No. 00-1021 

In the Supreme Court of the United States 

RUSH PRUDENTIAL HMO, INC., PETITIONER 

v. 

DEBRA C. MORAN, ET AL. 

ON WRIT OF CERTIORARI 
TO THE UNITED STATES COURT OF APPEALS 
FOR THE SEVENTH CIRCUIT 

BRIEF FOR THE UNITED STATES 
AS AMICUS CURIAE 

HOWARD M. RADZELY 

Acting Solicitor of Labor 
ALLEN H. FELDMAN 

Associater Solicitor 
NATHANIEL I. SPILLER 

Deputy Associate Solicitor 
ELIZABETH HOPKINS 

Senior Appellate Attorney 
Department of Labor 
Washington, D.C. 20210 
PAUL D. CLEMENT 

Acting Solicitor General 

Counsel of Record 

EDWIN S. KNEEDLER 

Deputy Solicitor General 

JAMES A. FELDMAN 

Assistant to the Solicitor 

General 
Department of Justice 
Washington, D.C. 20530-0001 
(202) 514–2217 

QUESTION PRESENTED 

Section 4-10 of the Illinois Health Maintenance Organi- 
zation Act (215 Ill. Comp. Stat. Ann. 125/4-10 (West 1993 & 
Supp. 2001) requires a health maintenance organization to 
“provide a mechanism for * * * review by a physician 

* * * in the event of a dispute between the primary care 
physician and the Health Maintenance Organization 
regarding the medical necessity of a covered service 
proposed by a primary care physician,” and provides that 
“[i]n the event that the reviewing physician determines the 
covered service to be medically necessary, the Health Main- 
tenance Organization shall provide the covered service.” 
The question presented is whether Section 4-10 of the 
Illinois Health Maintenance Organization Act is preempted 
by the Employee Retirement Income Security Act of 1974 
(ERISA), 29 U.S.C. 1001 et seq. 

(I) 

TABLE OF CONTENTS 

Page 

Interest of the United States ...................................................... 
1 

Statement ........................................................................................ 1 

Summary of argument .................................................................. 

4 

Argument: 

I. Section 4-10 of the Illinois HMO Act “relates to” 
ERISA plans for purposes of ERISA’s express 

preemption provision ................................................... 

6 

A. Section 4-10 “relates to” ERISA plans 
because it governs how plans make bene- 
fits determinations ................................................ 
6 

B. Pegran v. Herdrich is not to the contrary ........ 
7 

II. Section 4-10 “regulates insurance” for purposes 

of ERISA’s insurance saving clause .......................... 

11 

A. As a matter of “common-sense” Section 
4-10 regulates insurance ...................................... 
12 

B. Section 4-10 satisfies at least two of the 

McCarran-Ferguson factors ................................ 

16 

III. Section 4-10 does not conflict with Section 

502(a) of ERISA, which provides the exclusive 
civil action under ERISA ............................................ 

18 
A. Under Pilot Life, a State insurance law 

that conflicts with a provision of ERISA 
is preempted ........................................................... 

18 
B. Section 4-10’s provision for private dispute 

resolution does not conflict with Section 
502(a) ........................................................................ 21 

Conclusion ....................................................................................... 30 

Appendix ......................................................................................... 1a 

(III) 

IV 

TABLE OF AUTHORITIES 

Cases: Page 

Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 
504 (1981) ................................................................................. 
6 

Anderson v. Humana, Inc., 24 F.3d 889 (7th Cir. 
1994) ......................................................................................... 12 

Barnett Bank v. Nelson, 517 U.S. 25 (1996) ..................... 

16 

Bowen v. United States Postal Service, 459 U.S. 
212 (1983) ................................................................................. 
27 

Chappel v. Laboratory Corp. of America, 232 F.2d 
721 (9th Cir. 2000) .................................................................. 
24 

Circuit City Stores, Inc. v. Adams, 121 S. Ct. 1302 
(2001) ........................................................................................ 24 

Corporate Health Ins., Inc. v. Texas Dept. of Ins., 
215 F.3d 526 (5th Cir.), petition for cert. pending, 
No. 00-665 (2000) .............................................................. 

7, 8, 12 

Department of Treasury v. Fabe, 508 U.S. 491 
(1993) .................................................................................... 
16, 17 

Egelhoff v. Egelhoff, 121 S. Ct. 1322 (2001) ...................... 
6, 7 

FMC Corp. v. Holliday, 498 U.S. 52 (1990) ..... 
6, 7, 11, 14, 20 

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 
101 (1989) ................................................................................. 
26 

Franchise Tax Bd. v. Construction Laborers 

Vacation Trust, 463 U.S. 1 (1983) .................................. 

28, 29 

Geier v. American Honda Motor Co., Inc., 529 U.S. 
861 (2000) ................................................................................. 
18 

General Elec. Co. v. Gilbert, 429 U.S. 125 (1977) ............. 
14 

Group Life & Health Ins. Co. v. Royal Drug Co., 
440 U.S. 205 (1979) ............................................................ 
13, 17 

Harris Trust & Savings Bank v. Salomon Smith 

Barney, 530 U.S. 238 (2000) ................................................ 

23 

Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 
(1990) ........................................................................................ 
6, 19 

Iron Workers Local 272 v. Bowen, 624 F.2d 1255 
(5th Cir. 1980) ......................................................................... 22 

V 

Cases—Continued Page 

John Hancock Mut. Life Ins. Co. v. Harris Trust 
& Sav. Bank, 510 U.S. 86 (1993) ........................................ 
11 

Mertens v. Hewitt Associates, 508 U.S. 248 (1993) .......... 
19 

Metropolitan Life Ins. Co. v. Massachusetts, 
471 U.S. 724 (1985) ..................................................... 
11, 14, 15, 

17, 20, 25, 29 

Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58 
(1987) ........................................................................................ 2 

New York State Conference of Blue Cross & Blue 
Shield Plans v. Travelers Ins., Co., 514 U.S. 645 
(1995) ........................................................................................ 

6, 7 
Pappas v. Asbell, 768 A.2d 1089 (Pa. 2001), petition 
for cert. pending, No. 01-200 (2001) ................................... 
8 

Pegram v. Harbrich, 530 U.S. 211 (2000) ...................... 
7, 8, 12 

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987) .... 
passim 

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) ........... 
6 

Teamsters v. Lucas Flour Co., 369 U.S. 95 (1962) ........... 
23 

Textile Workers v. Lincoln Mills, 353 U.S. 448 
(1957) .................................................................................... 
23, 24 

UNUM Life Ins. Co. v. Ward, 526 U.S. 358 (1999) ....... 
3, 11, 

12, 16, 17, 20, 28, 29 
Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119 
(1982) .................................................................................... 

16, 17 

United Paperworkers Int’l Union v. Misco, Inc., 
484 U.S. 29 (1988) ......................................................... 
21, 22, 26 

United States Healthcare Sys. of Pa., Inc. v. 

Pennsylvania Hosp. Ins. Co., 530 U.S. 1241 (2000) ....... 

8 

Varity Corp. v. Howe, 516 U.S. 489 (1996) ........................ 
10 

Statutes and regulations: 

Employee Retirement Income Security Act of 
1974, 29 U.S.C. 1001 et seq.: 
§ 3(13), 29 U.S.C. 1002(13) ............................................... 

1 
§ 3(21)(A)(iii), 29 U.S.C. 1002(21)(A)(iii) ....................... 
10 

§ 402(a), 29 U.S.C. 1102(a) ............................................... 9 

VI 

Statutes and regulations—Continued 
Page 

§ 404(a)(1)(D), 29 U.S.C. 1104(a)(1)(D) .......................... 
9 

§ 502(a), 29 U.S.C. 1132(a) (1994 & Supp. V 
1999) ....................................................................... passim 

§ 502(a)(1)(B), 29 U.S.C. 1132(a)(1)(B) .................. 

passim 

§ 502(a)(2), 29 U.S.C. 1132(a)(2) (1994 & Supp. V 
§ 503, 29 U.S.C. 1133 ................................................. 
9, 24, 25 

§ 503, 29 U.S.C. 1133(2) .................................................... 
9 

§ 506(b), 29 U.S.C. 1136(b) ............................................... 
1 

§ 514(a), 29 U.S.C. 1144(a) ....................................... 
1, 4, 6, 10 

§ 514(a)(2)(B), 29 U.S.C. 1144(a)(2)(B) .......................... 
14 

§ 514(b)(2)(A), 29 U.S.C. 1144(b)(2)(A) .............. 
1, 3, 4, 11 

§ 514(b)(2)(A), 29 U.S.C. 1144(b)(2)(B) ..................... 
11, 20 

§ 514(d), 29 U.S.C. 1144(d) ............................................... 
25 

Federal Arbitration Act, 9 U.S.C. 1 et seq. .......................... 
25 

Health Maintenance Organization Act of 1973, Pub. L. 

No. 93-222, 87 Stat. 914, 42 U.S.C. 300e et seq. ................ 

12 

§ 1301(c)(2), 42 U.S.C. 300e(c)(2) .................................... 
12 

§ 1311(a)(1)(D), 42 U.S.C. 300e-10(a)(1)(D) .................. 
13 

Illinois Health Maintenance Organization Act, 
215 Ill. Comp. Stat. Ann. 125/4-10 et seq. (West 
1993 & Supp. 2001) ................................................................ 
2 

215 Ill. Comp. Stat. Ann. 125/4-10 (West 1993 & 

Supp. 2001) ...................................................... 
passim, 1a 

215 Ill. Comp. Stat. Ann. 125/1-2 .................................... 
14 

215 Ill. Comp. Stat. Ann. 134/1 et seq. (West 
2000 & Supp. 2001) ...................................................... 
2 

Labor-Management Relations Act, 1947, § 301, 29 

U.S.C. 185 ............................................................................ 

