legal duty implicated, then the cause of action is completely preempted. Here, the respondents' claims under the Texas Health Care Liability Act (THCLA) derive entirely from the denial of benefits promised under their ERISA plans. The duty of care imposed by the THCLA is not independent of the plan, as liability hinges on whether the requested treatment was a covered benefit. Merely labeling a claim as a 'tort' or seeking damages beyond what ERISA provides does not remove it from ERISA's exclusive remedial scheme. This case is distinguished from Pegram v. Herdrich because the HMOs made pure 'eligibility decisions' regarding coverage, not 'mixed eligibility and treatment decisions' made by a treating physician.


Concurring - Justice Ginsburg

Yes, the state-law claims are preempted under the Court's governing precedent. However, the Court's jurisprudence has created a 'regulatory vacuum' by coupling an encompassing interpretation of ERISA's preemptive force with a cramped construction of the 'equitable relief' available under § 502(a)(3). This leaves individuals who are harmed by wrongful benefit denials without any way to be made whole for their consequential injuries, such as the costs of hospitalization or pain and suffering. This unjust result is a 'gaping wound' in the law that either Congress or the Court must revisit to restore the make-whole remedies that were traditionally available under trust law, which Congress intended ERISA to replicate.



Analysis:

This decision solidified and expanded the doctrine of complete preemption under ERISA, establishing that state medical malpractice claims against plan administrators are preempted if they are fundamentally about benefit denials. It created a critical distinction between 'eligibility decisions' (preempted) and 'treatment decisions' (potentially not preempted), significantly shielding HMOs from state-court tort liability for coverage decisions. The ruling forces plaintiffs into federal court where ERISA's limited remedies—typically just the value of the denied benefit—make such lawsuits far less attractive and prevent recovery for consequential physical or economic harm.

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