06.beifuss Final Edit Formatted

ILLUSORY REMEDIES: WHY LACKING OVERSIGHT AND
PENALTIES LEAVE HALF THE COUNTRY WITH ONLY A SHADOW

OF HEALTHCARE
Francis Beifuss*
INTRODUCTION
Dawn Smith suffered for years from debilitating brain cancer,

starting as her twenties ended.1 One of the hardest parts of her war was the
never-ending battle with her insurer, Cigna Health.2 Procedures and tests
prescribed by her doctors were routinely denied; her appeals were met with
lacking justifications or silence.3 These denials often came for
preauthorization requests for critical care.4 Cigna’s denials blocked her from
treatment regularly, including treatments that prevented her suffering from
debilitating pain.5 She recounted lying on the floor wailing in pain for hours
because she could no longer afford medication for her extreme migraines
after a 10,000% price hike.6 It was not until she took her complaints to public
forums in 2009 that Cigna started approving procedures and treatments that
had previously been denied all the way to the final appeal.7
If Dawn received her insurance through an employer–sponsored
plan, her legal fight for medical coverage with Cigna would proceed unlike
any other litigation over contract for care.8 If Dawn’s prognosis worsened
because of her denials, and even if those denials were made in bad faith, there
* Francis Beifuss, 2024 J.D. Candidate at University of Louisville Brandeis School of Law. I thank Professor
Tim Hall for pointing me toward this issue, Professor Kathryn Moore for invaluable feedback, and special thanks
to Professor C.J. Ryan whose guidance and mentoring profoundly impacted my academic writing. Thank you to
Katy Harvy for the feedback and encouragement during the submission processes. Thank you to the FYM of vol.
62 who worked on this project. Special thanks to Kenneth Schwalbert, Alexandra Just, and Rachel Gumbel for
their exceptional editing, I owe you all. Thanks to my Uncle Lou Sanner for listening to me rant about this topic at
length, many nights. Finally, a very special thanks to my loving wife Kathlene for your continual support and
encouragement.
1
Mike Bryant, The Real Story of Healthcare Denial, ST. CLOUD INJURY LAW NEWS, LEGAL EXAMINER (Oct.
11, 2009), https://stcloud.legalexaminer.com/health/medical-malpractice/real-story-of-health-care-denial/
[https://perma.cc/MYQ5-6AUT]; see also Sam Stein, Dawn Smith, Brain Tumor Victim: How Her Story Became
Rallying Cry For Health Care Reform Supporters, HUFFPOST (May 25, 2011),
https://www.huffpost.com/entry/dawn-smith-brain-tumor-vi_n_309797 [https://perma.cc/JM27-3DTA].
2
Mike Bryant, supra note 1.
3
Id.
4
Id.
5
Id.
6
Id.
7
Id.
8
Peter K. Stris, ERISA Remedies, Welfare Benefits, And Bad Faith: Losing Sight of The Cathedral, 26 HOFSTRA
LAB. & EMP. L.J. 387, 396–98 (2009).
761
762 UNIVERSITY OF LOUISVILLE LAW REVIEW [Vol. 62:3
are few repercussions her insurer would face.9 If Dawn sought a remedy for
her wrongful denials, she would have to go through the insurer’s internal
appeal process, like she did, before she could bring a claim against her them.10
Then she would have to go through an external review process.11 Since that
did not work, if she took Cigna to court, assuming she received her Cigna
care through her or a family member’s employer, she would be able to
recover, with near certainty, zero dollars outside the cost of the originally
denied care.12
The confounding lack of remedy is due to a three-part wall.13 Each
layer interlocks, reinforcing the others:14 (1) damages immunities—insurers
of employer-sponsored plans are generally only subject to equitable remedies
and are not exposed to consequential or punitive damages;15 (2) consulting
physician malpractice immunity—the doctors that insurers hire to determine
if a claim is medically necessary are treated solely as fiduciaries to the plan,
avoiding a meaningful duty of care as a medical doctor to the patient-
claimant;16 (3) and, finally, a complex system of express, reverse, and implied
preemption, where states are charged with creating insurance regulations and
monitoring mechanisms but have no enforcement powers—resulting in a
bizarre, rigid regulatory terrain.17
Dawn’s story begs the questions: How often are claims denied? What
happens when they are? How have things changed since her case? Lastly,
what can be done to keep her story from repeating today?
Over 178,000,000 Americans received healthcare plans through
employers in 2021.18 This means over one-half of Americans receive
9
See id.; see Aetna Health Inc. v. Davila, 542 U.S. 200, 209 (2004).
10
See Bilyeu v. Morgan Stanley Long Term Disability Plan, 683 F.3d 1083, 1088 (9th Cir. 2012) (“As
a general rule, an ERISA claimant must exhaust available administrative remedies before bringing a claim
in federal court.”)(citation omitted); 29 U.S.C. § 1133 (2022); see also 1 WILLIAM T. BARKER & RONALD
D. KENT, NEW APPLEMAN INSURANCE BAD FAITH LITIGATION § 8.04(e)(i) (Matthew Bender, ed., 2d ed.
2022).
11
See Bilyeu, 683 F.3d at 1088; see BARKER & KENT, supra note 10.
12
See Peter K. Stris, supra note 8, at 396–98.
13
See Aetna Health Inc., 542 U.S. at 208–09; see Skelcy v. United Health Grp., Inc., 620 F. App'x 136, 143–44
(3d Cir. 2015); see CIGNA Corp. v. Amara, 563 U.S. 421 (2011).
14
See Aetna Health Inc. 542 U.S.; see Skelcy v. United Health Grp., Inc., 620 F. App'x 136 (3d Cir. 2015); see
CIGNA Corp. v. Amara, 563 U.S. 421 (2011).
15
See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 53–54 (1987)
16
See Pegram v. Herdrich, 530 U.S. 211, 222–25 (2000); Skelcy, 620 F. App’x at 140, 143–44.
17
See Peter K. Stris, supra note 8; see generally Terry L. Corbett, Operationalizing the Healthcare Benefit
Corporation, 24 J. HEALTHCARE L. & POL’Y 267 (2021) (describing the issues treating doctors as fiduciaries raises
regarding insureds’ access to care).
18
See KATHERINE KEISLER-STARKEY & LISA N. BUNCH, U.S. CENSUS BUREAU, HEALTH INS. COVERAGE IN
THE UNITED STATES: 2021 3–4 (2022). The term employer does not include all governmental employers, but
excludes TRICARE recipients and generally other government employees who receive their health insurance from
a direct government fund. Id. Additionally, the term may still cover government contractors who are subcontracted
or where a government entity outsources their funding for care to an insurance company. Id.
2024] Illusory Remedies 763
healthcare through an Employee Retirement Income Security Act (ERISA)

of 1974 protected plan.19 Protected is misleading because it implies employee
benefits are being protected; however, ERISA primarily ensures that benefit
sources, insurers, and employers are secure.20 Proponents of ERISA argue
that it protects employee–consumers and their dependents by ensuring access
to their benefits.21 ERISA guarantees access through essentially two
mechanisms: solvency and standardization.22 The Act is meant to ensure the
institution that provides benefits does not go bankrupt, whether that be a
pension fund or a healthcare plan, and to reduce multi-state employers’
administrative burdens.23 With protecting benefactor stability as a guiding
principal, a half-century long train of legislation and litigation has made
ERISA a safe haven for the largest insurance companies, employers, and
unions to provide insurance beneficiaries a fraction of what they are owed.24
Cloaked in the safety of legislation and precedent, insurers can avoid
covering claims because the penalties for breaching their duties are far
cheaper than performing them.25 But there is an additional major barrier to
resolution for wrongfully denied beneficiaries besides the three layer system
of immunities and preemption that is responsible for the perverse incentive
insurers have to wrongfully deny claims:26 no entity tracks the prevalence of
ERISA health plan claims denial.27 The lack of monitoring makes the
prevalence of wrongful claim denial impossible to know with certainty.
Worse, the selective reporting that is available is voluntary, making it high
risk for cherry-picked data that masks issues.28
19
Id. (2021 Census Bureau report on health insurance coverage, estimating 54.3% of the country receives health
insurance from an employer).
20
See Sharon J. Arkin, Tort Actions Against Health Maintenance Organizations and Their Doctors, 23
WHITTIER L. REV. 609, 609–12 (2002); Matthew G. Vansuch, Not Just Old Wine in New Bottles: Kentucky Ass'n
of Health Plans, Inc. v. Miller Bottles a New Test for State Regulation of Insurance, 38 AKRON L. REV. 253, 267–
68 (2005).
21
Sharon J. Arkin, supra note 20; Matthew G. Vansuch, supra note 20.
22
Lee Black, ERISA: A Close Look at Misguided Legislation, 10 J. OF ETHICS AMA 307, 307 (2008); see
Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. § 1001 (1974).
23
See Peter K. Stris, supra note 8, at 387.
24
See Sharon J. Arkin, supra note 20 (the primary statutory complaints raised by this article pertaining to
accessible tort actions remain essentially untouched); see also 29 U.S.C. §§ 1001–1461 (1974); see Gobeille v.
Liberty Mut. Ins. Co., 577 U.S. 312 (2016) (one of the most recent landmark ERISA cases pertaining to health
insurance reporting and describing the judicial lack of interest or ability to change ERISA policy).
25
See infra discussion section (II)(A).
26
See Aetna Health Inc. v. Davila, 542 U.S. 200, 208–09 (2004); see Skelcy v. United Health Grp., Inc., 620 F.
App'x 136, 143–44 (3d Cir. 2015); see CIGNA Corp. v. Amara, 563 U.S. 421, 439–40 (2011).
27
See generally EMP. BENEFITS SEC. ADMIN.(EBSA), REPORTING AND DISCLOSURE GUIDE FOR EMPLOYEE
BENEFIT PLANS (2017), https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-
center/publications/reporting-and-disclosure-guide-for-employee-benefit-plans.pdf [https://perma.cc/DRT2-
U35Z] [hereinafter EBSA REPORTING GUIDE]; see infra discussion section (II)(C).
28
EBSA REPORTING GUIDE supra note 27; see U.S. GOV’T ACCOUNTABILITY OFF., GAO-11-268, PRIVATE
HEALTH INSURANCE DATA ON APPLICATION AND COVERAGE DENIALS 10 (2011) (“In overseeing insurer activity,
states vary in the data they require insurers to submit on denials and internal appeals of denials.”).
Many regulated markets are largely untracked by the government;