23, 24, 

25, 26, 27, 28 
McCarran-Ferguson Act, § 2(b), 15 U.S.C. 1012(b) ............ 

17 

29 C.F.R.: 

Section 2560.503-1(b)(2)(i) (1978 & 2000) .......................... 

24 

Section 2560.503-1(b)(6) ........................................................ 
24 

Section 2560.503-1(c)(4)(ii) ................................................... 
24 

Section 2560.503-1(g)(1) (2000) ............................................ 10 

VII 

Statutes and regulations—Continued 
Page 

Section 2560.503-1(h)(1) ........................................................ 
10 

Section 2560.503-1(h)(3)(ii) ................................................... 
10 

Section 2560.503-1(i)(1)(ii) .................................................... 
10 

Section 2560.503-1(k) ............................................................ 
22 

Section 2560.503-1(k)(2)(i) .................................................... 
25 

Miscellaneous: 

Dep’t of Labor Advisory Op. 81-50A, 1981 WL 17772 
(June 4, 1981) .......................................................................... 

10 
Dep’t of Labor Advisory Op. 92-24A, 1992 

WL 337539 (Nov. 6, 1992) ..................................................... 

10 

42 Fed. Reg. 27,426 (1977) ....................................................... 
10 

65 Fed. Reg. (2000): 

p. 70,254 ................................................................................... 

22 

p. 70,266 ................................................................................... 
24 

p. 70,267 ................................................................................... 
24 

p. 70,268 ................................................................................... 
10 

p. 70,269 ................................................................................... 
10 

pp. 70,270-70,271 ................................................................ 
22, 25 

H.R. 2563, 107th Cong., 1st Sess (2001) ................................ 
19 

E.H. Morrein, Confusion in the Courts: Managed 

Care Financial Structures and their Impact on 
Medical Care, 35 Tort & Ins. L.J. (2000) ......................... 

15 
S. 1052, 107th Cong., 1st Sess. (2001) .................................... 
19 

S. Rep. No. 129, 93d Cong., 1st Sess. (1973) ......................... 
13 

J. P. Weiner & G. de Lissovoy, Razing a Tower of 

Babel: A Taxonomy for Managed Care and Health 
Insurance Plans, 18 J. Health Pol., Pol’y, & L. 75 
(1993) ........................................................................................ 15 

In the Supreme Court of the United States 

No. 00-1021 
RUSH PRUDENTIAL HMO, INC., PETITIONER 

v. 
DEBRA C. MORAN, ET AL. 

ON WRIT OF CERTIORARI 
TO THE UNITED STATE COURT OF APPEALS 
FOR THE SEVENTH CIRCUIT 

BRIEF FOR THE UNITED STATES AS 
AMICUS CURIAE 

INTEREST OF THE UNITED STATES 

This case concerns the interrelationship of the preemption 
provision of the Employee Retirement Income Security Act 
of 1974 (ERISA), 29 U.S.C. 1144(a), its insurance saving 
clause, 29 U.S.C. 1144(b)(2)(A), and ERISA’s civil enforce- 
ment provision, 29 U.S.C. 1132(a) (1994 & Supp. V 1999). 
The Secretary of Labor has primary authority for enforcing 
and administering Title I of ERISA, see 29 U.S.C. 1002(13), 
1136(b), which contains the ERISA provisions that are at 
issue. The United States filed an amicus brief in this case in 
the court below and at the petition stage in response to this 
Court’s order inviting the Solicitor General to express the 
views of the United States. 

STATEMENT 

1. Respondent Debra C. Moran is a beneficiary under a 
medical benefit plan sponsored by her husband’s employer 
and governed by ERISA. Pet. App. 3a. Respondent Rush 
Prudential HMO (Rush) provides “medically necessary” ser- 
vices under the plan. Ibid. Moran sought treatment in 1996 
from her Rush-affiliated primary care physician for pain, 
numbness, loss of function, and decreased mobility in her 

(1) 

2 

right shoulder. Ibid. Moran then consulted at her own 
expense with Dr. Julia Terzis, an out-of-network surgeon. 
Id. at 4a. Dr. Terzis recommended that Moran undergo a 
surgical microneurological procedure to correct her problem. 
Ibid. Two Rush-affiliated thoracic surgeons recommended a 
less expensive surgical procedure. Id. at 4a, 5a. Rush denied 
Moran’s request for the procedure recommended by Dr. 
Terzis. Id. at 5a. 

2. In January 1998, Moran sought independent review 
under Section 4-10 of the Illinois Health Maintenance Orga- 
nization Act, 215 Ill. Comp. Stat. Ann. 125/4-10 (West 1993 & 
Supp. 2001) (reproduced at App., infra, 1a). Section 4-10 
requires a Health Maintenance Organization (HMO), at the 
option of the patient, to submit to binding review by an unaf- 
filiated physician whenever there is a disagreement between 
the patient’s primary care physician and the HMO over 
whether a course of treatment is medically necessary. Pet. 
App. 6a.1 When Rush did not act on her request, Moran filed 
an action in state court to require Rush to submit to 
independent review. Id. at 6a-7a. Rush removed the action 
to federal district court on the ground that the claim was 
completely preempted by ERISA, see Metropolitan Life Ins. 
Co. v. Taylor, 481 U.S. 58 (1987), but the district court re- 
manded the case to the state court. Pet. App. 6a-7a, 28a-34a. 
In the meantime, Moran underwent the surgery by Dr. 
Terzis. Id. at 6a. She submitted the bill for $94,841.27 to 
Rush. Ibid. 

3. On remand, the state court ordered Rush to submit to 
independent review. Pet. App. 7a, 36a. The independent re- 
viewer determined that the surgery had been medically ne- 
cessary. Rush, however, denied Moran’s claim for reim- 
bursement. Id. at 7a-8a, 56a-57a. 

1 In 1999, after the events in this case, Illinois enacted a new statute 
that subjects the independent review process to more detailed require- 
ments. 215 Ill. Comp. Stat. Ann. 134/1 et seq. (West 2000 & Supp. 2001). 

3 

4. Moran then sought an order from the state court 
requiring Rush to reimburse her for the surgery. Pet. App. 
8a, 36a. Rush again removed the case to federal district 
court. That court refused to remand to state court, holding 
that Moran’s suit to compel reimbursement for surgery was 
properly characterized as a claim for benefits under Section 
502(a)(1)(B) of ERISA, 29 U.S.C. 1132(a)(1)(B). Pet. App. 
41a-42a. On the merits, the court concluded that Section 4- 
10 is preempted by ERISA and is not saved as an insurance 
regulation under 29 U.S.C. 1144(b)(2)(A) because it does not 
spread risk. Pet. App. 42a-43a. Subsequently, the district 
court granted summary judgment to Rush. Id. at 58a. The 
court noted that the plan granted Rush “the broadest possi- 
ble discretion” in making benefit determinations and held 
that Rush had not abused that discretion. Id. at 56a-58a. 

5. The Seventh Circuit reversed. Pet. App. 1a-24a. The 
court concluded that Section 4-10 of the Illinois HMO Act 
“relates to” ERISA plans, Pet. App. 16a, but that it “regu- 
lates insurance” and therefore falls within ERISA’s insur- 
ance saving clause, 29 U.S.C. 1144(b)(2)(A). Pet. App. 16a- 
18a. The court found that Section 4-10 satisfies the “common 
sense” test of insurance regulation because it “is directed at 
the HMO industry as insurers.” Id. at 17a. The court also 
concluded that the terms of the statutory independent- 
review provision “are substantive terms of all insurance 
policies in Illinois by operation of law,” ibid., and are 
therefore “‘integral’ to the insurer/insured relationship,” id. 
at 18a (quoting UNUM Life Ins. Co. v. Ward, 526 U.S. 358, 
374-375 (1999)). In light of those determinations, the court 
did not find it necessary to reach the question whether 
Section 4-10 spreads risk. Pet. App. 18a n.3. 

The court further held that Section 4-10 does not “creat[e] 
an alternative remedy scheme that conflicts with” Section 
502(a) of ERISA, 29 U.S.C. 1132(a) (1994 & Supp. V 1999). 
Pet. App. 21a. It reasoned that, because Section 4-10 simply 
“adds to the contract * * * an additional dispute resolving 

4 

mechanism,” id. at 22a, a suit “to enforce [Section 4-10] is 
simply a suit * * * ‘to enforce rights’ and ‘to recover 
benefits’ under the plan” under Section 502(a)(1)(B). Id. at 
21a. The court concluded that unlike the state-law cause of 
action held preempted in Pilot Life Ins. Co. v. Dedeaux, 481 
U.S. 41 (1987), Section 4-10 mandates insurance contract 
terms of the kind that were held in UNUM to be saved as 
the regulation of insurance. Pet. App. 23a. 

Judge Posner, joined by three other judges, dissented 
from the denial of rehearing en banc. Pet. App. 24a-27a. In 
Judge Posner’s view, the Illinois external review provision 
“establishes a system of appellate review of benefits deci- 
sions that is distinct from the provision in ERISA for suits in 
federal court to enforce entitlements conferred by ERISA 
plans.” Id. at 25a. He expressed the view that that scheme 
improperly transforms contractual suits envisioned under 
Section 502(a)(1) into suits “for judicial review of the inde- 
pendent physician’s decision.” Id. at 26a. 

