Anderson v. HMO Nebraska, Inc.

• Decision Date: 24 September 1993
• Docket Number: No. S-92-489,S-92-489
• Citation: 505 N.W.2d 700,244 Neb. 237
• Parties: Cindy ANDERSON, Appellee, v. HMO NEBRASKA, INC., Appellant.
• Court: Nebraska Supreme Court

Page 700

505 N.W.2d 700

244 Neb. 237

Cindy ANDERSON, Appellee, v. HMO NEBRASKA, INC., Appellant.

No. S-92-489.

Supreme Court of Nebraska.

Sept. 24, 1993.

Syllabus by the Court

1. Federal Acts: Insurance. The Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. (1988 & Supp. II 1990), regulates employee welfare benefit plans, including any plan, fund, or program established or maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, medical, surgical, or hospital care benefits. § 1002(1).

2. Federal Acts: Insurance: Claims: Appeal and Error. An ERISA plan is to include an appeal procedure to review denied claims. 29 C.F.R. § 2560.503-1(g) (1992).

3. Federal Acts: Insurance. ERISA plan fiduciaries are to discharge their duties in accordance with the governing plan documents and instruments solely in the interest of the participants and beneficiaries. 29 U.S.C. § 1104(a)(1) (1988 & Supp. II 1990).

4. Federal Acts: Insurance: Actions: Courts. A participant in or beneficiary of an ERISA-regulated plan may seek to enforce her or his benefits and rights thereunder by instituting a civil action in either the state or federal courts. 29 U.S.C. § 1132(a)(1)(B) and (e)(1) (1988).

5. Federal Acts: Insurance: Jurisdiction. Concurrent jurisdiction under ERISA is vested in the state courts only with respect to a civil action commenced by a participant or beneficiary seeking to recover or clarify rights to benefits under the terms of the plan, or to enforce rights under the terms of the plan.

6. Federal Acts: Insurance: Appeal and Error. Where an ERISA plan explicitly grants the plan administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan, the correctness of the administrator's or fiduciary's determinations is to be reviewed under an abuse of discretion standard; otherwise, the correctness of the determinations is to be reviewed de novo.

7. Insurance. One providing contractual health care benefits is not, by virtue of that reason alone, necessarily a fiduciary.

8. Federal Acts: Insurance: Claims. An insurance company, insurance service, or other similar organization providing or administering health care benefits subject to regulation under the laws of one or more states is the appropriate named fiduciary for the review of denied claims only if so named in the ERISA plan; otherwise, that responsibility goes by default, if no other entity is named, to the plan administrator.

9. Federal Acts: Insurance: Jurisdiction. When exercising concurrent jurisdiction in ERISA cases, Nebraska courts are to apply the federal substantive ERISA common law, but are to apply the procedural law of Nebraska.

10. Federal Acts: Insurance: Claims: Actions: Jurisdiction: Parties: Records. Nebraska courts shall not exercise subject matter jurisdiction in an action brought under ERISA unless (1) the plan fiduciary is named as a party, (2) the record establishes the relevant provisions of the employee welfare benefit plan under which benefits are sought, and (3) the record establishes as well that either (a) the administrative claim resolution procedures under the terms of the plan have been exhausted or (b) there exists an excuse for not exhausting such procedures.

11. Jurisdiction. Lack of subject matter jurisdiction may be raised sua sponte by a court; the parties cannot confer subject matter jurisdiction upon a judicial tribunal by either acquiescence or consent, nor may subject matter jurisdiction be created by waiver, estoppel, consent, or conduct of the parties.

John F. Thomas and Ronald Fleming, of McGrath, North, Mullin & Kratz, P.C., Omaha, for appellant.

Terry M. Anderson and Steven M. Lathrop, of Hauptman, O'Brien, Wolf & Lathrop, P.C., Omaha, for appellee.

HASTINGS, C.J., and BOSLAUGH, WHITE, CAPORALE, SHANAHAN, FAHRNBRUCH, and LANPHIER, JJ.

CAPORALE, Justice.

Asserting that the defendant-appellant, HMO Nebraska, Inc., a health maintenance organization (HMO), wrongfully denied benefits due her, the plaintiff-appellee, Cindy Anderson, seeks a declaration under the Uniform Declaratory Judgments Act, Neb.Rev.Stat. § 25-21, 149 et seq. (Reissue 1989), that the HMO must authorize and pay for the prophylactic surgical removal of her breasts and reconstructive procedures she seeks to undergo. In so doing, Anderson invokes the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. (1988 & Supp. II 1990), as well as state contract and tort theories. After first dismissing the state claims as preempted by ERISA, the district court concluded that the HMO is obligated under federal law to authorize and pay for the treatments Anderson seeks, and thus granted Anderson's prayer. The Nebraska Court of Appeals affirmed that declaration, whereupon the HMO successfully petitioned for further review. We reverse the judgment of the Court of Appeals on jurisdictional grounds, and remand with direction.