where the general principal is injured parties are best situated, with the help
of plaintiffs’ attorneys, to police tortious actors.29 Private actions in for torts
ranging from products liability to malpractice also can provide gauge of the
general health of a given industry.30 Using private court actions as an
unofficial tracking mechanism for ERISA health insurance claims is severely
inhibited for a number of reasons, including the traditional barriers to
initiating a lawsuit.31 ERISA health insurance claims, leave individuals to
fend for themselves, but limited remedies and party asymmetry make it much
different.32 ERISA provides a statutory scheme of enforcement to ensure
certainty and standardization; but it appears, instead, to have stripped over
half the health insurance market of meaningful accountability.33 Ultimately,
in exchange for insurer financial protection, over one hundred seventy eight
million Americans are granted only as much healthcare certainty as they can
afford out of pocket. For many insureds, this means paying for the privilege
of extremely limited access to healthcare, despite consumer protection
efforts.34
Consumer protection aspects of ERISA have accumulated over the
years, especially in the last twelve years since Dawn’s story.35 But as this
Note will show, protections, old or new, are undercut by shifted terms, special
immunities, institutionalized opacity, and a strict scheme of preemption.36 It
boils down to this: you can make all the rules in the world, but if there are no
punishments, or, if punishments are never enforced, then those rules really
have no legal effect—they are mere formalities.37
The level of immunity from harm enjoyed by insurers results in an
economic terrain where bad faith denials of health insurance claims do not
only occur but appear to be the standard.38 There may even be a conflict of
responsibilities for insurance company leadership between providing care as
29
See generally VICTOR E. SCHWARTZ ET AL., POSER, WADE, AND SCHWARTZ’S TORTS (14th ed. 2020); See
U.S. GOV’T ACCOUNTABILITY OFF., supra note 28.
30
VICTOR E. SCHWARTZ ET AL, supra note 29.
31
See U.S. GOV’T ACCOUNTABILITY OFF., supra note 28.
32
EBSA REPORTING GUIDE, supra note 27; see Lee Black, supra note 22.
33
Lee Black, supra note 22; Sharon J. Arkin supra note 20; see Employee Retirement Income Security
Act (ERISA) of 1974, 29 U.S.C. §§ 1131-1136 (1974) (detailing civil and criminal penalties available,
who can enforce them, and when they can be enforced).
34
See KATHERINE KEISLER-STARKEY & LISA N. BUNCH, supra note 18; Peter K. Stris, supra note 8.
35
See generally 29 U.S.C. §§ 1001–1461 (2022). See also Health Insurance Portability and Accountability Act
of 1996, Pub. L. No. 104–191, § 1, 110 Stat. 1936 (codified at 42 U.S.C. § 210 (2003)); see also The Patient
Protection and Affordable Care Act, Pub. L. No. 111-148, § 2718 (2010).
36
See Aetna Health Inc. v. Davila, 542 U.S. 200, 208–09 (2004); see Skelcy v. United Health Grp., Inc., 620 F.
App'x 136, 143–44 (3d Cir. 2015); see CIGNA Corp. v. Amara, 563 U.S. 421, 439–40 (2011).
37
Contra Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312, 323 (2016) (“These various requirements are not
mere formalities.”).
38
Peter K. Stris, supra note 8, at 396–98.
their plans describe and engaging in shareholder primacy.39 When fines are
significantly less costly than the bad behavior is profitable, which obligation
controls behavior?
After decades of litigation and legislation, the insurers’ position has
mostly improved, while patients find dwindling avenues for meaningful
redress.40 The United States Supreme Court has heard cases challenging
every one of ERISA’s prongs described here, and without fail, have upheld
the insurers’ interests typically in near unanimous decisions.41 Individual
states have little they can affect. The only avenue for long-term, system-wide
correction for this issue, is through federal legislation. That legislation must
remove immunity from penalties and get doctors back into the business of
considering patients first.
In addition to legislation, a more readily achieved resolution, would
require no additional legislation. ERISA gives the federal government the
ability to request information from insurers.42 The Department of Labor—the
federal agency delegated with enforcing employee benefits—could enact a
claim denial reporting system, as is done for Medicare,43 for ERISA plans
immediately.44 That information would make obfuscating insurance
malpractice much more difficult and would illuminate the severity of the
issue. Currently, without meaningful remedies, ERISA’s hulking patchwork
of regulation will remain mere suggestions, and insureds will continue to rely
on a massive illusion.45
This Note will argue that, outside of sweeping reform or an exodus
from ERISA markets, the best solutions to these issues would be through
modifications to the Department of Labor’s denial reporting requirements, as
well as surgical repeals and modifications to existing sections of the Act,
removing the cancerous lines that have metastasized throughout the
American healthcare system.46
Part I of this Note will describe the history and rationale behind
ERISA health insurance and where it is today in a post-Affordable Care Act
39
Id.
40
See Id. at 396–98; see BARKER & KENT, supra note 10, § 8.04(b)(ii).
41
See Pegram, 530 U.S. 211 (2000); Gobeille, 577 U.S. at 312; Aetna Health Inc., 542 U.S. at 200;
CIGNA Corp., 563 U.S. at 421; Humana Inc., 525 U.S. at 299; PacifiCare Health Sys., 538 U.S. at 401;
Metro. Life Ins. Co., 554 U.S. at 105.
42
See Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. § 1027 (2024).
43
Karen Pollitz et al., Claims Denials and Appeals in ACA Marketplace Plans in 2020, KAISER. FAM. FOUND.
(Jul. 5, 2022), https://www.kff.org/private-insurance/issue-brief/claims-denials-and-appeals-in-aca-marketplace-
plans [https://perma.cc/7JJC-89DE].
44
Id.
45
U.S. DEP’T OF LAB. & U.S. DEP’T OF HEALTH AND HUM. SERV., REPORT TO CONGRESS ON A STUDY OF
THE LARGE GROUP MARKET 5 (2011).
46
Id.
(ACA) world.47 It will also discuss basic economic theory necessary to

contextualize the effects of ERISA regulation. Part II will detail each layer
of the underlying problem—including immunities, physician fiduciaries,
lacking transparency, and preemption. Part III will analyze the impact of the
of the issues within the contextual framework outlined in Part I. Part IV will
propose legislative and administrative solutions to correct the issues, with
feasibility and efficacy as guiding principles. Finally, Part V will summarize
and conclude by describing the state of negligence within the health
insurance market and for action in its opposition.
I. BACKGROUND
A. Overview of ERISA
ERISA is highly technical and vast.48 It covers all forms of employee
benefits and has been added to for decades.49 Major bills like the Affordable
Care Act (ACA), and the Health Insurance Portability and Accountability Act
of 1996 (HIPAA) extensively modified and added to ERISA.50 The issues
raised in this Note mostly live in the high limbs of ERISA’s giant tree of
legislation. To understand the relevant issues, therefore, a cursory
understanding of the roots and trunk of ERISA—in other words, its
conceptual foundation—is necessary.
Congress established ERISA in 1974 to cure legal constraints arising
from the growing number of companies that had offices and employees
spanning numerous states. 51 Thanks to advances in communications and
travel, like the interstate highway system, rail, and telecommunications, the
world had become much smaller.52 However, expanding businesses also
increased employers’ legal landscape creating difficulties; each state had its
own standards for many forms of employee benefit plans—including pension
funds, stock options, termination benefits, health insurance, disability, and
47
See generally Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. § 1001; see generally
Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010).
48
See Lee Black, supra note 22 (“ERISA is a complex law that uses somewhat ambiguous language to set up
what is, essentially, a skeletal regulatory system for employer-sponsored health plans.”).
49
See History of EBSA and ERISA, EMP. BENEFITS SEC. ADMIN., https://www.dol.gov/agencies/ebsa/about-
ebsa/about-us/history-of-ebsa-and-erisa [https://perma.cc/DG4G-LHHJ] (last visited Feb. 8, 2024).
50
See also Health Insurance Portability and Accountability Act of 1996, Pub. L. No. 104–191, § 1, 110 Stat.
1936 (codified at 42 U.S.C. § 210 (2003)); see The Patient Protection and Affordable Care Act, Pub. L. No. 111-
148, § 2718 (2010).
51
29 U.S.C. § 1001(a) (1974). (“The Congress finds that the growth in size, scope, and numbers of employee
benefit plans in recent years has been rapid and substantial; that the operational scope and economic impact of
such plans is increasingly interstate . . . .”)
52
Id. at § 1001; See M. Ayhan Kose & Ezgi O. Ozturk, A World of Change, 51 INT’L MONETARY FUND FIN.
& DEV. 6, 7 (2014).
life insurance.53 ERISA was, therefore, meant to consolidate employee

benefit requirements under a uniform code, encouraging interstate
commerce.54
Understanding ERISA’s broad scope is important because, in many
cases, legislation or rulings in one covered area have unintended
consequences on the other areas. It helps explain some of the thought
processes behind seemingly irrational points of law. Even at its origin,
ERISA showed irrational consequences by broadly interpreting “employee
benefits.”55 Pension plans were the primary mode of retirement saving in the
1970’s when the bill was enacted.56 The concept of a pension plan is simple:
employees make contributions over their tenure.57 The plan is managed like
a hedge fund, accruing interest overtime; and once a person retires, they
receive regular payments, typically, until they die.58 If a plan were
mismanaged, even fraudulently, and an injured party sued and won, a large
award may bankrupt the plan.59 That effect could be catastrophic for the rest
of the plan beneficiaries. To balance justice for aggrieved beneficiaries and
the threat of a pension fund’s solvency, ERISA set out strict reporting
systems and statutory penalties for wrongful behavior.60
The same concept of balancing interests of aggrieved beneficiaries
and other beneficiaries was applied to welfare benefits plans, which include
health, disability, and life insurance.61 There are a few key differences
between retirement savings and welfare benefits plans, namely health
insurance. Pension funds are significantly more straightforward than health
insurance.62 Pension plan participants make contributions, which then must
be invested by in specified, sufficiently safe categories of holdings; retirees
then pull prescribed amounts of benefits based on their previous
contributions.63 If employer plans fail to report, or show errors, they are
53
See Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. § 1001(a); see Lee Black, supra
note 22.
54
29 U.S.C. § 1001(a).
55
Matthew G. Vansuch, supra note 20.
56
See Regina T. Jefferson, Rethinking the Risk of Defined Contribution Plans, 4 FLA. TAX REV. 607, 612 (2000)
(“When ERISA was enacted, defined benefit [one type of pension plan] was the predominant [retirement] plan
type.”).
57
Id.
58
Eric Whiteside, How Do Pension Funds Work?, INVESTOPEDIA (Apr. 29, 2022)
https://www.investopedia.com/articles/investing-strategy/090916/how-do-pension-funds-work.asp
[https://perma.cc/D62M-F6BG].
59
Id.
60
29 U.S.C. § 1001 (b); KATHRYN MOORE, UNDERSTANDING EMPLOYEE BENEFITS 6 (2nd ed., 2020); see Peter
K. Stris, supra note 8.
61
29 U.S.C. § 1001 (1974); see MOORE, supra note 60; see Peter K. Stris, supra note 8.
62
See Eric Whiteside, supra note 58.
63
Id.
exposed to fines.64
Health insurance, on the other hand, is anything but simple. For a
claim to be covered, the insurer must determine if the procedure or medical
device is medically necessary, which requires the opinion of medical
professionals;65 when they disagree, who determines which opinion controls
what an insurance company must pay for? Additionally, ERISA welfare
benefits fines are restricted to much smaller sums than those available for
other benefit plans.66 Typically, fines are no more than $100 a day for failing
to furnish plan information for more than thirty days after a proper request.67
The fairly insignificant amount of these fines for not sending plan
information also raises the fair question: so what? In essence, the civil
enforcement structure through fines does little more than push insurers to
give someone the contractual language letting them know if they are being
wrongfully denied but does little once they are equipped with that
knowledge.68
Speaking on ERISA fines, in Gobeille v. Liberty Mut. Ins. Co.,
Justice Kennedy, writing for the majority, noted the mandates are serious and
implied there was a steep price for noncompliance: “These various
requirements are not mere formalities. Violation of any one of them may
result in both civil and criminal liability.”69 What he failed to mention,
however, is that the standard for criminal action requires a willful state of
mind, the most difficult mens rea to prove, and that civil risks were few, as
this Note will demonstrate.70
B. Plan Types
Health insurance plans in the U.S. break down into three main
categories: public, private individual, and group.71
Public plans are sponsored by either the local or the federal
government.72 They can be further broken down into entitlements like
Medicaid and government-as-employer programs like TRICARE.73
Although TRICARE, personal private, ACA market plans, religious
64
See Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. §§ 1131-1136 (detailing civil
and criminal penalties available and their enforcement mechanisms).
65
See 29 C.F.R. §§ 2590.715-2719 (2022); see also Karen Pollitz et al., supra note 43.
66
29 U.S.C. §§ 1131-1136.
67
Id.
68
See EBSA REPORTING GUIDE, supra note 27.
69
Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312, 323 (2016).
70
See id.; see Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. §§ 1131–1136.
71
See KEISLER-STARKEY & LISA N. BUNCH, supra note 18.
72
Id. at 3.
73
Id.
organization insurance, and Veterans Affairs may be offered as an employee