SUMMARY OF ARGUMENT 

Section 4-10 of the Illinois HMO Act “relates to” ERISA 
plans within the meaning of ERISA’s preemption clause, 29 
U.S.C. 1144(a), because the processing of benefit claims is a 
core concern of ERISA and Section 4-10 affects how HMOs 
make benefit determinations on behalf of ERISA plans. 

Section 4-10, however, is saved from “relates to” preemp- 
tion because it is a law that “regulates insurance” under 
ERISA’s insurance saving clause, 29 U.S.C. 1144(b)(2)(A). 
The law regulates insurance as a matter of “common sense” 
because it is directed at HMOs, which are generally risk- 
bearing organizations that combine a traditional insurance 
function with the provision of medical services. The fact that 
some HMOs by contract transfer the risk to another entity 
—whether individual medical providers, a physicians’ prac- 
tice group, or a reinsurance company—does not alter the 
analysis, because the HMO generally remains ultimately li- 

5 

able for the medical care it has promised to provide. In any 
event, HMOs that retain a claims-processing function when 
they pass on risk to providers necessarily retain an insur- 
ance function, because claims processing is inextricably 
intertwined with the bearing of risk. For similar reasons, 
Section 4-10 also satisfies the factors used to determine what 
constitutes the “business of insurance” under the McCarran- 
Ferguson Act. 

Even if a law comes within the terms of the insurance 
saving clause, it may nonetheless be preempted if it conflicts 
with a specific provision of ERISA. See Pilot Life Ins. Co. v. 
Dedeaux, 481 U.S. 41, 51-56 (1987). Section 4-10’s provision 
for a private dispute resolution mechanism, however, does 
not conflict with Section 502(a) of ERISA. In contrast to 
Pilot Life, in which the Court addressed a state law creating 
a cause of action with alternative remedies to those in 
Section 502(a), Section 4-10 merely requires HMO contracts 
to include an arbitration-like dispute-resolution mechanism 
of the sort that private parties routinely include in contracts. 
Even under Section 4-10—as under labor arbitration provi- 
sions generally—a suit pursuant to Section 502(a) remains 
necessary to enforce a reviewer’s decision. Moreover, unlike 
in Pilot Life, neither the external reviewer nor the court can 
award relief that goes beyond what is provided for in the 
plan itself. Section 4-10 does not interfere with any right 
guaranteed under Section 502(a), because the plan partici- 
pant or beneficiary retains the ability to seek benefits 
directly in court in an action under Section 502(a). 

6 

ARGUMENT 

I. SECTION 4-10 OF THE ILLINOIS HMO ACT 
“RELATES TO” ERISA PLANS FOR PURPOSES OF 
ERISA’S EXPRESS PREEMPTION PROVISION 

A. Section 4-10 “Relates To” ERISA Plans Because It 

Governs How Plans Make Benefits Determinations 

Under Section 514(a) of ERISA, 29 U.S.C. 1144(a), the 
provisions of ERISA “shall supersede any and all State laws 
insofar as they * * * relate to any employee benefit plan.” 
Section 514(a) “indicates Congress’s intent to establish the 
regulation of * * * [ERISA] plans ‘as exclusively a federal 
concern.’ ” 
New York State Conference of Blue Cross & Blue 

Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 651, 656 
(1995) (quoting Alessi v. Raybestos-Manhattan, Inc., 451 
U.S. 504, 523 (1981)). Section 514(a) was designed “to ensure 
that plans and plan sponsors would be subject to a uniform 
body of benefits law,” and thus “minimize the administrative 
and financial burden of complying with conflicting directives 
among States or between States and the Federal 
Government.” Id. at 656 (quoting Ingersoll-Rand v. 
McClendon, 498 U.S. 133, 142 (1990)); see Shaw v. Delta Air 
Lines, Inc., 463 U.S. 85, 98-100 & n.20 (1983) (quoting re- 
marks of Congressional sponsors). Accordingly, Section 
514(a) is “clearly expansive” in its preemptive sweep. 
Egelhoff v. Egelhoff, 121 S. Ct. 1322 (2001). 

In general, a state law “relate[s] to” an ERISA plan “if it 
has a connection with or reference to such a plan.” Egelhoff, 
121 S. Ct. 1322, 1327 (quoting Shaw, 463 U.S. at 97). Al- 
though “relates to” preemption is not without limits, Tra- 
velers, 514 U.S. at 655, where a state law purports to 
regulate matters at the core of ERISA—such as the content 
or administration of ERISA plans or the mechanisms for 
enforcing rights under the plans—the requisite connection to 
ERISA plans is present. See 514 U.S. at 657-658 (discussing 

7 

Shaw, Alessi, Ingersoll-Rand, and FMC Corp. v. Holliday, 
498 U.S. 52, 60 (1990)). 

Section 4-10 does not specifically refer to ERISA plans, 
but it does have the requisite connection to such plans. As 
the court of appeals held, by requiring an HMO to provide a 
mechanism for independent review of a benefit determina- 
tion and to abide by the reviewer’s decision, Section 4-10 
“has an effect on how benefit determinations are made.” 
Pet. App. 16a. Accord Corporate Health Ins., Inc. v. Texas 
Dep’t of Ins., 215 F.3d 526, 537 (5th Cir.), opinion on denial of 
reh’g, 220 F.3d 641 (5th Cir. 2000), petition for cert. pending, 
No. 00-665. Thus, Section 4-10 “squarely fall[s] within 
ERISA’s preemption clause.” Pet. App. 16a; see Egelhoff, 
121 S. Ct. at 1325 (by binding “plan administrators to a par- 
ticular choice of rules for determining beneficiary status,” 
the state probate statute “implicates an area of core ERISA 
concern”); Travelers, 514 U.S. at 658 (ERISA preempts state 
laws that “mandate[] employee benefit structures or their 
administration”). 

B. Pegram v. Herdrich Is Not To The Contrary 

1. This Court’s recent decision in Pegram v. Herdrich, 
530 U.S. 211 (2000), does not alter the conclusion that Section 
4-10 “relates to” ERISA plans. In Pegram, an ERISA plan 
participant contended that an HMO had violated its fiduciary 
duties under ERISA by structuring its operations so that its 
physician-owners received greater profits if they held down 
the HMO’s medical treatment expenses. The plaintiff al- 
leged that the plan’s physicians acted in a fiduciary capacity 
when they made “mixed eligibility and treatment decisions,” 
id. at 229—decisions that mix questions concerning “the 
plan’s coverage of a particular condition or medical proce- 
dure for its treatment” with “choices about how to go about 
diagnosing and treating a patient’s condition,” id. at 228. 
This Court held that “mixed eligibility [and treatment] deci- 

8 

sions by HMO physicians are not fiduciary decisions” subject 
to suit for breach of fiduciary duty under ERISA. Id. at 237. 

Some statements in Pegram, if read in isolation, might 
suggest that such “mixed decisions”—which appear to be the 
subject of the disputes addressed by Section 4-10—are never 
fiduciary acts under ERISA, regardless of whether they are 
made by the treating physician or by another physician who 
is ruling on a beneficiary’s internal appeal of the denial of her 
claim. See, e.g., 530 U.S. at 231. If so, there might then be a 
question whether a state law governing mixed decisions 
“relates to” ERISA plans at all.2 

The better reading of Pegram, however, is that it ad- 
dresses only mixed decisions made by treating physicians. 
Pegram grew out of such a decision by the plaintiff ’s treat- 
ing physician, see 530 U.S. at 215, 217, 231, and there is no 
indication that the plaintiff then sought review pursuant to 
the HMO’s appeals process. Furthermore, although the 
Court did not regard the plaintiff’s claim of a fiduciary 
breach as limited to that one incident, see id. at 226, the 
Court did appear to view her claim as involving only an 
attack on the compensation policies as they affected treating 
physicians. See, e.g., id. at 228 (noting that treatment and 
eligibility decisions are “practically inextricable from one 
another * * * not merely because” they are “made by the 
same person, the treating physician,” but also “because a 
great many * * * coverage questions are not simple yes-or-no 
questions”) (emphasis added); id. at 232 (“physicians through 
whom HMOs act make just the sorts of decisions made by 
licensed medical practitioners millions of times every day”).3 

2 Such an argument was presented to the Fifth Circuit on rehearing in 
Corporate Health and rejected by that court. 220 F.3d. at 643-644. It was 
not briefed or addressed in the Seventh Circuit. 

3 The Secretary of Labor addressed the import of Pegram in an 
amicus brief filed with the Supreme Court of Pennsylvania in Pappas v. 
Asbell, 768 A.2d 1089 (2001), petition for cert. pending, No. 01-200, on 
remand from this Court, see United States Healthcare Sys. of Pa., Inc. v. 

