Case Study in Nevada: The Allegedly Unsafe Medical Provider and ERISA Preemption

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In Cervantes v. Health Plan of Nevada, 263 P.3d 261 (Nov. 2011), the plaintiff commenced an action against a managed care organization (MCO) alleging it violated Nevada's quality assurance laws and regulations when MCO allegedly referred her to a "blatantly unsafe medical provider" where she alleges she contracted hepatitis C. The plaintiff received health care benefits through her union's self-funded benefit plan governed by the Employee Retirement Income and Security Act of 1974, 29 U.S.C. §1001, et seq. (ERISA). The ERISA plan had retained the MCO to negotiate contracts for discounted fees with selected providers, who were then denominated as in-network providers.

The MCO moved for summary judgment, arguing that the plaintiff's claims were preempted by ERISA §514(a) because they have an impermissible connection with an ERISA plan; the district court granted the motion. The Supreme Court of Nevada affirmed, holding a claim predicated upon Nevada's quality assurance laws and regulations may be preempted if the MCO merely acts as an administrator or agent of the ERISA plan because Nevada's law would directly regulate the ERISA plan's benefit structure – i.e., ERISA plans would have a duty to monitor their service providers and, in turn, provide as a plan benefit a quality assurance program due to Nevada law. The court held that such a requirement clearly undermined Congress' objective of the uniform administration of ERISA benefits because administrative decisions would be subjected to individual state laws.

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