benefit, they do not fall under ERISA.74 However, some government
employee healthcare plans do fall under ERISA.75 But, determining if a
government employee plan qualifies for ERISA requires more facts than
private sector employee plans.76 For this Note, it is important to understand
is that a portion of government employees and contractors have ERISA
healthcare, contributing to the total usage.77
Plans bought by individuals on the private market tend to be more
expensive than group plans that are typically offered by associations like a
chamber of commerce or an employer—a distinction that encompasses
unions for the purposes of ERISA.78 Employer group plans typically have the
lowest private market premiums because employers provide human resources
efficiencies, saving insurers considerable cost.79 Those savings, along with
tax credits, are efficiencies employers can leverage to functionally pay their
employees more at a lower cost to the company.80 These savings are one
reason for ERISA health plan prevalence.81
Employer sponsored plans branch into two categories: fully-funded
and self-funded.82 Fully-funded plans are the more typically thought of
version of a group health insurance plan.83 In a fully-funded plan, an
employer contracts with an insurer to provide their staff insurance.84 The
74
See Alan M. Levine, ERISA Title I Fundamentals, LEXISNEXIS,
https://www.morrisoncohen.com/siteFiles/files/ERISA%20Title%20I%20Fundamentals.pdf
[https://perma.cc/773Q-REU8] (last visited Apr. 10, 2024).
75
BARKER & KENT, supra note 10, § 8.04(b)(ii).
76
Id. It must be determined if the instrumentality of employment pulls more into the private or public sector,
through a six factor test: (1) whether the instrument is for a government purpose; (2) whether performance is on
behalf of multiple political subdivision; (3) whether private, state, or political subdivisions have ownership interests
or powers; (4) whether control and supervision is under a public authority; (5) whether express or implied statutory
authority is necessary for creation and use; and (6) the degree of financial autonomy and source of operating
expenses. Id.
77
See Id.
78
See Corbett, supra note 17. Unions are a special case because unions do not employ all their members. Id.
But unlike a normal association, they are considered an employer, larger unions may self-insure or seek a fully-
funded plan option for their members. Id. The union intersection with ERISA provides a considerable wrinkle, in
the ERISA landscape. Id. What is important to understand for this Note, is how it impacts ERISA prevalence. Id.
Unions hold a major share of the U.S. labor market and the related health insurance market share. Id; see Luke
Petach & David K. Wyant, The Union Advantage: Union Membership, Access to Care, and the Affordable Care
Act, 23 INT’L J. HEALTH ECON. & MGMT. 1, 2 (2023).
79
Corbett, supra note 17.
80
See GARY CLAXTON ET AL., EMPLOYER HEALTH BENEFITS: 2022 ANNUAL SURVEY KEISER FAM. FOUND,
30 (2022).
81
KEISLER-STARKEY & LISA N. BUNCH, supra note 18, at 3, 4; see Employee Retirement Income Security Act
(ERISA) of 1974, 29 U.S.C. §§ 1181–1191(d). 26 I.R.C. § 5000 (2022)
82
CLAXTON ET AL., supra note 80, at 163. For the purposes of this Note, fully-funded plans are also known as
insured or fully-insured plans. To reduce confusion between insured, and insureds or the state of being insured this
paper uses the fully-funded terminology.
83
KEISLER-STARKEY & LISA N. BUNCH, supra note 18, at 3–4
84
CLAXTON ET AL., supra note 80, at 9.
advantages the insurer receives from having a captive client base, that is at
least healthy enough to work, and from having certain administrative
functions performed by the employer’s internal human resource departments,
are traded back in part to the employer and the employees through reduced
rates.85
Self-funded or self-insured plans are those where the employer will
foot the bill for any covered medical expenses, but employers typically use a
health insurance company to perform the administrative duties required to
manage an ERISA plan.86 Self-funded companies present many of their own
problems for employees, because they are not subject to nearly any state law
governing insurance.87 Rather, they are completely covered by ERISA,
giving them an extreme amount of leeway in determining acceptable
coverage.88 Self-funded plans have few bounds other than those written into
the terms of their plans,89 whereas when an insurance company is the actual
insurer, a fully-insured plan, they are bound by some state laws that may
mandate certain minimum standards.90
This Note will predominantly address issues arising from fully-
funded plans. While all the issues discussed apply to self-funded plans, it is
important to distinguish between the incentive structures for self-funded
firms, and insurance companies.91 In a self-funded plan, the claim
administrators, which are typically actual insurance companies, are
compensated through a fee system instead of a premium structure.92 It is not
clear if this actually has a large impact on claims outcomes.93 To draw a
connection between claim denials and the compensation structure for claim
administrators requires consideration of many more market incentive, which
is a task beyond the scope of this Note.94 Accordingly, this Note narrows its
focus on fully-funded plans, where the incentives are much more bare.95
C. Claims and Denials
Essential to this Note are the basic concepts of claims for coverage
and their subsequent denials. Unlike most other forms of insurance,
85
KENNETH S. ABRAHAM & DANIEL SCHWARCZ, INSURANCE LAW AND REGULATION: CASES AND
MATERIALS 383–84 (7th ed. 2020).
86
Id.; see Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. §§ 1181–1191(d).
87
ABRAHAM & SCHWARCZ, supra note 85; see 29 U.S.C. §§ 1181-1191(d).
88
ABRAHAM & SCHWARCZ, supra note 85, at 400.
89
Id.
90
Id.
91
Id.
92
Id.
93
Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 114 (2008).
94
95
Id.
healthcare coverage includes the function of access to routine and

preventative care.96 This quality creates a strange adjustment to the concept
of a claim. Normally, in the insurance context, a claim is a reactive measure.97
For example, in the context of homeowners or automobile owners insurance,
when calamity strikes and a new roof or bumper is needed, the insured files
a claim outlining what happened that an adjuster reviews to determine if the
claim has merit under the terms of the relevant policy.98 Health insurance
claims, however, include, inter alia, regular doctor checkups and medical
testing, which do not occur sporadically but are considered a routine aspect
of health care.99
Claims for medical coverage can be described under two general
categories: post care and prior-authorization .100 Post care refers to any care
that is written in the plan as approved or that is approved by law and a claim
for it is filed after the care or product is provided.101 This may cover routine
care like an annual check-up, limited discretionary coverage (i.e., care
assumed covered up to X amount during a Y period), and emergency
services.102 For more expensive, elective, or repeat care within a certain time
frame, plans require prior-authorization.103 Prior-authorization is coverage
that requires the insurer to approve coverage before the insured receives
care.104 When prior-authorization is denied, patients must choose between
paying out of pocket, assuming they even can, for care like medical tests that
may bring positive or negative results, or they can save their money and hope
for the best.105 A tendency to avoid care is not entirely irrational if the
potential debt from that care would jeopardize a person’s food or shelter
security, putting them in the “what will kill me faster” dilemma.106
Unfortunately, there is not currently a reliable source for national
claim denial prevalence in ERISA markets.107 While the Centers for
96
Id. at 383.
97
Id.
98
Id.
99
Id.
100
See Preauthorization, HEALTHCARE.GOV, https://www.healthcare.gov/glossary/preauthorization/
[https://perma.cc/3N4S-RJCD] (last visited Apr. 10, 2024).
101
See Haley Sweetland Edwards, How You Could Get Hit With a Surprise Medical Bill, N.Y. TIMES (Mar. 7,
2016, 2:38 PM EST) https://time.com/4246845/health-care-insurance-suprise-medical-bill/
[https://perma.cc/QV9Y-TSLC].
102
Id.
103
104
See HEALTHCARE.GOV, supra note 100.
105
See Karen Pollitz et al., supra note 43 (analyzing CMS data on Healthcare.gov market plans’ claim denial
data and finding less than one percent of claims were appealed).
106
See Mark Henricks & Kim Porter, Medical Bankruptcies: Can You File for Bankruptcy Over Medical Bills?
FORBES (Aug. 11, 2022, 4:00 PM), https://www.forbes.com/advisor/debt-relief/medical-bankruptcies/
[https://perma.cc/R4Y4-X79S].
107
See Infra discussion section (II)(C).
Medicare and Medicaid Services (CMS) have instituted denial reporting in a

systematic manner, it does not include private markets.108 Thirty states have
all payer reporting programs, but the data they capture is not consistent state-
to-state.109 Additionally, in 2016, the United States Supreme Court held in
Gobeille v. Liberty Mut. Ins. Co. that states could ask for reporting
information, but they could impose no penalties on ERISA plans for non-
compliance.110 Loose reporting requirements have also led to difficulty for
private sector research groups struggling to provide consistent denial
information in such a fragmented market.111 Various research group
estimates range from as low as four percent to thirty percent being denied in
employer–sponsored markets.112 These numbers can be even worse when
inclusive of ignored, delayed, or lost claims.113
A Kaiser Foundation report from 2022 analyzed transparency data
released by the CMS on claims denials and appeals for non-group qualified
health plans offered on HealthCare.gov.114 While this data is not from the
employer–sponsored market, it is the most reliable data available to provide
a clearer, albeit still incomplete, snapshot of the denial landscape.115
HealthCare.gov insurers denied over eighteen percent of in-network
claims.116 The reasons for denials were broken into the following categories:
a. Denials due to lack of prior authorization or referral,