9 

2. Pegram also must be read against the background of 
provisions of ERISA itself and longstanding Labor Depart- 
ment regulations that provide that plan administrators who 
make coverage decisions on review of the denials of claims 
for benefits are plan fiduciaries. Section 503(2) of ERISA, 29 
U.S.C. 1133(2), provides that “[i]n accordance with regula- 
tions of the Secretary, every employee benefit plan shall 

* * * afford a reasonable opportunity to any participant 
whose claim for benefits has been denied for a full and fair 
review by the appropriate named fiduciary of the decision 
denying the claim.” See also 29 U.S.C. 1102(a) (plan must 
provide for “one or more named fiduciaries * * * to control 
and manage the operation and administration of the plan”; 
“ ‘named fiduciary’ means a fiduciary who is named in the 
plan instrument, or who, pursuant to a procedure specified in 
the plan, is identified as a fiduciary”). Thus, Section 503 of 
ERISA itself requires that appeals within a plan—even as to 
medical necessity issues that are decided by a non-treating 
physician—must be decided by someone who is subject to 
fiduciary responsibilities.4 
Section 503(2) also requires ERISA plans to decide claims 
“[i]n accordance with regulations of the Secretary.” 29 
U.S.C. 1133. In regulations promulgated last year, the 

Pennsylvania Hosp. Ins. Co., 530 U.S. 1241 (2000). In Pappas, an HMO 
employee—who was not a treating physician—refused to authorize out-of- 
network treatment for an HMO subscriber. The Secretary contended that 
“the logic of Pegram applie[d]” to that case. Sec’y of Labor Br. at 11 n.6. 
However, the Secretary also noted that “[d]ifferent considerations may 
apply when an HMO * * * uses medical judgment in deciding whether a 
claim for treatment that has already been provided should be paid.” Id. at 
12 n.7. In any event, for the reasons given in the text, regardless of 
whether the claim is made before or after treatment, the better view is 
that an HMO employee deciding a claim is an ERISA fiduciary. 

4 Those responsibilities include that the decisionmaker “discharge his 
duties * * * in accordance with the documents and instruments of the 
plan.” 29 U.S.C. 1104(a)(1)(D). Thus, the decisionmaker’s fiduciary duty is 
to be faithful to the terms of the plan, not to favor the position of the 
claimant who took the appeal. 

10 

Secretary made clear that claimants must have an opportu- 
nity to appeal “an adverse benefit determination to an ap- 
propriate named fiduciary.” 65 Fed. Reg. 70,268 (2000) 
(to be codified at 29 C.F.R. 2560.503-1(h)(1)) (emphasis 
added); id. at 70,269 (to be codified at 29 C.F.R. 2560.503- 
1(h)(3)(ii) and (i)(1)(ii)). The predecessor regulation, 29 
C.F.R. 2560.503-1(g)(1)(2000), promulgated in 1977 (see 42 
Fed. Reg. 27,426), likewise provided for review by “an 
appropriate named fiduciary or to a person designated by 
such fiduciary.” See also Dep’t of Labor Advisory Op. 81- 
50A, 1981 WL 17772, at *2 (June 4, 1981) (citing prior opin- 
ions). 

More generally, “a person is a fiduciary with respect to a 
plan to the extent * * * he has any discretionary authority 
or discretionary responsibility in the administration of such 
plan.” 29 U.S.C. 1002(21)(A)(iii). Mixed decisions involving 
medical necessity necessarily require the exercise of judg- 
ment, and for that reason they are “discretionary” rather 
than merely “ministerial.” Personnel who make such judg- 
ments on appeal under an HMO’s claims procedures are 
therefore fiduciaries under ERISA. See Varity Corp. v. 
Howe, 516 U.S. 489, 511-512 (1996); id. at 530 (Thomas, J., 
dissenting); Pilot Life, 481 U.S. at 53; Dep’t of Labor Advi- 
sory Op. 92-24A, 1992 WL 337539, at *4 n.4 (Nov. 6, 1992). 
Accordingly, a state law that regulates such ERISA fiduci- 
ary decisions necessarily “relates to” ERISA plans under 
Section 514(a), even if the subject of the decision is “medical 
necessity” and the decisionmaker is a physician. 

3. Even if Pegram were read to state that a medical 
necessity determination by a plan administrator is not the 
subject of an ERISA-based fiduciary obligation, Pegram still 
would not lead to the conclusion that Section 4-10 does not 
relate to ERISA plans. Although Section 4-10 does not 
directly regulate medical necessity determinations by, for 
example, specifying what treatments are medically neces- 
sary in certain defined circumstances (see Pet. App. 22a n.6), 

11 

it does regulate the processes to be used by HMOs (and thus 
by plans) to adjudicate disputes when medical necessity deci- 
sions are at issue. Nothing in Pegram suggests that—in the 
absence of ERISA’s insurance saving clause, discussed 
below—States would have authority to regulate the claims- 
resolution processes utilized by ERISA plans. 

II. SECTION 4-10 “REGULATES INSURANCE” FOR 

PURPOSES OF ERISA’S INSURANCE SAVING 
CLAUSE 

ERISA’s insurance saving clause provides that “nothing 
in this subchapter shall be construed to exempt or relieve 
any person from any law of any State which regulates in- 
surance.” That clause is one of a series of provisions of Sec- 
tion 514 that preserve certain other laws—state and federal 
—even though they “relate to” ERISA plans. By saving 
state laws that “regulate[] insurance,” Section 514(b)(2)(A) 
“leaves room for complementary or dual federal and state 
regulation,” John Hancock Mut. Life Ins. Co. v. Harris 
Trust & Sav. Bank, 510 U.S. 86, 98 (1993), and preserves the 
States’ traditional role in insurance regulation.5 

To determine whether a state law “regulates insurance” 
for purposes of the insurance saving clause, a court must 
first undertake a “common-sense” examination of whether 
the state law regulates insurance. UNUM, 526 U.S. at 367 
(citing Metropolitan Life, 471 U.S. at 740, and Pilot Life, 481 
U.S. at 48). To satisfy the “common-sense” test, “a law must 

5 The insurance saving clause is qualified by the “deemer” clause, 29 
U.S.C. 1144(b)(2)(B), which provides that an employee benefit plan shall 
not be “deemed to be an insurance company or other insurer * * * or to 
be engaged in the business of insurance * * * for purposes of any law of 
any State purporting to regulate insurance companies, [or] insurance con- 
tracts.” The effect is to preclude States from “deem[ing]” self-insured 
plans to be insurers and thereby subjecting them to state insurance laws. 
FMC Corp. v. Holliday, 498 U.S. 57, 61, 62 (1990). We agree with the 
court of appeals (Pet. App. 18a) that, because the health plan here is 
insured, the “deemer clause” is inapplicable to this case. See UNUM, 526 
U.S. at 367 n.2. 

12 

not just have an impact on the insurance industry, but must 
be specifically directed toward that industry.” Pilot Life, 
481 U.S. at 50. The Court then considers the three factors 
used to determine what constitutes the “business of insur- 
ance” under the McCarran-Ferguson Act. UNUM, 526 U.S. 
at 367. Those three factors—(1) whether the law transfers 
or spreads the policyholder’s risk, (2) whether the law is an 
integral part of the policy relationship between the insurer 
and the insured, and (3) whether the law is limited to entities 
within the insurance industry—are helpful “guideposts” to 
be considered, rather than essential elements, each of which 
must be satisfied. Id. at 374-375. 

The court of appeals in this case and the Fifth Circuit in 
Corporate Health agreed that the respective state indepen- 
dent review provisions come within the insurance saving 
clause. Both courts held that the provisions satisfy the 
“common sense” test and two of the three McCarran-Fer- 
guson factors. See Pet. App. 18a; Corporate Health, 215 F. 
3d at 538. Those conclusions are correct. 

A. As A Matter Of “Common-Sense,” Section 4-10 

Regulates Insurance 

1. Section 4-10 meets the common sense test of insurance 
regulation. In general, HMOs combine in various ways an 
insurance function (taking on the risk of beneficiaries’ medi- 
cal expenses in return for fixed payments) and a medical 
care function. As the court of appeals explained, that 
appears to be true under Illinois law, which recognizes 
HMOs as insurance vehicles. Pet App. 17a (citing Anderson 

v. Humana, Inc., 24 F.3d 889, 892 (7th Cir. 1994)). That view 
also is supported by this Court’s understanding of HMOs as 
“risk-bearing organizations,” akin to traditional insurance 
companies. Pegram, 530 U.S. at 219. Indeed, this Court 
noted in Pegram that the Health Maintenance Organization 
Act of 1973, Pub. L. No. 93-222, 87 Stat. 914, 42 U.S.C. 300e 
et seq., “allowed the formation of HMOs that assume finan- 
cial risks for the provision of health care services.” 530 U.S. 

13 

at 233; see 42 U.S.C. 300e(c)(2) (qualified HMO must assume 
“full financial risk”).6 Because it appears that Section 4-10 is 
aimed exclusively at HMOs in their role of furnishing in- 
surance, it regulates insurance from a “common-sense” per- 
spective. 

2. Petitioner argues that Section 4-10 does not regulate 
insurance because it is directed both to HMOs that conced- 
edly bear risk as insurers and to HMOs that petitioner 
asserts “act in a purely administrative role and devolve all 
risk onto their providers or onto a third-party insurer.” 

6 Petitioner’s amici, American Association of Health Plans, et al., 
assert (Br., 24 n.11) that Congress’s enactment in 1973 of federal require- 
ments for the administration of qualified HMOs is inconsistent with the 
proposition that Congress intended when it enacted ERISA in 1974 to 
allow the States to regulate HMOs that serve ERISA plan beneficiaries. 
Congress’s concern in 1973 was that some restrictive state laws had 
prevented the development of HMOs. Congress therefore included in the 
1973 Act a provision that exempts HMOs from state-law insurance re- 
quirements “respecting initial capitalization and establishment of financial 
reserves against insolvency,” where such requirements would prevent 
HMOs from operating in accordance with the federal Act. See §§ 2, 87 
Stat. 931 (§ 1311(a)(1)(D), 42 U.S.C. 30e-10(a)(1)(D)); S. Rep. No. 129, 93d 
Cong., 1st Sess. 26-27 (1973). The obvious premise of that partial preemp- 
tion of state insurance laws was that many States did regard HMOs as in- 
surers. Significantly, moreover, Congress preempted only certain provi- 
sions of state insurance law. This feature of the 1973 HMO Act under- 
scores that when Congress enacted ERISA one year later, it anticipated 
that there were aspects of state insurance regulation that affected HMOs 
and would fall within the States’s reserved power to “regulate[] insurance.” 