The employer of Anderson's husband offers its employees and their dependents a choice of four health care schemes, including the one the husband selected, the coverage provided by the HMO. Under each of the four schemes, the employee pays a portion of the cost of the scheme selected, and the employer pays the remainder.

The "Health Maintenance Service Contract" between the HMO and the employer generally obligates the HMO to provide for Anderson's health care needs. However, excluded from that obligation are, among other things, treatments which are not medically necessary. The HMO is empowered by the contract to determine medical necessity, which the document defines as consisting of those services, treatments, or supplies which are appropriate and consistent with the symptoms and diagnosis or treatment of the patient's illness, are in accordance with the standards of good medical practice in this state and could not be omitted without adversely affecting the patient's condition, and are most cost effective.

Without determining how much of the evidence may be relevant to an ultimate resolution on the merits, we note for the limited purpose of setting the background for this review that there is evidence that Anderson has developed fibrous tissue in her breasts, making the uncovering of cancer more difficult; that she has an extensive family history of breast cancer; and that she is obsessively apprehensive that she will develop the disease. There is also evidence that continued surveillance to detect the development of cancer is an alternative treatment. The HMO takes the position that as Anderson does not presently suffer from the malady, the surgeries and procedures she seeks are not medically necessary.

ERISA regulates " 'employee welfare benefit plan[s],' " which are defined, insofar as is pertinent to this review, as any "plan, fund, or program ... established or ... maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise ... medical, surgical, or hospital care or benefits." § 1002(1). The plan is to include an appeal procedure to review denied claims, 29 C.F.R. § 2560.503-1(g) (1992), and the act directs plan fiduciaries to discharge their duties in accordance with the governing plan documents and instruments solely in the interest of the participants and beneficiaries, § 1104(a)(1). To help reduce the number of frivolous lawsuits, promote the consistent treatment of claims, provide a nonadversarial method of settling claims, and minimize the cost of settling claims, under most circumstances the review procedure specified in the plan must be exhausted as a precondition to the institution of suit. Springer v. Wal-Mart Associates' Group Health Plan, 908 F.2d 897 (11th Cir.1990); Zipf v. American Tel. & Tel. Co., 799 F.2d 889 (3d Cir.1986); Kross v. Western Elec. Co., Inc., 701 F.2d 1238 (7th Cir.1983); Amato v. Bernard, 618 F.2d 559 (9th Cir.1980).

To the extent relevant to this review, the act supersedes "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan...." § 1144(a). ERISA has therefore preempted state law with respect to actions brought to clarify rights to benefits or to enforce rights arising under a plan coming within the purview of ERISA. E.g., Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990) (wrongful discharge claim); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987) (action for bad faith denial of benefits under plan); Memorial Hosp. System v. Northbrook Life Ins. Co., 904 F.2d 236 (5th Cir.1990) (derivative claims for benefits assigned to a health care provider asserting breach of contract and state statute); Baxter By and Through Baxter v. Lynn, 886 F.2d 182 (8th Cir.1989) (state common-law rules of subrogation); Daniel v. Eaton Corp., 839 F.2d 263 (6th Cir.1988), cert. denied 488 U.S. 826, 109 S.Ct. 76, 102 L.Ed.2d 52 (breach of contract and promissory estoppel); Anderson v. John Morrell & Co., 830 F.2d 872 (8th Cir.1987) (breach of contract). However, not every claim touching upon employee benefits has been preempted by ERISA. See Hospice of Metro Denver v. Group Health Ins., 944 F.2d 752, 756 (10th Cir.1991) (state promissory estoppel claim by a health care provider against an insurance company providing health care coverage to an ERISA plan not preempted, since it "[did] not affect the 'relations among the principal ERISA entities, the employer, the plan, the plan fiduciaries, and the beneficiaries' as such").

A participant in or beneficiary of an ERISA-regulated plan may seek to enforce her or his benefits and rights thereunder by instituting a civil action in either the state or federal courts. § 1132(a)(1)(B) and (e)(1). The courts are to develop a federal common law of rights and obligations under ERISA-regulated...