b. Denials due to an out-of-network provider,
c. Denials due to an exclusion of a service,
d. Denials based on medical necessity (reported separately
for behavioral health and other services), or
e. Denials for All Other Reasons.117
By far the most common reason for denials was “all other reasons.”118 These
denial reason categories are applicable to group plan denials, and the
companies that administer Medicare and Medicaid plans are companies that
108
See EBSA REPORTING GUIDE, supra note 27; see also infra discussion section (II)(C).
109
KATHERINE GRACE CARMAN ET AL., THE HISTORY, PROMISE AND CHALLENGES OF STATE ALL PAYER
CLAIMS DATABASES: BACKGROUND MEMO FOR THE STATE ALL PAYER CLAIMS DATABASE ADVISORY
COMMITTEE TO THE DEPARTMENT OF LABOR 1 (Jun. 2, 2021), https://home.treasury.gov/policy-issues/financial-
markets-financial-institutions-and-fiscal-service/federal-insurance-office/about-fio [https://perma.cc/9NKS-
U82U].
110
See Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312, 323 (2016).
111
112
Id.
113
Id.
114
Karen Pollitz et al., supra note 43.
115
Id.
116
See id.
117
Id.
118
Id.
also manage large group plans, like Blue Cross Blue Shield and Cigna. The
necessary elements for a denial tracking system to function are already in
place, showing that denial tracking could be readily incorporated for ERISA
plans. 119
Following the CMS data, seventy percent of internal claim appeals
were completely successful, but less than one percent of denials were
appealed.120 It is possible that the reason for appeal success prevalence is that
unreasonable denials are so rare that the small percentage of wrongful denials
are easy to catch; however, more likely, the rarity of appeals themselves
points to issues of inertia and completely asymmetrical competition between
insurers and insureds.121
D. Economics and Incentives
Basic economic doctrine has held for centuries that firms and
individuals act in their interest.122 While the more recent field of behavioral
economics has cast some doubt on the uniformity of firms’ and individuals’
ability to act rationally, the basic concept still holds.123 Firms and individuals
take actions because they feel that the value or utility of the outcome will
outweigh the cost or opportunity cost expenditure of the act.124 In other
words, people do not cheat on their taxes or steal because the penalties and
social costs, multiplied by a probability of being caught, outweigh the
perceived benefits—at least for some. And people do things like purchase
cars because the utility they bring outweighs the cost.125
The larger a group is, the more interests that become relevant.126 This
is especially true in policymaking.127 The increasingly peripheral interests are
referred to as externalities.128 Classic examples of weighing externalities are
119
Id.
120
Id.
121
Margaret G. Farrell, ERISA Preemption and Regulation of Managed Healthcare: The Case for Managed
Federalism, 23 AM. J. L. AND MED. 251, 265-266 (1997); See generally Katherine T. Vukadin, Unfinished
Business: The Affordable Care Act and The Problem of Delayed And Denied Erisa Healthcare Claims, 47 J.
MARSHALL L. REV. 1 (2014); See Ivan Major, Two-Sided Information Asymmetry in the Healthcare Industry, 25
INT’L ADVANCES IN ECON. RSCH., 177 (2019).
122
See generally RICHARD H. THALER, MISBEHAVING: THE MAKING OF BEHAVIORAL ECONOMICS (Jun. 14,
2016).
123
Id.
124
JACK P. FRIEDMAN ET AL., BARRON’S DICTIONARY OF BUSINESS AND ECONOMICS TERMS (5th ed. 2012). In
economics, utility is catchall term to describe the more subjective forms from which entities derive value and is the
quantifying of qualitative values like taste, smell, or status; and non-monetary quantitative values like calories or
dosage. See id.
125
Id. See generally RICHARD H. THALER, supra note 122.
126
JACK P. FRIEDMAN ET AL., supra note 124.
127
See RICHARD H. THALER supra note 122.
128
Id.
seen in health and welfare.129 For example, economists weigh the loss in tax
income from burdening a power plant with expensive air filtration machinery
against the cost of having a population riddled with lung diseases from
pollution.130 The diseases are negative externalities of the pollution, and
avoiding lost work and medical expenses are positive externalities of the
regulatory requirements.131 When given a large-scale problem, like pollution
control or health insurance policy, the sum of all externalities, original costs,
and benefits equal what is termed as the “social cost” or “social benefit,”
depending on whether the externality is a net loss or gain.132 In sum, so long
as the social benefit of an action continues to outweigh the social cost of that
action, a course of action is likely advisable.
1. Perverse Incentives.
When narrow interests create a social cost, this is often the result or
cause of a perverse incentive.133 The cobra effect describes this concept’s
origin in economics.134 The British Empire, concerned about cobras in Deli,
put a bounty on their heads; but this led to the breeding of cobras, and
increased their overall population.135
A perverse incentive scenario more like the one at play in ERISA
healthcare markets.136 In this context, there is a student who parks in an area
near enough to the Brandeis School of Law, that is functionally equidistant
to the paid-for parking lots. Unfortunately, it is metered. But, after deducing
they would only receive–on average–one fifteen-dollar ticket a semester, they
weighed the cost of being a scofflaw against the utility of essentially free
parking. It would cost them at least $300-$330 to pay for parking for the
school year; they could also park for free around a twenty-minute walk from
129
See generally Bruce C. Greenwald & Joseph E. Stiglitz, Externalities in Economies with Imperfect
Information and Incomplete Markets, 101 Q. J. OF ECON. 229 (1986).
130
See id. at 230.
131
Çağatay Koç, The Productivity of Healthcare and Health Production Functions, 13 HEALTH ECON. 739,
741–43 (2004).
132
133
Perverse Incentives, FORBES (Feb. 20, 2009), https://www.forbes.com/2009/02/19/incentives-
compensation-bonuses-leadership_perverted_incentives.html?sh=6c7515745b3b [https://perma.cc/79L2-6P3E];
Patrick Warczak Jr., The Cobra Effect: Kisor Roberts, and the Law of Unintended Consequences, 54 AKRON L.
REV. 111, 112 (2020).
134
Patrick Warczak Jr., supra note 133.
135
Id.
136
See David McAdams & Michael Schwarz, Perverse Incentives
in the Medicare Prescription Drug Benefit: 44 INQUIRY: J. HEALTH CARE ORG., PROVISION, & FIN.157,
158 (2007) (“Since insurers prefer to attract less costly patients, each insurer has an incentive to offer less
generous coverage than its competitors (at a lower price). In some situations, this can create a ‘race to the
bottom’ in which a competitive insurance market fails to offer any insurance product providing
meaningful coverage.”).
the school every day. The solution is obvious, roll the dice on the metered
area.137 A student dodging parking tickets because the incentives line up is
hardly a major issue, maybe even whimsical. But, when gatekeepers of access
apply that logic healthcare, the social cost is catastrophic. 138 Consider the
analog of theft. Imagine the only punishments for theft were having to return
what was stolen and paying legal defense fees. There would be an incentive
to steal anything more valuable than cost of associated legal fees.139 The cost
incurred socially would include massively increased retail security;
depressed sales and income tax revenue; and the cascading effects of the
ensuing vigilantism, as the legitimacy of the justice system waned.140 In the
healthcare context, when firms find the rate of denying claims is more
profitable than approving them, including factors like marketability, they
reach market equilibrium.141 As in the theft analogy, if the regulatory solution
is ineffective, and other market factors do not reign in a market with perverse
incentives the social cost will spiral.142
2. Inelastic Demand.
Inelastic demand and market choice are two more central factors in
market equilibrium deranging outcomes in ERISA healthcare.143 Demand is
a primary market mover; it is how much something is wanted or needed.144
Elasticity is how much the price can fluctuate without effecting demand.145
The more necessary something is for survival or the more coerced into its
use, the more inelastic its demand becomes.146 Insulin has an inelastic
demand curve for diabetics, EpiPens for people with severe allergies, oil for
shippers, and so on.147
137
JACK P. FRIEDMAN ET AL., supra note 124. over the course of two years of this parking experiment the
students has paid $45 in tickets, or only 14% of the price to pay for parking).
138
See Lee Black, supra note 22.
139
See Patrick Warczak Jr., supra note 133.
140
See Lee Black, supra note 22; see also Bruce C. Greenwald & Joseph E. Stiglitz, supra note 129.
141
JACK P. FRIEDMAN ET AL. supra note 124. Market equilibrium is where the price for something meets the
demand for it. Id. Markets will fluctuate, events like Market equilibrium occurs when the price and quantity of an
item are aligned with an equal market demand and market supply. Id. Markets will fluctuate; for instance, events
like supply shortages may drive the cost of something up beyond demand, and there may be a mismatch where
firms work to adjust their model to return their supply and demand to equal at a desired profit margin. Id. There
are an almost incalculable number of factors affecting price for any good or service, which is why price stability is
often treated as dispositive as to whether a market is stable instead rather than other concepts like supply, demand
elasticity, and speculated security. See id.
142
See Patrick Warczak Jr., supra note 133.
143
Çağatay Koç, supra note 131, at 741.
144
145
Çağatay Koç, supra note 131, at 741.
146
Id.
147
Id.
Coercion can come from regulatory or unofficial channels.148

Regulatory coercion would be requiring a specific inspection or service to
perform a central function of one’s life, more formally known as standards
compliance.149 Health insurance may present like this for employers large
enough to trigger ACA and ERISA mandates to provide coverage for
employees.150 Coercion in this context is not necessarily bad. But, it does put
employers in a position where they must provide health insurance.151 Savings
per-person increase with participation, and plans may require certain
participation minimums.152 This puts employers in a position where they may
mandate participation in their company healthcare plan.153 It is also generally
much more affordable to be on an ERISA plan than on a private plan, and
employee compensation is often designed with the understanding that a
significant portion of what would be wages will be diverted to pay for health
insurance.154 This means participants on ERISA plans have little to no actual
choice in how they participate in the market.155 They may complain in mass
to their employers who have a choice, but only once a year; and changing
insurance providers is a costly exercise.156 This combination of coercion and
necessity creates a highly bizarre market, not subject to the kind of pressures
normally present in other markets, despite directed legislative efforts to fix
ERISA shortfalls.157
E. Movements to Cure Deficiencies in ERISA Healthcare
Landmark legislation affecting ERISA over the past three decades,

from least recent to most recent, includes: HIPPA, the ACA, and The Mental
Health Parity and Addiction Equity Act (MHPAEA).158 MHPAEA compels
148
Coercion, FREE LEGAL DICTIONARY, https://legal-dictionary.thefreedictionary.com/coercion
[https://perma.cc/2MC6-W63B] (last visited Nov. 7, 2022).
149
See generally Ekow N. Yankah, The Force of Law: The Role of Coercion in Legal Norms, 42 U. RICH. L.
REV. 1195 (May, 2008).
150
Id,; see also ABRAHAM & SCHWARCZ, supra note 85, at 383–84.
151
ABRAHAM & SCHWARCZ, supra note 85, at 383–84; Yankah, supra note 149.
152
ABRAHAM & SCHWARCZ, supra note 85, at 383-84; Yankah, supra note 149.
153
Çağatay Koç, supra note 131, at 741 (describing how demand can be artificially created in large work forces,
given appropriate incentive structures).
154
ABRAHAM & SCHWARCZ, supra note 85, at 383–84; see G. EDWARD MILLER ET AL., AGENCY FOR
HEALTHCARE RSCH. & QUALITY, MEPS INSURANCE COMPONENT CHARTBOOK 2022 114–15 (2022); and see
AGENCY FOR HEALTHCARE RSCH. & QUALITY, Medical Expenditure Panel Survey (MEPS) Insurance
Component (IC) https://datatools.ahrq.gov/meps-ic [https://perma.cc/E5BW-SQM2] (last visited Feb. 28, 2023).
155
See generally David Horton, Infinite Arbitration Clauses, 168 U. PA. L. REV. 633 (2020).
156
See Sam Hughes et al., Federal Solutions to Address Rising Costs of Employer-Sponsored Insurance, CNTR.
FOR AM. PROGRESS (Feb. 2024), https://www.americanprogress.org/article/federal-solutions-to-address-rising-
costs-of-employer-sponsored-insurance/ [https://perma.cc/U9KV-LBF9]; see also Employee Retirement Income
Security Act (ERISA) of 1974, 29 U.S.C. §§ 1181–1191(d).
157
See Yankah, supra note 149; see also Çağatay Koç, supra note 131.
158
Health Insurance Portability and Accountability (HIPAA) Act of 1996, Pub. L. No. 104-191, 100
insurance providers to treat mental healthcare on more equal footing with

physical healthcare; it is of some interest to this Note because it is a source
of emerging ERISA litigation.159 Congress has enacted smaller adjustments
in regular intervals over the years, even as recently as 2022, with emphasis
on consumer protection—like the No Surprise Act.160 Additions include
measures to curb out-of-network price difference, conflicting and confusing
language in plans and their summaries, and language used by representatives
of insurers.161 Congress over the years has also mandated coverage for items
including air ambulance transportation gynecological exams, and neonatal
care, as well as requiring external reviews as a final step when insurance
companies deny claim appeals.162 Possibly the most consequential reform
was the ACA’s mandate against denying coverage based on preexisting
conditions.163
On the surface, these new regulations are excellent from a consumer
viewpoint because they are steps toward patient access to care and they signal
growing political will to make systemic changes in healthcare.164 However,
the political viability of a universal care solution is extremely low in the near
future.165 A hybrid model that expands the ACA and creates a viable public
option is more likely to pass, but that still could easily take a few electoral
cycles to institute.166
How will the most recent consumer protection bills affect ERISA
Stat. 2548; Patient Protection and Affordable Care Act (ACA), Pub. L. No. 111-148, 124 Stat. 119 (2010);
Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), Pub. L. No. 110-343, 122 Stat. 3881
(2018).
159
See Jason Grant, UnitedHealth to Pay $14.3M in 'Landmark' Settlement Over Mental Health Parity Law,
ALM BENEFITS PRO, (Aug. 19, 2021), https://www.benefitspro.com/2021/08/19/in-first-joint-state-fed-
enforcement-of-mental-health-insurance-coverage-parity-laws-ag-james-announces-14-3m-settlement-412-
120152/?slreturn=20221007193928 [https://perma.cc/3LM7-HMNB].
160
See Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. §§ 1885–1885(n); see 26 I.R.C.
§ 9816 (2022).
161
29 U.S.C. §§ 1885-1885(n); 26 I.R.C. § 9816.
162
29 U.S.C. §§ 1885-1885(n); 26 I.R.C. § 9816.
163
Pre-Existing Conditions, U.S. DEP’T OF HEALTH AND HUMAN SERV. https://www.hhs.gov/healthcare/about-
the-aca/pre-existing-conditions/index.html [https://perma.cc/8FFZ-3FCY] (last visited Feb. 17, 2024). See also
Vukadin, supra note 121.
164
See Vukadin, supra note 121.
165
Tracking Public Opinion on National Health Plan: Interactive, KAISER FAM. FOUND. (Oct. 16, 2020),
https://www.kff.org/interactive/tracking-public-opinion-on-national-health-plan-interactive/
[https://perma.cc/5GSZ-S4RM]; Public Opinion on Single-Payer, National Health Plans, and Expanding Access
to Medicare Coverage, KAISER FAM. FOUND. (Oct. 16, 2020), https://www.kff.org/slideshow/public-opinion-on-
single-payer-national-health-plans-and-expanding-access-to-medicare-coverage/ [https://perma.cc/R63C-
DXCV]. Though these studies are a couple years old, they show a contentious field where there is intense dissent
over whether there should be a universal healthcare plan or not. There is growing popular support for a Medicare-
for-all solution, but it is not great enough to reasonably overcome legislative opposition. However, there is much
greater popular support for making healthcare availability fairer, and some level of governmental increase to
availability. See id.
166
Id.
healthcare markets?167 Such bills will likely not impact ERISA healthcare
markets as much as reformers hope.168 Recall the parking scenario, like
paying for infrequent inexpensive tickets being cheaper than paying for
parking, if the cost of penalties for wrongfully denying claims is cheaper than
paying for them, then the math becomes simple, and the incentives
perverse.169
II. ANALYSIS OF THE INDIVIDUAL ISSUES