Petitioner’s amici likewise err in relying (Br. 24) on the discussion in 
Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 226 (1979), 
of the treatment of prepaid health plans by the States at the time the 
McCarran-Ferguson Act was passed. State practices in 1945 do not con- 
trol the interpretation of ERISA’s insurance saving clause, which was en- 
acted almost 30 years later, especially in light of the fact that the ERISA 
saving clause is broader than the McCarran-Ferguson Act’s narrow 
exemption from the antitrust laws, at issue in Royal Drug. See note 8, 
infra. Moreover, the Court stated in Royal Drug that the contract be- 
tween a prepaid plan and its members may be the “business of insurance” 
under the McCarran-Ferguson Act, even though the provider agreements 
challenged in that case were not. See id. at 227 n.34, 230 nn. 37-38. 

14 

Br. 38 (internal quotation marks and citation omitted). This 
effort to remove Section 4-10 from the scope of the insurance 
saving clause is unavailing.7 

HMOs may split up their functions in various ways. For 
example, as petitioner notes (Br. 37-38), an HMO may con- 
tract to transfer its medical care function to providers who 
are not themselves employees of the HMO. Although the 
HMO assumes by contract the financial risk of members’ 
medical expenses, it may also re-transfer (in petitioner’s 
term “devolve,” Br. 38) that risk to the medical providers by 

7 The Illinois HMO Act defines an HMO as an “organization formed 

* * * to provide or arrange for one or more health care plans under a 
system which causes any part of the risk of health care delivery to be 
borne by the organization or its providers.” 215 Ill. Comp. Stat. Ann. 
125/1-2 (West 1993 & Supp. 2001) (emphasis added). The Act defines 
“[h]ealth care plan” to mean “any arrangement whereby any organization 
undertakes to provide or arrange for and pay for or reimburse the cost of 
basic health care services from providers selected by [a] Health Main- 
tenance Organization and such arrangement consists of arranging for or 
the provision of such health care services, as distinguished from mere 
indemnification against the cost of such services.” Ibid. (emphasis added). 
Those definitions make clear that the law applies only to HMOs that either 
bear the “risk of health care delivery” themselves or have undertaken that 
risk and then transferred it through contractual arrangements with their 
providers. 

For this reason, petitioner’s amici err in arguing (Br. 21) that Section 4- 
10 “applies to HMOs that perform purely administrative services for self- 
funded [i.e., self-insured] plans” and that this supposed feature “destroys 
any attempt by the State to rely on” ERISA’s insurance saving clause. 
Even if Section 4-10 were construed to apply to such HMOs, however, that 
would have no effect on the application of Section 4-10 to HMOs that 
insure non-self-insured ERISA plans. A state insurance law that includes 
self-insured plans among the insurers within its reach is still a law that 
regulates “insurance” within the meaning of the insurance saving clause, 
even though the deemer clause, 29 U.S.C. 1144(a)(2)(B), would preempt 
the application of that state insurance law to the self-insured plans. See 
Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 735-736 n.14, 
740-747 (1985); FMC, 498 U.S. at 61 (“We read the deemer clause to 
exempt self-funded ERISA plans from state laws that ‘regulat[e] 
insurance’ within the meaning of the saving clause.”); cf. General Elec. Co. 

v. Gilbert, 429 U.S. 125, 138 n.16 (1976). (“That General Electric self- 
insures does not change the fact that it is, in effect, acting as an insurer.”). 

15 

paying them a fixed, per-patient (“capitation”) fee. In doing 
so, the HMO may retain administrative functions (such as 
rendering decisions on claims) associated with the risk-bear- 
ing function. Regardless of how the HMO divides up the 
risk-bearing function and its associated administrative 
responsibilities (such as claims processing), however, Section 
4-10 is still directed toward insurance, for two reasons. 

First, the HMO’s transfer of its risk by contract to 
another entity or entities (such as individual medical pro- 
viders, a physicians’ practice group, or a reinsurance com- 
pany) does not alter its own continuing responsibility to its 
members for the costs of their medical care. As the law- 
review articles cited by petitioner (Br. 37, 38 n.13) recognize, 
even an HMO that has a “capitation” arrangement with 
medical providers nonetheless typically retains some risk, 
including the risk that the providers will become financially 
unable to provide services, since “[t]he HMO is legally 
committed to furnish care to its enrollees.” J. P. Weiner & 
G. de Lissovoy, Razing a Tower of Babel: A Taxonomy for 
Managed Care and Health Insurance Plans, 18 J. Health 
Pol., Pol’y, & L. 75, 96 (1993); see also E.H. Morreim, Con- 
fusion in the Courts: Managed Care Financial Structures 
and their Impact on Medical Care, 35 Tort & Ins. L.J. 699, 
705-706 (2000) (“if the physicians use up all of their 
[capitation] funds too quickly, the [HMO] is still obligated to 
provide care and could potentially be required to infuse 
money beyond the contracted capitation amount”). 

Second, even HMOs that pass on risk to network pro- 
viders necessarily retain an insurance function, because they 
retain a claims-processing function and claims processing is 
inextricably intertwined with insurance and the bearing of 
risk. Claims processing is the means by which an insurer 
pays for a risk it has undertaken, and the regulation of 
claims processing therefore is a central feature of state 
insurance law. See, e.g., Metropolitan Life, 471 U.S. at 728 

n.2 (“Laws regulating aspects of transacting the business of 

16 

group insurance include, for example, those regulating 
claims practices or rates.”) (emphasis added); UNUM, 526 
U.S. at 375 n.5 (same). That is true regardless of whether 
the entity that does the claims processing also bears the risk 
or is an independent entity that has contracted with risk- 
bearing entities (such as insurance companies or providers 
operating under a capitation agreement) to perform this 
insurance function. Cf. Barnett Bank v. Nelson, 517 U.S. 25, 
39 (1996) (regulation of agents of insurance companies re- 
lates to the “business of insurance”). An insurer that 
reinsures 100% of its risks, but continues to process claims, 
is still an insurer. Such an insurer may not simply contract 
itself out of state insurance law that is saved under ERISA 
by offloading the primary risk-bearing function to an 
independent entity. 

B. Section 4-10 Satisfies At Least Two Of The McCarran- 
Ferguson Factors 

1. The McCarran-Ferguson factors reinforce the common- 
sense conclusion that Section 4-10 is a law regulating 
insurance. Regardless of whether the risk-spreading factor 
is satisfied—an issue left open by the court of appeals, Pet. 
App. 18a n.3—that court correctly concluded that Section 4- 
10 satisfies the other two factors. Id. at 18a.8 

8 The Court in UNUM noted, but found it unnecessary to pursue, the 
argument of the United States that “[i]nsofar as the notice-prejudice rule 
shifts the risk of late notice and stale evidence from the insured to the 
insurance company in some instances, it has the effect of raising premiums 
and spreading risk among policyholders.” 526 U.S. at 374. Similarly here, 
Section 4-10 can be viewed as spreading the risk of loss resulting from the 
erroneous denial of claims by an HMO. 

Petitioner (Br. 40) and its amici (Br. 29) rely on the statement in Pireno 
that the transfer of risk occurs “at the time the [insurance] contract is 
entered.” See 458 U.S. at 130-131. But as the Court later pointed out in 
Department of Treasury v. Fabe, 508 U.S. 491, 503-504 (1993), where it 
upheld a state statute giving priority to policyholders in the event of insol- 
vency, that statement in Pireno “presumes that the insurance contract in 
fact will be enforced,” for “[w]ithout performance of the terms of the 
insurance policy, there is no risk transfer at all.” Like the priority statute 

17 

Because Section 4-10 creates a procedural right enforce- 
able by the insured against the HMO as insurer, it is integral 
to the relationship between the insured and the insurer. See 
Pet. App. 17a-18a. Petitioner relies (Br. 41) on the Court’s 
conclusion in Pireno that an insurer’s use of a peer review 
committee was not an “integral part of the policy relation- 
ship between insurer and insured.” See 458 U.S. at 131. In 
Pireno, however, the insurer’s arrangement with the peer 
review committee was separate from its contract with its 
insured, id. at 131-132; the committee’s opinions were not 
binding on the insurer; and the committee therefore was not 
part of “the claims adjustment process itself,” but was 
instead merely “ancillary” to it, id. at 134 n.8. See Fabe, 508 
U.S. at 503. Here, by contrast, Section 4-10 “dictates the 
terms of the relationship between the insurer and the 
insured,” UNUM, 526 U.S. at 374, because the independent 
review process it mandates is triggered by the insured, the 
independent reviewer’s decision is binding on the HMO, and 
the independent review therefore is an integral part of the 
claims-adjustment process. See also note 8, supra. Further- 
more, because the Illinois law is aimed exclusively at HMOs 
in the furnishing of insurance (see pp. 12-16, supra), it also 
satisfies the third McCarran-Ferguson factor. Pet. App. 18a. 