This section will discuss ERISA’s elements of law and
administration, which create the resulting perverse incentive for insurers to
deny health insurance claims.170 Section (A) will discuss statutory
immunities for insurers from various damages. Section (B) will discuss
insurers’ consulting physician-fiduciary immunities and their consequences.
Section (C) will list and discuss stakeholders, who would be expected to track
claim denials but do not, and the resulting lack of reliable market data.
Section (D) will discuss preemption and how it has and still makes solving
the other listed issues nearly impossible.
A. Wrongful Denial Damages Immunities
1. Source of Authority for Recoverability and Standing

The first layer and the most formidable protection for ERISA
insurers comes from 29 U.S.C. § 1132.171 This section exempts ERISA
healthcare plans from some of the fines other ERISA financial benefits are
subject to.172 It also declares that the Secretary of State, beneficiaries, and
participants can recover by injunctive action, or equitable remedies for
coverage that was denied.173
Under an ERISA plan, there are several entities that can bring a claim
for any given denial: a plan participant (generally the employee), a
167
See 29 U.S.C. §§ 1885–1885(n); see also 26 I.R.C. § 9816.
168
Lee Black, supra note 22.
169
See Yankah, supra note 149; see infra pp. 18-19; see also Çağatay Koç,, supra note 131, at 741.
170
See David McAdams & Michael Schwarz, supra note 136; see Lee Black, supra note 22.
171
See 29 U.S.C. § 1132.
172
Id. (“A civil action may be brought— . . . by a participant, beneficiary, or fiduciary (A) to enjoin any act or
practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate
equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the
plan.”)
173
Id. (Injunctive relief can be in the form of an order for an insurer to approve coverage for something they
refuse to cover; this would address a situation where a healthcare provider will not perform a treatment without
prior authorization—so no money has been spent, and an exact cost may be unknown. Equitable relief is more
ambiguous, but it generally refers to costs incurred in reliance or by dues owed by performance. If an insured has
incurred costs from treatments that should have been covered but were denied, the insurer may have to pay those
costs. This is similar to expectancy damages, but it is limited to actual costs or dues.).
beneficiary (generally the employee’s dependent), a Secretary of State, the

Department of Labor, an employer, and the denied medical provider.174
A second source of authority is from 29 U.S.C. § 1131, which
provides a criminal statute for violating ERISA statutes “willfully.”175
Willfully typically means that someone intentionally violates a law which
they know of, making it the highest bar for intentionality.176 Willfully in §
1131 is modified by 29 U.S.C. § 1028, which defines the standard making
the element for intentionality only knowing, but it gives a secondary defense
based on a good faith interpretation of statements from sufficiently
authoritative bodies.177 Section 1131 could produce restitution funds for
affected claimants, but, to date there appears to have been—five—cases in
the past fifty years which garnered a § 1131 conviction by plea or trial, all of
which were, raised over retirement fund fraud.178 No criminal cases arising
from § 1131 pertaining to welfare benefits plans were found.
2. Barriers to Recovery and Limitations on Awards
ERISA-backed plan insurers are immune from consequential and

punitive damages for negligence regarding their actual plan.179 Their
immunity includes bad faith, so even if they know they are being negligent,
the cost of that negligence is capped very low.180 The rationale is that, if they
were to suffer major awards against them, the plan could be at risk for
insolvency, jeopardizing their ability to provide benefits for everyone else
who relies on them.181 The method used to protect against insurer abuse is a
174
BARKER & KENT, supra note 10, § 8.04(c)(iii).
175
29 U.S.C. § 1131.
176
Id.
177
See Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. § 1132; see Employee
Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. § 1028; see also United States v. Phillips, 19 F.3d
1565, 1584 (11th Cir. 1994) (“The only logical interpretation of Part 1 of ERISA is that the term ‘willfully’
in section 1131 requires a finding of only general intent and that section 1028 provides additional statutory
defenses not otherwise present for general intent crimes. Under this interpretation, sections 1131 and 1028 serve
distinct purposes; the term ‘willfully’ as used in section 1131 ensures that the act was done voluntarily and not by
accident or mistake; and section 1028 provides the proper scope of defenses in accordance with the codified
‘prudent man’ standard as determined by Congress.).
178
Phillips, 19 F.3d at 1565; United States v. Gray-Burriss, 920 F.3d 61 (D.C. Cir. 2019); Sealed Order, United
States v. Lontine, No. 3:02-cr-00365 (D. Or. Jul. 15, 2004); Sealed Order, United States v. Mayhew, No. 3:02-cr-
00364 (D. Or. Jul. 15, 2004); Plea Agreement, United States v. Higgs et al, No. 4:05-cr-00239 (W.D. Mo. Feb. 8,
2006) (please entered for two defendants). Author performed exhaustive searches using Lexis+, Westlaw,
Bloomberg Law, with no jurisdictional limitations. Author also searched through Federal Department of Justice
databases. Author holds that it is likely his search has not found cases which were brought. But, the scarcity of
caselaw, dockets, and legal news, indicate a clear lack of either prosecutorial interest, or efficacy of the statute.
Compare this statute, to similarly situated white collar criminal statutes like those which apply to securities, and
the void of indictments is unsettling.
179
See generally Lee Black, supra note 22.
180
Id.; see also 29 U.S.C. §§ 1131–1136.
181
See Peter K. Stris, supra note 8.
system of semi-mandatory reporting to the Department of Labor (DOL),

which channels through their relatively new sub-agency the Employee
Benefits Security Agency (EBSA); state Departments of Insurance, and the
Department of Treasury.182 But the statutory enforcement scheme and
schedule of fines takes negligent behaviors that would normally create
millions of dollars in liability exposure—per-incident—and reduces them to
mere hundreds of dollars in exposure.183
In Dawn’s case, she would be able to seek reimbursement or
coverage for the medication she needed, but she would receive nothing for
the months of needless pain and suffering.184 If that pain and suffering forced
her to hire home care that was not covered under the plan, she would be out
that money as well. Dawn would get nothing to cover the costs incurred from
her insurer’s negligence.185
Insurers are further insolated by institutionalized difficulty in
recovery.186 Before a person can recover, they must go through a multi-step
internal appeal process.187 ERISA mandates that insurers develop a system
for appeal, but those systems are only checked if an investigation is started.188
Before that point, insurers may be granted multiple warnings to change
course.189 This is a slow process for someone who needs care. Once the
EBSA or another agency gets involved, insurers still have at least thirty days
to respond, by sending the plan language.190 While an appeal can be lodged
immediately, without plan language, the appellee may be swinging in the
dark.191
If appeal efforts are exhausted, and it is a beneficiary or participant
who is seeking redress, they will likely be forced to arbitrate.192 Because of
the extreme damages immunities, there is a narrow window of cases that most
attorneys in this area of law will take on contingency,193 making it a daunting
182
183
29 U.S.C. §§ 1131–1136(2024); see also Peter K. Stris, supra note 8.
184
See Bryant, supra note 1; see also Arkin, supra note 20, at 667–69.
185
Arkin, supra note 20, at 667–69.
186
See 29 U.S.C. § 1133; see also 29 C.F.R. § 2590.715-2719 (2022).
187
BARKER & KENT, supra note 10, § 8.04(c)(iii); 29 U.S.C. § 1133; 29 C.F.R. §§ 2590.715-2719
(2022). There are exceptions for going through the internal processes: if it can be shown that the insurer
is not responsive, or their internal review processes does not comply with statute. Id.
188
29 C.F.R. § 2560.503-1 (2023) (explaining claims procedures for health insurance in general, including
appeals for group plans under ERISA).
189
Id.
190
U.S.C. § 1132(c)(1). Plan language, also referred to as detailed plan language, is essentially the contract the
insurer must honor; ERISA cases often turn on whether there is a reasonable interpretation of the language within
the plan which the insurer is contradicting. Id.
191
See generally HEALTH INFO. CTR. ERISA CLAIMS AND APPEALS PROCEDURES, PACER CTR. (2016),
https://www.pacer.org/health/pdfs/HIAC-h15.pdf [https://perma.cc/D58A-5F5E].
192
See PacifiCare Health Sys. v. Book, 538 U.S. 401, 406–07 (2003); see also Horton, supra note 155.
193
MARY FRANCES DERFNER & ARTHUR D. WOLF, COURT AWARDED ATTORNEY FEES ¶ 16.63 (2022)
(“Dague was decided under a pair of ‘prevailing party’ fee-shifting statutes requiring use of the lodestar
task to find representation.
3. Costs of Seeking Care and Redress
If claimants make it to a court room or win at arbitration and they

can only receive injunctive or equitable relief, their hard fight may still be
worth their efforts, considering 8% of Americans file bankruptcy over
medical debt.194 Unlike most other claims that have a tortious element, the
legal fight runs the risk of bankrupting plaintiffs as well.195 This is because
the damages available are generally preclusive of attorneys’ fees, and
considering punitive and consequential damages are disallowed, there is no
room for attorneys to work on contingency.196 A win means medical bills are
paid or a procedure is now pre-approved.197 There are exceptions to this rule,
but they usually arise from ERISA claims outside the scope of this Note, like
disability, life, or when a health care provider has had enough of an insurer’s
denials and files a mass tort on behalf of a series of their patients.198 For the
average patient though, the choice to pay out of pocket for legal aid to ensure
their access to medical care may be preferable to fighting with an insurance
company pro se, but for most it is unattainable.199
4. Blocking and Cost-Effective Medical Malpractice
A hidden figure in the wrongful denial picture are subsequent claims

derived from gatekeeper claims.200 Making it difficult to get a blood test more
than once a year, or an MRI ever, is not only incentivized by the cost of the
methodology. Because the statutes providing for fees in favor of a ‘prevailing party’ are given a uniform
interpretation, the courts of appeals have applied the reasoning of Dague to preclude contingency enhancements
under a variety of other federal fee-shifting statutes that employ the ‘prevailing party’ language. A non-exhaustive
list of “prevailing party” statutes under which contingency enhancements are prohibited include: . . . ERISA.”).
194
See Lina Velikova, The Truths & Myths Behind Medical Bankruptcies, MEDALERTHELP (Jan. 14, 2022).
https://medalerthelp.org/blog/medical-bankruptcies/ [https://perma.cc/5GJ8-W8TE].
195
Id.; see also DERFNER & WOLF, supra note 193.
196
See DERFNER & WOLF, supra note 193.
197
Id.; see Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. § 1132; see also BARKER
& KENT, supra note 10, § at 8.04(c)(i); and see PacifiCare Health Sys., 538 U.S. at 406–07 (2003).
198
Complaint at 1, Popovchak et al. v. UnitedHealth Grp. Inc. et al., (S.D.N.Y. Dec 21, 2022) (No. 1:22-cv-
10756). This case is a mass tort, being spearheaded by a healthcare provider. It exemplifies the scenario where an
interest is large enough for equitable remedies to justify litigation intervention. This case also pulls in several other
federal statutory violations, and it may show a viable legal strategy to for Plaintiffs’ attorneys to follow in the future
because the additional causes of action may allow them to bypass the strict preclusion of punitive and consequential
damages.
199
DERFNER & WOLF, supra note 193.
200
See U.S. GOV’T ACCOUNTABILITY OFF., supra note 28, at 25. While the data from this report is more than
twelve years old, it does state that diagnostic treatment appeals are more likely to result in a reversal—which
suggests there is a higher prevalence of frivolous denial of diagnostic care, although it is inconclusive as to the
degree. Id.
testing, but also by the extreme cost of chronic illness.201 Pain management
is far cheaper.202 From the perspective of an insurer, it is also far cheaper to
have a chronically ill person move to public care through Medicaid or
Medicare.203
With a young cancer patient like Dawn Smith, when comparing the
costs of receiving treatments resulting in remission—or—being slowed from
receiving diagnostic care, until her tumor is inoperable the second option is
a fraction of the cost.204 The American Cancer Society published a study in
2017, providing three case studies that were descriptive of a typical cancer
patient’s cost profile, which ranged from over $123,000 to $201,000 in
treatment costs over a single year.205 Especially considering the high rate of
cancer patients who suffer return bouts after remission,206 there is a clear
perverse incentive to move chronically or severely ill patients as quickly and
quietly toward long term government care as possible.207
B. Doctors as Fiduciaries
1. Basic Concept and Functionality
When a claim for care is sent to an insurer, it is almost always done