2. If Section 4-10 is not saved as a regulation of insur- 
ance, then it would appear that state laws mandating that 

in Fabe, Section 4-10 is concerned with the performance of undertakings in 
the insurance contract. Moreover, Pireno (like Royal Drug, also cited by 
petitioner (Br. 40)), involved the second clause of Section 2(b) of the 
McCarran-Ferguson Act, 15 U.S.C. 1012(b), which was designed to carve 
out only a narrow exemption from the federal antitrust laws, while the 
first clause, at issue in Fabe, preserves to the States broad regulatory 
authority over the business of insurance generally. See 508 U.S. at 504- 
505. ERISA’s insurance saving clause parallels the first clause of Section 
2(b) of the McCarran-Ferguson Act in its broader purpose of preserving 
general authority over insurance to the States. See Metropolitan Life, 471 
U.S. at 740-741, 744 n.21; U.S. Amicus Br. Pet. Stage (at 15-16), Kentucky 
Ass’n of Health Plans, Inc. v. Miller, No. 00-1471. 

18 

HMOs provide certain medical benefits would likewise not 
be saved. This Court made clear in Metropolitan Life, how- 
ever, that state laws mandating that non-HMO health in- 
surers provide certain benefits are saved by ERISA’s in- 
surance saving clause and may be applied to health insurance 
policies purchased by ERISA plans. Under petitioner’s 
argument, therefore, while state laws requiring other health 
insurers to provide certain benefits are valid under ERISA, 
state laws requiring HMOs to provide the same benefits are 
preempted. Petitioner does not attempt to explain why Con- 
gress would have intended that ERISA plans obtain that ex- 
tra exemption from state insurance law merely by purchas- 
ing HMO coverage rather than traditional health insurance. 

III. SECTION 4-10 DOES NOT CONFLICT WITH SEC- 
TION 502(a) OF ERISA, WHICH PROVIDES THE 
EXCLUSIVE CIVIL ACTION UNDER ERISA 

A. Under Pilot Life, A State Insurance Law That 
Conflicts With A Provision Of ERISA Is Preempted 

Even if a state law “regulates insurance” and is therefore 
saved from “relates to” preemption, it may still be pre- 
empted if it “conflict[s] with a substantive provision of 
ERISA.” Pilot Life, 481 U.S. at 57. More generally, “this 
Court has repeatedly declined to give broad effect to saving 
clauses where doing so would upset the careful regulatory 
scheme established by federal law.” Geier v. American 
Honda Motor Co., 529 U.S. 861, 870 (2000) (internal quota- 
tion marks omitted); see also id. at 869 (concluding that the 
saving clause at issue there “does not bar the ordinary 
working of conflict pre-emption principles”). Thus, although 
Section 4-10 is a law regulating insurance, there remains the 
inquiry whether it is nonetheless preempted because it 
conflicts with a provision of ERISA.9 

9 We note, in this regard, that both the House and Senate have passed 
legislation this year that would amend ERISA to require plans to adopt 
external review procedures for denials of claims for benefits. See, e.g., 

19 

In Section 502(a) of ERISA, 29 U.S.C. 1132(a), Congress 
included “a ‘carefully integrated’ civil enforcement scheme 
that ‘is one of the most essential tools for accomplishing the 
stated purposes of ERISA.’ ” 
Ingersoll-Rand, 498 U.S. at 

137 (quoting Pilot Life, 481 U.S. at 52, 54 (additional quota- 
tion and citation omitted)). That “comprehensive” scheme 
“represents a careful balancing of the need for prompt and 
fair claims settlement procedures against the public interest 
in encouraging the formation of employee benefit plans.” 
Pilot Life, 481 U.S. at 54; see also Mertens v. Hewitt Assocs., 
508 U.S. 248, 252 (1993). Section 502(a)(1)(B)—the specific 
provision pertinent here—confers upon a participant or 
beneficiary a federal cause of action “to recover benefits due 
to him under the terms of the plan, to enforce his rights 
under the terms of the plan, or to clarify his rights to future 
benefits under the terms of the plan.” 29 U.S.C. 
1132(a)(1)(B). 

In Pilot Life, this Court concluded that “ERISA’s civil 
enforcement [remedies were intended to] be exclusive.” 481 
U.S. at 57. In particular, Pilot Life held that a state common 
law tort and contract action asserting improper processing of 
a claim for benefits conflicted with Section 502(a)(1)(B)’s 
provision for a federal cause of action by a participant or 
beneficiary to recover on a claim for benefits due under the 
plan or to enforce his rights under the plan, and with Section 
502(a)(2)’s provision for a suit by a participant or beneficiary 
for breach of fiduciary duty. 481 U.S. at 53-57. 

In Metropolitan Life, by contrast, this Court held that a 
state mandated-benefit law is within the scope of the insur- 

H.R. 2563, 107th Cong., 1st Sess., § 104(a); S. 1052, 107th Cong., 1st Sess., 
§ 104(a) (2001). Both bills would set out in federal law new detailed and 
comprehensive procedures for external review, including timelines for 
review, qualifications of external reviewers, and limitations on the 
availability of remedies. Should Congress adopt external review proce- 
dures under ERISA, those provisions might well preempt any state 
external review procedures. 

20 

ance saving clause and therefore may be applied to insurance 
policies issued to ERISA plans. See 471 U.S. at 739-747. 
The Court reasoned that such a law “regulates the terms of 
certain insurance contracts,” and thus is saved under a 
clause that preserves state laws “which regulate[] insur- 
ance.” Id. at 740. That conclusion was reinforced by the 
deemer clause, which provides that an employee benefit plan 
shall not be deemed to be an insurance company “for pur- 
poses of any law of any State purporting to regulate insur- 
ance companies, insurance contracts, banks, trust com- 
panies, or investment companies.” 29 U.S.C. 1144(b)(2)(B) 
(emphasis added). The Court reasoned that the deemer 
clause “makes explicit Congress’s intention to include laws 
that regulate insurance contracts within the scope of the 
insurance laws preserved by the saving clause,” for other- 
wise it would have been unnecessary for the deemer clause 
explicitly to exempt such laws from the saving clause when 
they are applied directly to benefit plans. 471 U.S. at 741; 
see also FMC, 498 U.S. at 62-63, 64. 

The state mandated-benefit laws saved under Metropoli- 
tan Life do not conflict with Section 502(a) of ERISA be- 
cause the mandated benefit is incorporated into the insur- 
ance policy purchased by the ERISA plan (and therefore 
into the plan itself ). The mandated-benefit requirement can 
then be enforced in a suit by a participant or beneficiary 
under Section 502(a)(1)(B) “to recover benefits due under 
the terms of his plan” or “to enforce his rights under the 
terms of the plan.” See UNUM, 526 U.S. at 377. The same 
analysis cannot be applied to a state law creating a cause of 
action for compensatory and punitive damages, as in Pilot 
Life, because private parties could not meaningfully contract 
for such a cause of action, and the state law creating such a 
cause of action therefore would not merely “regulate[] the 
substantive terms of the insurance contract.” Metropolitan 
Life, 471 U.S. at 741. As we explain more fully below, 

21 

Section 4-10 does not conflict with Section 502(a) under these 
principles. 

B. Section 4-10’s Provision For Private Dispute 
Resolution Does Not Conflict With Section 502(a) 

As petitioner repeatedly emphasizes, Section 4-10 “con- 
sists of a form of compulsory binding arbitration rather than 
a judicial cause of action.” Br. 31 n.10; see also id. at 17, 22, 
24, 27. Private parties routinely contract to arbitrate dis- 
putes. Section 4-10 merely makes an arbitration-like clause 
a mandatory provision of contracts between HMOs in Illinois 
and those who purchase their services, including ERISA 
plans. Both the duty to arbitrate under that provision and 
any award of benefits in favor of a participant or beneficiary 
may be enforced in a suit against the plan under Section 
502(a)(1)(B) of ERISA. Furthermore, neither the external 
reviewer nor the court in a suit under Section 502(a)(1)(B) to 
enforce the reviewer’s decision may award relief that goes 
beyond what is provided for in the plan itself—an award of 
benefits, in kind or in cash, for medically necessary services. 
Because the arbitration-like mechanism that Section 4-10 
requires to be included in HMO insurance policies does not 
authorize a civil action in court or any relief beyond that 
provided in the plan itself, it does not conflict with Section 
502(a). 

1. a. The text of Section 502 gives no indication that it 
was intended to prevent the operation of private, non-judi- 
cial modes of dispute resolution, such as that provided for 
under Section 4-10. Section 502 is entitled “Civil enforce- 
ment.” Submission of a dispute to an independent reviewer 
under Section 4-10 constitutes compliance with an ERISA 
plan; it is not “enforcement” of the plan in the sense that 
Section 502 uses that term, because a private arbitrator does 
not have the coercive powers of a court. The reviewer’s 
decision can be enforced only in a subsequent judicial action, 
such as the present action under Section 502(a). United 

22 

Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29, 37 
(1987); see also Iron Workers Local 272 v. Bowen, 624 F.2d 
1255, 1259 (5th Cir. 1980) (court in Section 502(a) suit may 
order trustees to comply with arbitrator’s award). More- 
over, subsection (a) of Section 502, which is entitled “Persons 
entitled to bring a civil action,” is itself concerned solely with 
creating causes of action in court; it provides that “[a] civil 
action may be brought” by certain parties in specified cir- 
cumstances for specified relief. 29 U.S.C. 1132(a) (1994 & 
Supp. V 1999). Its text does not address private dispute- 
resolution mechanisms. 

b. Section 4-10 does not interfere with any rights granted 
by Section 502(a). The relevant provision is Section 
502(a)(1)(B), which grants a right to “a participant or bene- 
ficiary” to bring a cause of action “to recover benefits due to 
him under the terms of his plan [or] to enforce his rights 
under the terms of the plan.” 29 U.S.C. 1132(a)(1)(B). 
Section 4-10 does not interfere with that right in any aspect. 
Nothing in Section 4-10 purports to force a plan participant 
or beneficiary to invoke the external review mechanism that 
Section 4-10 obligates the HMO to make available. Instead, a 
plan participant or beneficiary retains the right to bring an 
action directly in court under Section 502(a)(1)(B) to chal- 
lenge the denial of a requested service. Indeed, the preamble 
to the claims-processing regulations recently promulgated 
by the Secretary of Labor notes that, “while [external re- 
view] procedures as established by State law are not pre- 
empted by the regulation, * * * claimants cannot be 
required to submit their claims to such procedures in order 
to be entitled to file suit under section 502(a) of the Act.” 65 
Fed. Reg. 70,254 (2000); accord id. at 70,254 n.33. 