by the claimant’s medical provider.208 These claims are reviewed by insurers
for a number of factors, including whether the procedure is covered, or if a
treatment is medically necessary.209 The only people generally qualified to
make these determinations are medical professionals, so insurers retain
consulting physicians to make those determinations, qualification standards
201
See AM. CANCER SOC’Y, THE COST OF CANCER 9–12 (2017),
https://www.fightcancer.org/sites/default/files/Costs%20of%20Cancer%20-%20Final%20Web.pdf
[https://perma.cc/X9XX-D7BZ].
202
See generally McAdams & Schwarz, supra note 136.
203
See AM. CANCER SOC’Y, supra note 201 (If someone paid $1,000 a month for their health insurance
premiums, it would take 124 months to pay in the cost of a twelve-month period of cancer treatment for the least
expensive case study. That calculation excludes the cost of plan administration and the value of interest from
investing premiums over time, so the total calculation is, of course, more involved. Regardless of how the other
factors impact overall cost, shifting these kind of losses to a public system as fast as possible is clearly preferred
because the chance that the account of a chronically ill person proving a net positive is very low.).
204
Id.
205
Id.
206
Andrea S. Blevins Primeau, Cancer Recurrence Statistics, CANCER THERAPY ADVISOR (Nov. 30, 2018),
https://www.cancertherapyadvisor.com/home/tools/fact-sheets/cancer-recurrence-statistics/
[https://perma.cc/A8MY-VNRG].
207
Id.; see also AM. CANCER SOC’Y, supra note 201.
208
Everything You Need to Get Started In Medical Billing & Coding: 3.04: More About Insurance & the
Insurance Claims Process, MED. BILLING & CODING CERTIFICATION,
https://www.medicalbillingandcoding.org/insurance-claims-process/ [https://perma.cc/P5C4-HEM8] (last
checked, Jan. 22, 2023).
209
See 29 C.F.R. §§ 2590.715-2719 (2022); see also Karen Pollitz et al., supra note 43.
for these consulting physicians vary by state.210

Physicians making these determinations for insurers are not
considered as making medical determinations for care when assessing
claims.211 They are instead considered to be making descriptive
determinations as plan fiduciaries.212 ERISA defines who is a fiduciary in 29
U.S.C. § 1002(21)(A):
[A] person is a fiduciary with respect to a plan to the extent[:]

(i) he exercises any discretionary authority or discretionary
control respecting management of such plan or exercises any
authority or control respecting management or disposition of
its assets,
(ii) he renders investment advice for a fee or other
compensation, direct or indirect, with respect to any moneys
or other property of such plan, or has any authority or
responsibility to do so, or
(iii) he has any discretionary authority or discretionary
responsibility in the administration of such plan. Such term
includes any person designated under section 1105(c)(1)(B)
of this title.213
By this rule, physicians consulting on behalf of welfare benefits plans are

treated under the law as fiduciaries because of their discretionary authority,
while they make qualitative determination regarding administration of the
plan.214 However, this does not mean they must meet the standard of care
required by a treating physician.215 In Pegram v. Herdrich, the Court
determined this to mean, unless the physician fiduciary is actually treating
the patient, as they had under certain the Health Maintenance Organization
(HMO) plans, they are not exposed to medical malpractice.216 Despite the
210
AM. MED. ASS’N, 2021 PRIOR AUTHORIZATION STATE LAW CHART (2021), https://www.ama-
assn.org/sites/ama-assn.org/files/corp/media-browser/public/arc-public/pa-state-chart.pdf [https://perma.cc/J7R9-
B2KJ] (explaining how the state where the plan is issued controls what the specific review standards are, and how
the state of issuance is typically the determined by the employer and not the beneficiary).
211
See generally Skelcy v. United Health Grp., Inc., 620 F. App’x 136 (3d Cir. 2015); and see Corbett, supra
note 17, at 296–98.
212
See Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. § 1109(a); see Aetna Health
Inc. v. Davila, 542 U.S. 200, 220 (2004); see also Pegram v. Herdrich, 530 U.S. 211, 220–22 (2000) (The Health
Maintenance Organization (HMO) in Pegram was a hybrid system where patients were treated by the same
organization that acted as the insurer in a pre-paid arrangement. The doctors who saw patients were directly
incentivized not to treat patients through an associated bonus structure. Id.); and see Corbett, supra note 17, at 296–
98.
213
29 U.S.C. § 1002(21)(A).
214
See Pegram, 530 U.S. at 227–28.
215
Id. at 229; see also Wit v. United Behav. Health, 79 F.4th 1068, 1082–83 (9th Cir. 2023).
216
Pegram, 530 U.S. at 229.
Court’s acknowledgement that decisions of treatment and eligibility are

“inextricably mixed” defacto medical determinations,217 insurance companies
have another layer of credibility protection that immunizes them from any
respondeat superior claims.218 Insulation from medical malpractice claims
incentivizes doctors to act against the interest of patients, while creating a
terrain of medical shadow governance.219 Unaccountable physicians who
never see or even speak with the patients override the determinations of
treating physicians who engage with patients.220
In Dawn’s case, despite a diagnosis of brain cancer, if the insurer’s
consulting doctor, without even once seeing her, decided that requested care
was not medically necessary, the consulting doctor would have no medical
malpractice exposure.221 It would not matter that the doctor had not met a
physician’s standard of care by any assessment, because they would be acting
only as a plan fiduciary; they may, however, have liability exposure for
approving treatment that is not medically necessary for the same reason.222
The second form of liability however, would most likely be to the insurer.223
2. Controlling Opinion and Valid Roles in Medical Consultation
Of course, there are legitimate differences in opinion on appropriate

treatments between medical professionals.224 Though this is not a
controversial claim, the practitioner with the most information is usually best
situated to make determinations for a given patient.225 This is especially true
if differences in levels of qualification are considered.226 It is also not a
controversial claim that some doctors over-prescribe treatments because they
are unscrupulous.227 However, the number of doctors who operate actively in
bad faith are few.228
It is fair for insurers to protect against abuse of their obligations by
mistake or fraud; however, it is divorced from reality to deny that insurers’
consulting physicians are not making medical determinations of consequence
217
Id.; see also Corbett, supra note 17, at 296–98.
218
Pegram, 530 U.S. at 211.
219
See id.; Corbett, supra note 17, at 296–98.
220
See Pegram, 530 U.S. at 229.
221
See id.; and see Sam Stein, supra note 1.
222
See Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. § 1109.
223
29 U.S.C. § 1109.
224
Kathy Katella, Can a Second Opinion Make a Difference?, YALE MED. (Jan. 15, 2020)
https://www.yalemedicine.org/news/second-opinions [https://perma.cc/AKA2-YX3Z].
225
See generally Major, supra note 121.
226
Id.
227
See Lauren Rousseau and I. Eric Nordan, Tug v. Mingo: Let the Plaintiffs Sue – Opioid Addiction, The
Wrongful Conduct Rule, and the Culpability Exception, 34 W. Mich. U.T.M. Cooley L. Rev. 33, 73 (2017).
228
Corbett, supra note 17, at 298–99.
to patients’ health outcomes.229 It is a baffling determination, then, that a

consulting physician is immune from medical malpractice especially
because, unlike with an attending physician, a patient cannot get a second
opinion.230 Patients can appeal, but their appeal will go to the same company
and, with a relatively high probability, the same physician.231 After that
appeal, they can then go for an external review, but this process can delay
treatment for months.232
Consider Dawn’s denial of coverage for her migraine medication
after the price hike.233 Her claim would have supposedly gone in front of the
doctor who denied the claim originally.234 In so doing, the doctor determined
either Dawn did not need the medicine, or there was a qualifying substitute.235
Those are both medical determinations: The doctor would have to read her
medical record, determine what treatments were viable, and filter out
normally viable options based on her medical history.236 Since insurer
determinations are made internally, consulting physicians performing
medical services and guarding the interests of their employers cannot be
separated.237
3. Consequences of Doctors Acting Only as Fiduciaries
Treating consulting physicians only as fiduciaries is flawed for two

reasons of practice and one of rationale. First, this system gives consultants
with no interest in patient wellbeing veto power over their treatment.238 Care
providers who deal directly with patients, when given the choice between
risking patient default and providing care without prior-authorization,
sensibly must often choose to delay treatment, especially if their employer
does not allow them to treat patients without prior-authorization.239
Second, this system necessarily indemnifies insurers from
229
See Pegram v. Herdrich, 530 U.S. 211, 229 (2000).
230
See Aetna Health Inc. v. Davila, 542 U.S. 200, 220 (2004) (“This strongly suggests that the ultimate
decisionmaker in a plan regarding an award of benefits must be a fiduciary and must be acting as a fiduciary when
determining a participant’s or beneficiary’s claim.”).
231
See generally HEALTH INFO. CTR., supra note 191.
232
Id.
233
See Bryant, supra note 1; see also infra discussion in Introduction.
234
Bryant, supra note 1. see Am. Med. Ass’n, supra note 210.
235
Id.; see, e.g., Skelcy v. United Health Grp., Inc., 620 F. App’x 136, 143–44 (3d Cir. 2015).
236
RESTATEMENT (THIRD) OF TORTS: CONCLUDING PROVISIONS, Duties to Patients & Others § 3I (Am. L. Inst.
2022).
237
See Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 127–28 (2008) (Scalia, J. dissenting) (“A third-party
insurance company that administers an ERISA-governed disability plan and that pays for benefits out of its own
coffers profits with each benefits claim it rejects. I see no reason why the Court must volunteer, however, that an
employer who administers its own ERISA-governed plan ‘clear[ly]’ has a conflict of interest.”).
238
Id.
239
Id.
malpractice done by their employees, making it especially pernicious.240 As

a general rule, employers are responsible for the actions of their employees,
and to a lesser extent contractors, so long as their employees are acting in the
scope of their employment and in furtherance of the employer’s interest.241 It
would be paradoxical for these physicians to not act within the furtherance
of their employer’s interest while assessing claims.242 In a typical medical
malpractice case, hospitals and practices are liable for the malpractice of their
associates.243 But because of this special role, insurers bear none of that
risk.244 Insurers cannot be liable for medical malpractice that their consulting
physicians have not committed by operation of law, even if in fact they
have.245
Finally, the rationale for the deference given to physician gate
keepers, presumes an abundance of hypochondriacs and unqualified or
predatory treating physicians. It juxtaposes medical doctors into the
adversarial system of law, and medicine should be anything but
adversarial.246 When disagreements arise between physicians over a patient,
the Hippocratic Oath and human decency demand physicians do no harm.247
Their goal must be to reach the best outcome for the patient in question
practicable, not play a game of semantic gotcha248
C. Prevalence and Transparency

1. The Existing CMS Data System
As stated, the only reliable data on claim denial comes from CMS.249
But that data only tracks the CMS plans of Medicare and Medicaid.250 A
Kaiser Family Foundation report on recent CMS data found less than one
percent of claim denials were appealed by insureds, and of the appeals, over
seventy percent were reversed.251 From this CMS data, it may be extrapolated
that probable only a tiny percentage of denials are appealed.252 It can also be
240
See Skelcy v. United Health Grp., Inc., 620 F. ’pp'x 136, 143–44 (3d Cir. 2015).
241
JOSEPH D. ZAMORE ET AL., BUSINESS TORTS § 5.03 (2022).
242
See id. § 22.02.
243
Id. § 5.03.
244
See LOUIS R. FRUMER & MELVIN I. FRIEDMAN, PERSONAL INJURY: ACTIONS, DEFENSES, DAMAGES § 77.03
(2023).
245
Id.
246
See AMA Principles of Medical Ethics, AM. MED. ASS’N, https://code-medical-ethics.ama-
assn.org/principles [https://perma.cc/8J22-ATDA] (last visited Feb. 13, 2023).
247
Id.
248
Id.
249
See infra discussion section I.
250
251
Id.
252
Id.
extrapolated from the data that a denied claim’s merit and appellate status are
not correlated in a way that predicts merit of non-appealed claims because
there is no control group studied here.253 To determine how many valid
claims are being denied, a random sampling or complete review would need
to be taken.254 The void of information begs the question: Who should be
collecting and aggregating claim denial data for ERISA plans?
2. Stake Holding Agencies and The Common Tragedy
The tangled web of preemption and statutory regulation fractures

ERISA health insurance plan monitoring into various federal and state
agencies, creating a seemingly porous system of accountability.255 The
organizations that are supposed to monitor or regulate insurers providing
ERISA-based care include: the EBSA under the Department of Labor (DOL);
state and federal Departments of Insurance under their Secretary of State;
state All Payer Reporting Systems; the Department of the Treasury; a pseudo
private entity, the National Association of Insurance Commissioners (NAIC);
and, to a lesser extent, multiple other governmental bodies, like specialized
departments under the Department of Justice (DOJ), that deal with healthcare
fraud, or other highly specific issues that might run against insurers.256
Despite this, no agency tracks ERISA claim denials that are not brought to
it.257
After contacting multiple agencies, including the EBSA and
departments of insurance, I found, at least at the consumer-facing level, their
representatives tend to think tracking denials is a different agency’s
function.258 According to the scant guidance available, there is nothing
compelling insurers to report their denials, unless they are specifically asked
by a qualified federal agency as part of an open investigation.259 Moreover,
state attempts to monitor claim denials were hamstrung: in 2016, Gobeille v.
253
Id.
254
See Abolfazl Asudeh et al., On Detecting Cherry-picked Trendlines, 13 VLDB ENDOWMENT 939–41
(2020).
255
See, e.g., Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312 (2016); see also U.S. GOV’T ACCOUNTABILITY
OFF., supra note 28.
256
What We Do, EMP. BENEFITS SEC. ADMIN., https://www.dol.gov/agencies/ebsa/about-ebsa/about-us/what-
we-do [https://perma.cc/L44E-893L] (last visited Jan. 22, 2023); Industry Directory, INS. INFO. INST.,
https://www.iii.org/services/directory/company-categories/state-insurance-departments [https://perma.cc/7JY2-
U6TQ] (last visited Feb. 17, 2024); CARMAN ET AL., supra note 109; About FIO, U.S. DEP’T OF THE TREASURY,
https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/federal-
insurance-office/about-fio [https://perma.cc/7VZR-3APN] (last visited Jan. 22, 2023).
257
See infra discussion sections (II)(C)(1)-(9).
258
Telephone Interview with anonymous representatives, Emp. Benefits Sec. Admin. (Dec. 16, 2022, Sept. 28
2022, Sept. 02, 2022, Aug. 30, 2022); E-mail from Francis Beifuss to NAIC representative (Nov. 1, 2022, Nov. 2,
2022); Telephone Interview with anonymous representative, U.S. Department of the Treasury (Nov. 1, 2022).
259
See EBSA REPORTING GUIDE, supra note 27, at 2.
Liberty Mut. Ins. determined that state reporting systems usually conducted
through All-Payer Claims Databases (APCD) cannot enforce penalties.260
Vermont had a system where it enacted fines for non-compliance.261 Insurers
were supposed to report data about their insured, specifically cost and
demographic data.262 Liberty Mutual brought suit against the imposition, and
in an eight to one split, the Supreme Court upheld that the fines were
preempted by ERISA, thus rendering the state’s enforcement mechanism
useless.263
3. The Employee Benefit Security Administration
The Employee Benefit Security Administration (EBSA) is a sub-

agency under the DOL, which is mandated with administering ERISA
requirements.264 While the EBSA has a significant role in protecting other
critical employee benefits like 401-ks and pension plans, they bare a large
portion of the health insurer regulating burden.265 The EBSA sets mandatory
reporting standards for insurers, advocates for employees, has investigative
authorities, and conducts various benefits related research.266
Although the EBSA is a boon for employees trying to use their owed
benefits there are some clear holes in their methodology and
implementation.267 The relationship it polices is the employer-employee
relationship.268 What that process looks like for an employee who is running
into a wrongful denial of healthcare is bifurcated depending on the plan type:
fully-funded or self-funded plans.269
In the self-funded case, where coverage is ultimately paid for by the
employer, the EBSA leveraging fines and going directly against the employer
makes more sense.270 Even if a wrongful denial was the claim administrator’s
fault, a self-funded firm is typically large enough to hire human resources
260
See generally Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312 (2016).
261
Id. at 315.
262
Id. at 315–16.
263
Id. at 326–27.
264
EMP. BENEFITS SEC. ADMIN, What We Do, supra note 256.
265
Id.; see also EMP. BENEFITS SEC. ADMIN., History supra note 49.
266
EMP. BENEFITS SEC. ADMIN., History, supra note 256; and see EMP. BENEFITS SEC. ADMIN, What We Do,
supra note 49.
267
EMP. BENEFITS SEC. ADMIN., History, supra note 256; and see EMP. BENEFITS SEC. ADMIN, What We Do,
supra note 49; see also JANET L. YELLEN ET AL., REALIZING PARITY, REDUCING STIGMA, AND RAISING
AWARENESS: INCREASING ACCESS TO MENTAL HEALTH AND SUBSTANCE USE DISORDER COVERAGE, U.S.
DEP’T OF LAB. 3 (2022); and see Telephone Interview with anonymous representatives, Emp. Benefits Sec.
Admin., supra note 258 (An EBSA representative clarified that plans and issuers, referenced in the above report,
as meaning the sponsoring employer and the plan they procure. Claim administrators are not considered the issuer.).
268
See U.S. GOV’T ACCOUNTABILITY OFF., supra note 28, at 5.
269
Id.
270
Id.
staff and other support staff to ensure compliance; and the EBSA countering
the incentives they have for negligence is rational.271 Moreover, the
employers have plenty of time to correct the behavior of the claim
administrators before any actual penalties are levied; and their account size
and the nature of the relationship between a claim administrator as opposed
to an insurer, gives self-funded firms significant leverage to control or fire
claim administrators.272
Conversely, in the case of fully-funded plans, EBSA leveraging fines
against the employer directly and immediately makes little to no sense.273 The
rationale is that the employer, once it notices wrongful healthcare claim
denials, should fight for their employees and should sue their insurers if they
are non-compliant.274 However, employers with fully-funded plans are often
smaller with fewer resources, and they do not have the option to leave a plan
the way an administrator can be fired.275 The plan, therefore, ultimately takes
the risk away from the perpetrator and places it on an employer, in hopes that
market solutions will prevail in curbing bad insurer behavior.276
The problem with that assertion is health insurance in the U.S. does
not operate like a normal market.277 Instead, the health insurance market is
insulated from normal remedies and avoids many anti-trust laws through the
McCarren Ferguson Act—discussed in more depth in section (II)(D)—
allowing the industry to set somewhat uniform standards, even if those
standards are sub-optimal.278 Even if the health insurance market did respond
to normal market pressures, the current system would unnecessarily still pit
employees against employers. 279
As an example, imagine an employee in a firm with thirty full-time
271
AL STEWART, U.S. DEP’T OF LAB., ANNUAL REPORT ON SELF-INSURED GROUP HEALTH PLANS MARCH
2021 4 (2021), https://www.dol.gov/sites/dolgov/files/EBSA/researchers/statistics/retirement-bulletins/annual-
report-on-self-insured-group-health-plans-2021.pdf.
272
See BARKER & KENT, supra note 10; see also Employee Retirement Income Security Act (ERISA) of 1974,
29 U.S.C. § 1133.
273
See BARKER & KENT, supra note 10.
274
YELLEN ET AL., supra note 267, at 39–41.
275
See STEWART supra note 271.
276
See Major, supra note 121.
277
See McCarran-Ferguson Act, 15 U.S.C. §§ 1011–1015; see also United States v. Robertson, 158 F.3d 1370,
71–72 (9th Cir. 1998) (clarifying that “. . . Congress enacted the McCarran-Ferguson Act, 15 U.S.C. §§ 1011–
1015, . . . [to] allow[ ] the states to continue regulating the insurance industry despite its interstate effects.”); contra
Humana Inc. v. Forsyth, 525 U.S. 299, 314 (1999) (“Because RICO [federal law] advances the State's interest in
combating insurance fraud, and does not frustrate any articulated Nevada policy, we hold that the McCarran-
Ferguson Act does not block the respondent policy beneficiaries' recourse to RICO in this case.”); see discussion
infra Section I.(D).
(insurance in general was insulated from federal anti-trust laws because information is necessary for firms to
function, and they provide a backstop or safety net. So they are allowed to share information insureds, which
normally could amount to price fixing).
278
United States v. Robertson, 158 F.3d at 1370.
279
See Major, supra note 121, at 178–79. United States v. Robertson, 158 F.3d 1370.
employees. The employee is denied an MRI, and it is clear from their plan
language and personal context that the MRI should be covered. Their
employer is a small firm, so they, like most others, outsource health insurance
to a fully-funded plan like one through United Health Systems.280 United
denies the claim, while breaking a series of ERISA plan requirements and
resulting in confusion, and gives bad advice for how their denial should be
resolved, which in turn creates further delays.281 If requested by the
employee, the EBSA will contact the employer and let them know they are
violating the terms of their care plan. Because it is the employer’s duty to
police the insurer,282 this puts whomever at the small firm is wearing the
human resources hat that day against an insurer.283 They can only really leave
once a year.284 It also likely has an obvious chilling effect—employees
accusing their employers and source of healthcare of potentially criminal
wrongdoing certainly presents a difficult proposition to the wronged.285 This
is especially so when the wrongdoing is clearly not the fault of the employer,
who likely has no idea there is even an issue, because of the reporting
requirements set by the EBSA.286
In its current Reporting and Disclosure Guide for Employee Benefits,
the EBSA does not require insurers to notice anyone other than beneficiaries
or participants of a denial of a claim for care.287 In fact, they may be violating
privacy act regulations for disclosing the entirety of a claim denial to the
employer who is supposedly policing them.288
The EBSA provides a necessary function of helping curb issues of
lacking accountability; however, their methods are monolithically aimed
toward self-funded plans.289 There is also a major issue creating a conflict
between maintaining barriers of privacy between employers and employees
when it comes to their healthcare outcomes.290 There needs to be a
280
See STEWART supra note 271, at 4–5.
281
HEALTH INFO. CTR., supra note 191.
282
283
Id.
284
See EBSA REPORTING GUIDE, supra note 27, at 5–8.42 U.S.C. §§ 300gg-1(a)-(c) (restrictions on denying
insurance coverage for preexisting conditions, can be avoided outside of special enrolment periods, this and
contractual obligations makes leaving a plan partway through difficult and risky).
285
286
See EBSA REPORTING GUIDE, supra note 27, at 5–8.
287
Id. at 2–5.
288
Id. at 2 (The row entitled “Notification of Benefits Determination” states that “[a]dverse benefit
determinations must include required disclosures (e.g., the specific reason(s) for the denial of a claim . . .” must be
disclosed only to “[c]laimants (participants and beneficiaries or authorized claims representatives).”).
289
See U.S. GOV’T ACCOUNTABILITY OFF., supra note 28, at 5.
290
See EBSA REPORTING GUIDE, supra note 27, at 2.(consider the implication of having to explain to an
employer that insurance is not covering a necessary form of care, while an above-board human resources
department should handle that, without asking what the coverage is for, it creates issues in advocacy and many
small firms do not have actual human resources departments).
requirement for claim denials to be monitored proactively, or the system is