10 Further- 

10 See also 65 Fed. Reg. at 70,254, 70,270-70,271 (to be codified at 29 
C.F.R. 2560.503-1(k)) (explaining that claims regulation does not preempt 
state law regulating insurance unless it prevents application of a require- 
ment of the regulation, and that state external-review laws “are beyond 
the scope of the regulation”). 

23 

more, if the participant or beneficiary chooses to invoke the 
procedure that Section 4-10 affords, he retains the right to 
bring an action under Section 502(a)(1)(B) of ERISA—either 
to recover the benefits due if the independent reviewer rules 
in his favor, or to challenge the decision if it is adverse. 
Thus, Section 4-10 does not purport to—and may not be 
applied to—interfere with a participant’s or beneficiary’s 
rights under Section 502(a)(1)(B). 

Neither Section 4-10 nor the Secretary’s claims-process- 
ing regulations confer a similar right on an HMO or an 
ERISA plan insured by an HMO to bypass the independent 
review procedure. But that omission does not conflict with 
Section 502(a)(1)(B). That Section does not even mention, 
much less confer a right of immediate access to court on, an 
HMO or ERISA plan. See Harris Trust & Sav. Bank v. 
Salomon Smith Barney, 530 U.S. 238, 246 (2000). 

c. A private, non-judicial arbitration-like mechanism to 
settle disputes is fully consistent with the exclusivity of the 
federal cause of action under Section 502(a)(1)(B). In Pilot 
Life, this Court noted that “the pre-emptive force of § 502(a) 
was modeled on the exclusive remedy provided by § 301 of 
the Labor-Management Relations Act, 1947.” See 481 U.S. 
at 52. Binding arbitration is fully consistent with Section 
301’s provision of an exclusive cause of action to enforce a 
collective bargaining agreement. Indeed, arbitration is 
strongly encouraged by federal labor law. See, e.g., Team- 
sters v. Lucas Flour Co., 369 U.S. 95 (1962); Textile Workers 

v. Lincoln Mills, 353 U.S. 448, 455-456 (1957). The same con- 
clusion follows with respect to Section 502(a) of ERISA. 

11 

11 In Pilot Life, the Court explained that “[t]he expectations that a 
federal common law of rights and obligations under ERISA-regulated 
plans would develop, indeed, the entire comparison of ERISA’s § 502(a) to 
§ 301 of the LMRA, would make little sense if the remedies available to 
ERISA participants and beneficiaries under § 502(a) could be supple- 
mented or supplanted by varying state laws.” 481 U.S. at 56. As noted in 
text, Congress’s plan, embodied in Section 301, for a “federal common law 

24 

The logic of petitioner’s contrary argument is that Con- 
gress intended that Section 502(a)(1)(B) provide not only the 
exclusive judicial remedy, but also the exclusive binding 
mechanism of any sort for resolving disputes over medical 
necessity or other questions arising under an ERISA plan. 
If so, petitioner’s position is necessarily in deep tension with 
permitting binding voluntary agreements to arbitrate bene- 
fit disputes. Yet, since 1978, Department of Labor regula- 
tions have recognized that arbitration of disputes regarding 
plan benefits is permissible under ERISA. See generally 
Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 116 (2001) 
(discussing benefits of arbitration); Chappel v. Laboratory 
Corp. of America, 232 F.3d 713, 724 (9th Cir. 2000). Those 
regulations provide that when a collective bargaining agree- 
ment contains procedures (including arbitration) for the 
resolution of disputes, those procedures will generally be 
deemed to satisfy the requirements of ERISA that a plan’s 
dispute-resolution procedures must be fair and reasonable. 
29 C.F.R. 2560.503-1(b)(2)(i) (1978, 2000). That provision has 
been carried forward in the Secretary’s new claims-pro- 
cessing regulations. See 65 Fed. Reg. at 70,266 (to be 
codified at 29 C.F.R. 2560-503-1(b)(6)); see also id. at 70,267 
(to be codified at 29 C.F.R. 2560.503-1(c)(4)(ii)). 

12 

of rights and obligations under” labor contracts is entirely consistent with 
permitting binding private arbitration of disputes under those contracts. 
It follows that, contrary to petitioner’s suggestion (Br. 25 n.6), Congress’s 
intention that courts develop a federal common law of rights and obliga- 
tions under ERISA plans is consistent with permitting arbitral mecha- 
nisms, like that provided by Section 4-10, for resolving disputes under 
ERISA plans. Moreover, as is true under Section 301 of the LMRA, the 
basic ERISA plan contract remains governed by federal law, although by 
virtue of the insurance saving clause, some provisions of that contract may 
be mandated by state law. Compare Lincoln Mills, 353 U.S. at 457 (dis- 
cussing absorption of state law into federal law under Section 301). 

12 Petitioner argues (Br. 22 n.5) that Section 4-10 “conflicts with 
ERISA’s fiduciary requirements” because Section 503 of ERISA requires 
plans to provide for review of denied claims by a fiduciary. See pp. 9-10, 
supra. Section 503, however, governs internal plan appeals, not external 

25 

d. The fact that the arbitration-like procedure here is 
mandated by the State as a term of the underlying contract 
of insurance does not create a conflict with Section 502(a) of 
ERISA. Section 502(a), like Section 301 of the LMRDA, 
does not regulate the terms of the underlying contract. Each 
takes the contract as it finds it. 

Many saved state insurance laws, such as the mandated- 
benefits law in Metropolitan Life, will in effect add terms to 
ERISA plans. So long as the state insurance law does not 

review; in this case, respondent has already invoked her right of internal 
appeal to a named fiduciary. Section 4-10 applies only “in the event of a 
dispute between the primary care physician and the [HMO] regarding the 
medical necessity of a covered service”—i.e., only after the HMO, acting as 
plan administrator through a plan fiduciary, has made its final decision. 
See also 65 Fed. Reg. at 70,270-70,271 (claims-processing regulations do 
not preempt state law “merely because such State law establishes a 
review procedure * * * involving adverse benefit determinations under 
group health plans so long as the review procedure is conducted by a 
person other than * * * plan fiduciaries”) (emphasis added) (to be 
codified at 29 C.F.R. 2560-503.1(k)(2)(i)). 

Petitioner’s amici suggest (Br. 27 n.13) that the Federal Arbitration 
Act (FAA), 9 U.S.C. 1 et seq., would preserve a plan’s or HMO’s ability to 
provide for arbitration, if it voluntarily chooses to do so, even if the exter- 
nal review procedure under Section 4-10 is preempted because the arbi- 
trator is not a plan fiduciary. But if Section 503 precludes binding arbitra- 
tion by a non-fiduciary, then there is a substantial question whether the 
FAA could render such arbitration lawful under ERISA. The FAA could 
apply to ERISA plans only by virtue of a saving provision for other 
federal laws that is quite similar to the saving provision for state laws 
regulating insurance. See 29 U.S.C. 1144(d) (“Nothing in this subchapter 
shall be construed to * * * modify, invalidate, impair, or supersede any 
law of the United States.”). Thus, if the insurance saving clause does not 
save a state insurance law providing for arbitration of insurance disputes, 
it is unclear how Section 1144(d) would save a federal statute authorizing 
arbitration of such disputes. But even if the FAA would apply by virtue of 
Section 1144(d) and protect voluntary agreements to arbitrate in the man- 
ner amici assert, the McCarran-Ferguson Act also is made applicable 
under ERISA by Section 1144(d), and that Act independently preserves a 
state insurance law (like Section 4-10) that requires arbitration clauses in 
insurance contracts. Cf. Metropolitan Life, 471 U.S. at 744-745 n.21. 
Application of the McCarran-Ferguson Act of course “lends further sup- 
port to” the validity of Section 4-10. Ibid. 

26 

attempt to add a contract term that conflicts with a provision 
of ERISA itself, the fact that the state law imposes the term 
on an unwilling insurer does not render it unenforceable in 
an action by a participant or beneficiary under Section 
502(a)(1)(B). Moreover, the procedure that is incorporated 
into insurance contracts pursuant to Section 4-10 is well 
within the range of standard arbitration-like mechanisms 
that are accepted contractual arrangements for private reso- 
lution of disputes in a wide range of settings—including 
especially in the collective bargaining setting in which many 
ERISA plans are created. 

e. Petitioner notes (Br. 21-22) that in the absence of 
Section 4-10, the court in a suit under Section 502(a)(1)(B) 
would review the plan’s decision only for abuse of discretion, 
because the plan in this case vests discretion in its fiduciaries 
to construe and apply the plan. See Firestone Tire & Rubber 
Co. v. Bruch, 489 U.S. 101, 114 (1989). By contrast, peti- 
tioner continues, the court in a Section 502(a)(1)(B) action 
brought after Section 4-10 has been invoked would review 
the external reviewer’s decision under the deferential stan- 
dard used for review of an arbitrator’s decision. That fact 
does not create a conflict with Section 502(a)(1)(B). 

Section 502(a)(1)(B), like Section 301 of the LMRA (29 
U.S.C. 185), does not itself mandate any particular standard 
of review. Accordingly, in Firestone, the Court held that it 
was appropriate to look to background principles of trust law 
and the terms of the plan to determine the standard of 
review in a Section 502(a)(1)(B) action. Here, the terms of 
the plan, as required by state law, provide for arbitration- 
like external review that is binding on the plan. In a Section 
301 action following arbitration of a dispute in which the con- 
tract provides that “the arbitrator’s decision is final and 
binding upon the parties,” Misco, 484 U.S. at 32, this Court 
has held that a deferential standard should be applied in 
reviewing the arbitrator’s decision. Id. at 37-38. In a Section 
502(a)(1)(B) action following review of an HMO’s decision 

27 

under Section 4-10, the court can draw on those same backg- 
round principles, consistently with Section 502(a), and apply 
a deferential standard to the independent reviewer’s deci- 
sion. 

13 Thus, under Section 502(a)(1)(B), as under Section 
301, the standard of review is dictated not by the statutory 
authorization to file a civil action, but by the nature of the 
suit and the terms of the underlying contract. Compare, e.g., 
Misco (deferential review of arbitrator’s decision) with Bowen 

v. United States Postal Service, 459 U.S. 212 (1983) (trial de 
novo in employee’s suit where union declined to file 
grievance). 

f. Finally, Section 4-10 is fully consistent with this 
Court’s decision in Pilot Life. In that case, the Court rea- 
soned that Section 502(a) provides the exclusive avenue for 
judicial relief for ERISA participants and beneficiaries 
whose claims for benefits are denied—not that Section 502(a) 
provides the sole permissible mechanism for resolving bene- 
fit disputes. After noting that causes of action outside 
Section 502(a) would lead to the award of judicial remedies, 
such as compensatory and punitive damages, that Congress 
had rejected, 481 U.S. at 53-54, the Court concluded that 
“[t]he policy choices reflected in the inclusion of certain re- 
medies and the exclusion of others under the federal scheme 
would be completely undermined if ERISA-plan participants 
and beneficiaries were free to obtain remedies under state 
law that Congress rejected in ERISA,” id. at 54. That rea- 
soning clearly prevents a State from adopting causes of ac- 
tion under state law to enforce the terms of an ERISA plan 
(including any incorporated provisions of state law) as an 
alternative to the cause of action under federal law in Sec- 
tion 502(a)(1)(B). For the same reasons, a State could not 

13 Of course, Section 4-10 does not specify a standard of review. 
Accordingly, if application of the deferential standard employed in Section 
301 cases somehow conflicts with Section 502(a), the answer would be to 
adopt a standard of review consistent with Section 502(a), not to declare 
Section 4-10 preempted. 

28 

under any circumstances make a plan or its insurer liable to 
the participant or beneficiary for punitive damages. Such a 
requirement would be far removed from what private par- 
ties might ordinarily contract for and would directly upset 
the policy choices reflected in Congress’ inclusion of certain 
remedies and the exclusion of others. 

The same concerns are not implicated by a state law 
giving plan participants a right to arbitrate their claims, as 
long as federal law and the terms of the plan (including any 
validly incorporated provisions of state law) govern in the 
arbitration and the arbitrator’s award is enforceable only in 
an action under Section 502(a)(1)(B). Because Section 4-10 
provides no relief beyond that provided for in the plan itself 
and the enforcement mechanism for obtaining benefits under 
the plan remains a Section 502(a)(1)(B) action, it does not 
pose the challenge to Congress’s policy choices that the 
Court addressed in Pilot Life. 

Furthermore, the Court reasoned in Pilot Life that Con- 
gress was “well aware” when it patterned Section 
502(a)(1)(B) of ERISA after Section 301 of the LMRA that 
Section 301 displaced all state actions for violations of con- 
tracts between an employer and a labor organization. See 
481 U.S. at 55. Congress presumably was equally well aware 
that Section 301 does not bar arbitration clauses in such con- 
tracts. Indeed, the two cases on which the Court relied in 
Pilot Life in describing how Section 301 of the LMRA should 
inform the interpretation of Section 502(a) of ERISA— 
Lueck and Lucas Flour—both involved disputes related to 
arbitration clauses. 

14 

14 In its amicus brief in UNUM, the United States suggested (at 19-25) 
that there may be reasons for the Court to reconsider the portion of Pilot 
Life discussing Section 502 to the extent it is read to mean that a cause of 
action provided by a state law regulating insurance would in all circum- 
stances be preempted by Section 502. See UNUM, 526 U.S. at 377 n.7 
(stating that the Court “need not address” that argument); see also 
Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 

29 

2. Petitioner argues (Br. 19) that permitting the States 
to enforce insurance laws like Section 4-10 “would nullify 
Congress’ intent to establish a uniform scheme for enforcing 
rights under ERISA plans.” See also Br. 26-30. That effect 
is simply a product of ERISA’s insurance saving clause, 
which contemplates some disuniformity as “the inevitable 
result of the congressional decision to ‘save’ local insurance 
regulation.” UNUM, 526 U.S. at 376 n.6. It is therefore 
well-settled that specific terms of plans may be affected indi- 
rectly by state insurance regulations. See, e.g., Metropolitan 
Life, 471 U.S. at 747. As noted, the relevant distinction is 
not between substantive terms (such as mandated benefits) 
and procedural terms, but between state laws that require 
contractual provisions (including procedural provisions) and 
state laws that create duplicative causes of action or distinct 
remedies, such as punitive damages. 

15 In UNUM, for 

25 (1983). That portion of the United States’ amicus brief in UNUM, 
however, reflected a particular concern with the possible availability of a 
cause of action for state-created remedies or sanctions to enforce sub- 
stantive state insurance law where the causes of action provided under 
Section 502(a) itself were not suited to that purpose. See U.S. UNUM Br. 
22-23 & n.12, 24 n.13, 25 & n.14; see e.g., Metropolitan Life, 471 U.S. at 734 
(suit by state attorney general to enforce mandated-benefits law); Fran- 
chise Tax Bd., 463 U.S. at 24-26 (action by state tax agency to levy against 
plan trust). The UNUM brief also recognized (at 24 n.13) that “notwith- 
standing the savings clause, an insurance law that conflicts with a provi- 
sion of ERISA itself is preempted by virtue of the Supremacy Clause.” 

This case involves not a state-created cause of action in court, as in 
Pilot Life, but a mandatory contractual provision for private dispute reso- 
lution that, like the state-law provision at issue in UNUM, can readily be 
enforced in a suit under Section 502(a)(1)(B) of ERISA itself. Therefore, 
as in UNUM, there is no occasion for the Court to address state causes of 
action in situations in which such a suit cannot be brought under Section 
502(a). 

15 Petitioner argues (Br. 29), for example, that if Section 4-10 is not 
preempted, “administrators of nationwide ERISA plans could no longer 
develop a uniform medical necessity standard.” Of course, state man- 
dated-benefits laws, which petitioner concedes (Br. 30, 32) are valid, could 
define “medical necessity” in a variety of ways, and insured plans would 
have to follow those definitions, no matter how much variation was intro- 

30 

example, this Court held that a state law governing the 
effects of a late notice of claim by the insured—a paradig- 
matically procedural provision—is saved by the insurance 
saving clause and therefore not preempted. Indeed, man- 
dated-benefits laws create very substantial disuniformity at 
the heart of the ERISA scheme by varying the benefits due 
under a plan in different States, and they impose a serious 
administrative burden by requiring insurers administering 
ERISA plans to consider state law before accepting or rejec- 
ting each claim. By contrast, external review provisions like 
Section 4-10 affect only the relatively small number of 
benefit disputes that cannot be resolved internally. Litiga- 
tion of such disputes under Section 502(a)(1)(B) necessarily 
proceeds—even under petitioner’s account—on a case-by- 
case basis in any event. 

CONCLUSION 

The judgment of the Seventh Circuit should be affirmed. 
Respectfully submitted. 

HOWARD M. RADZELY 

Acting Solicitor of Labor 
ALLEN H. FELDMAN 

Associater Solicitor 
NATHANIEL I. SPILLER 

Deputy Associate Solicitor 
ELIZABETH HOPKINS 

Senior Appellate Attorney 
Department of Labor 
PAUL D. CLEMENT 

Acting Solicitor General* 
EDWIN S. KNEEDLER 

Deputy Solicitor General 

JAMES A. FELDMAN 

Assistant to the Solicitor 

General 

NOVEMBER 2001 

duced. Indeed, such mandated-benefits laws would likely introduce more 
disuniformity than case-by-case determination by external reviewers of 
“medical necessity” in a variety of individual cases. 

* The Solicitor General is recused in this case. 

APPENDIX 

215 Ill. Comp. Stat. Ann. 125/4-10 (West 1993 & Supp. 
2001) provides in pertinent part: 

Each Health Maintenance Organization shall provide a 
mechanism for the timely review by a physician holding 
the same class of license as the primary care physician, 
who is unaffiliated with the Health Maintenance 
Organization, jointly selected by the patient (or the 
patient’s next of kin or legal representative if the patient 
is unable to act for himself), primary care physician and 
the Health Maintenance Organization in the event of a 
dispute between the primary care physician and the 
Health Maintenance Organization regarding the medical 
necessity of a covered service proposed by a primary 
care physician. In the event the reviewing physician 
determines the covered service to be medically 
necessary, the Health Maintenance Organization shall 
provide the covered service. 

(1a)