reliant on completely asymmetrical information and power holders to reach
tenable, reasonable solutions.291To frame the asymmetry, consider the
following: Instead of Dawn with a brain tumor, it is your family member—
one who does not read legal literature on health insurance. They have brain
fog and debilitating pain and potentially a small window of operability.292
What is the chance they will figure out there is a little known subagency that
will compel their employer to advocate for them?293 Will their employer have
the resources to fight a 200-billion-dollar insurance company?294 Would you
stake their life on it?
4. Department of the Treasury
The U.S. Department of the Treasury stores Form 5500’s, which are
forms that organizations with 100 employees or more must use to report their
ERISA and ACA compliance information.295 The Form 5500’s are fairly
scant,296 but they provide some raw data for medium-to-large firms on ERISA
participation.297 This reporting determines the number of U.S. residents on
ERISA plans.298 However, the scope of Form 5500 is quite limited: It does
not capture those who have employer-sponsored health insurance from firms
with under 150 employees. Considering that employers with 100 or more
employees must provide insurance plans to their employees and that smaller
firms have incentives through tax and labor market realities, the number of
people receiving insurance from employers who are not required to send in
Form 5500’s are immense.299 Additionally, the Department of the Treasury
established the Federal Insurance Office (FOI) in 2010, which collects
market data and proposes executive and legislative action.300 It has stated
291
292
See AM. CANCER SOC’Y, supra note 201.
293
Id.
294
UnitedHealth Group, Annual Report (Form 10-K) 66 (Dec. 31, 2021) (UnitedHealth Group reported
$212,206,000,000 in total consolidated assets in 2021).
295
See Dodd-Frank Act, 12 U.S.C. § 5383(a)(1)(C) (2022); see U.S. DEP’T OF THE TREASURY, supra note 256;
see U.S. DEP’T OF LAB., EMP. BENEFITS SEC. ADMIN., USER GUIDE 2019 FORM 5500 GROUP HEALTH PLANS
RESEARCH FILE 2 (2021) [hereinafter USER GUIDE 2019 FORM 5500].
296
See Form 5500, U.S. DEP’T OF LAB. (2022), https://www.dol.gov/sites/dolgov/files/EBSA/employers-and-
advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2022-form-5500.pdf
[https://perma.cc/F4L2-YL48].
297
USER GUIDE 2019 FORM 5500, supra note 296.
298
Id. Additionally, the Department of the Treasury established the Federal Insurance Office (FIO) in 2010,
which collects market data and proposes executive and legislative action. See U.S. DEP’T OF THE TREASURY, supra
note 256. It has stated however, health insurance outside of Medicare and Medicaid is generally outside the scope
of FIO. Id.
299
Id.
300
U.S. DEP’T OF THE TREASURY, supra note 256.
however, health insurance outside of Medicare and Medicaid is generally

outside the scope of FOI.301
5. State Enforcement Mechanisms
As states bear the burden of monitoring insurers in most cases.302 In

addition to federal government agencies like EBSA, each state has a
Department of Insurance, which exists to enforce and monitor insurance
regulations within its respective state.303 Nevertheless, the interventions of
these state agencies are generally preempted in the case of ERISA health care
plans, rendering their purpose diminished serve little purpose and resulting
in them generally referring the complaints that arise from their consumers to
EBSA.304
State APCDs are also established under the guidance and control of
state departments of insurance.305 State APCDs function as the monitoring
component for participating states.306 As states are supposed to regulate the
business of insurance, they bear the burden of monitoring insurers in most
cases.307 Thirty states have installed APCDs.308 Each program varies in what
and how it captures data, as not all of them explicitly ask for claim denials.309
But after Gobeille v. Liberty Mut. Ins. in the case of ERISA plans, inquiring
about claim denials is a moot question.310 State departments of insurance can
ask for claim denial data as much as they want, but the state programs are
preempted by the federal government and, therefore, cannot impose penalties
for violations.311
The lack of enforceability renders APCDs an extremely porous
mechanism for accountability.312 Ultimately, it is unclear whether their data
is helpful or not because skewed data can be more detrimental than no data.
Consider the difference between having no report on claim denial prevalence
and one that shows claims are almost never denied. The first gives no
indication of the health of a system, while the second shows that it is a healthy
301
Id.
302
See CARMAN ET AL., supra note 109, at 1–2.
303
INS. INFO. INST., supra note 256.
304
See Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312, 323 (2016); and see BARKER & KENT, supra
note 10, § 8.04(d).
305
CARMAN ET AL., supra note 109, at 5.
306
Id.
307
Id. at 1.
308
Id. at 7.
309
Id.
310
See id. See generally Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312 (2016).
311
See Gobeille, 577 U.S. at 323.
312
See id.; see CARMAN ET AL., supra note 109, at 2 (“This [Gobeille] has created a significant limitation:
ACPDs can no longer mandate submission of data on a large proportion of the population covered by employer-
sponsored insurance.”).
system and should not be tampered with. But if the second only includes
cherry-picked data and, in reality, it is providing cover for an extremely
unhealthy system, then the issue with skewed data becomes clearer. When
insurance companies get to pick and choose what data is sent to the APCDs,
they can quickly turn into government-legitimized marketing tools.313
6. The National Association of Insurance Commissioners
The National Association of Insurance Commissioners (NAIC) is a

nongovernmental organization with a board comprised of the insurance
commissioners for each state.314 NAIC’s stated purpose is to gather data,
write model laws, and regulate the market through non-governmental action
as professional boards like the American Bar Association might.315 The
NAIC came into existence as a product of the McCarren Ferguson Act, which
was enacted in response to burgeoning anti-trust laws in the mid 1800’s.316 It
collects data, although it is not clear how effectively; its data, collection
methodology, and reach are closely guarded against consumers.317
The NAIC serves as a data repository for insurance companies,
which allows them to circumvent anti-trust prohibitions on data sharing and
ultimately price fixing.318 On one hand, the NAIC allows for smaller
emerging insurance companies to function because their data pools make
expectancy value estimates accurate to a degree that small firms would
otherwise not be able to achieve.319 On the other hand, the NAIC allows the
U.S. market to operate as a cartel,320 where competition is somewhat
illusory.321 One justification is that the organization allows firms to be precise
when underwriting premiums, but it is not clear if those efficiencies are seen
by consumers when contrasted against the backdrop of lacking incentives to
compete on service.322 Healthcare, having an inelastic demand combined
with insurers ability to operate as a cartel, leads to insurance companies
313
See infra discussion section (II)(D).
314
315
Id.
316
See McCarran-Ferguson Act, INS. INFO. INST. https://www.iii.org/publications/insurance-
handbook/regulatory-and-financial-environment/mccarran-ferguson-act [https://perma.cc/JG6H-B34V] (last
visited Feb. 19, 2024); and see McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015.
317
See ABRAHAM & SCHWARCZ, supra note 85, at 112; see also U.S. GOV’T ACCOUNTABILITY OFF., supra
note 28.
318
See ABRAHAM & SCHWARCZ, supra note 85, at 112–15.
319
Id. at 118–19.
320
Id.; JACK P. FRIEDMAN ET AL., supra note 124 (defining a cartel as a group of independent market participants
who collude to improve profits and dominate the market). Cartels typically operate in related markets or the same
market. Id. They are anti-competitive and are generally outlawed through anti-trust laws. Id. Cartels price fix, rig
bidding, and set output. Id.
321
ABRAHAM & SCHWARCZ, supra note 85, at 112; JACK P. FRIEDMAN ET AL., supra note 124.
322
ABRAHAM & SCHWARCZ, supra note 85.
existing in a prisoners’ dilemma.323 As long as insurance companies all avoid

taking new clients outside of open enrollment cycles and provide minimal
services for the most costly patients, they can avoid extreme costs.324 From
the consumer perspective, the result is as follows: their current insurer is not
giving adequate coverage, but, if they leave, they can be denied coverage by
other insurers until open enrolment, and the quality elsewhere will not be
significantly different—so why bother leaving?325
While NAIC supposedly denial data and helps legislators regulate
the market,326 it only publicly publishes a denial data summary—which is
extremely lacking as it has no information on methodology and little
breakdown of data.327 It is unclear what the actual requirements for insurers
reporting to NAIC are.328 NAIC certainly does not have governmental
authority to demand data from insurers.329 The organization states: “Our goal
is to bring state regulators together to serve the public interest. We provide
tools and resources to help regulators set standards and best practices, provide
regulatory support functions, and educate consumers and stakeholders on
U.S. state-based insurance regulation.”330
However, it will not give a detailed report to a non-insurer,331 which is
problematic because , as NAIC is a private organization, this data is likely
not discoverable under a Freedom of Information Act request.332 Considering
these factors, it is nearly impossible to assess the credibility of NAIC’s claims
and, subsequently, the usefulness of its data.333
The latest market summary in its entirety is seen below in figure (II)(1):334
323
Id.
324
29 C.F.R. §§ 2590.715-2719 (2022); See infra discussion section (II)(D)(1).
325
326
See U.S. GOV’T ACCOUNTABILITY OFF., supra note 28.
327
Contacts and Score Card, NAT’L ASS’N INS. COMM’R,
https://view.officeapps.live.com/op/view.aspx?src=https%3A%2F%2Fcontent.naic.org%2Fsites%2Fdefault%2F
files%2Finline-files%2Findustry_mcas_2021_scorecard_ltc%2520_all.xlsx&wdOrigin=BROWSELINK (last
visited Feb. 19, 2024).
328
See Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312, 323 (2016); and see U.S. GOV’T ACCOUNTABILITY
OFF., supra note 28.
329
330
Regulator, NAT’L ASS’N INS. COMM’R, https://content.naic.org/regulator [https://perma.cc/T9A5-4NJH]
(last visited Jan. 22, 2023).
331
E-mail from Jacob Kline, NAIC Representative, to Francis Beifuss, author (Nov. 2, 2022, 12:06 EST) (on
file with author) (stating, “Thank you for reaching back out. To gain access to MCAS, a CoCode [an insurer
identifier] would be necessary to proceed with account creation. Any questions, please let us know. Thanks, Jacob
Kline, NAIC Service Desk, National Association of Insurance Commissioners Customer Service and
Support/Help Desk, 1100 Walnut St., Ste 1500, Kansas City, MO 64106-2197 P:
[816.783.8500|tel:8167838500].”).
332
See Freedom of Information Act, 5 U.S.C. § 552(b)(4).
333
Asudeh et al., supra note 254 (detailing how data can be manipulated through cherry-picking to show
seemingly accurate information that is highly misleading).
334
NAT’L ASS’N INS. COMM’R, supra note 327.
Figure (II)(1)335
Yes, that is it.336 What little information the NAIC’s report contained is scant
and, based on the information contained within, it is unclear what the actual
requirements, if any, exist for insurers reporting to the NAIC.337 The NAIC
has no governmental authority to demand data from insurers.338 The
organization states “Our goal is to bring state regulators together to serve the
public interest. We provide tools and resources to help regulators set
standards and best practices, provide regulatory support functions, and
educate consumers and stakeholders on U.S. state-based insurance
regulation.”339 However, the NAIC will not give the detailed report to a non-
335
Id.
336
Id.
337
See Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312, 323 (2016); U.S. GOV’T ACCOUNTABILITY OFF., supra
note 28.
338
339
Regulator, NAT’L ASS’N INS. COMM’R, https://content.naic.org/regulator [https://perma.cc/T9A5-4NJH]
insurer.340 Because they are a private organization, this data is likely not
discoverable under a Freedom of Information Act request either.341
Considering these factors, it is impracticable to assess the credibility of their
claims and subsequently the usefulness of the data.342
7. Private Organizations
In 2011 the Rand Institute published a short article reinforcing the

position that the health insurance market, specifically the ERISA market, is
essentially unmonitored.343 Rand found its monitoring was so fragmented and
incomplete, there was no trustworthy data—at least in terms of claim denials,
this appears to still be the case.344
A Google search or even more detailed open-source research will
bring up many results from private organizations that make claims on denial
prevalence.345 I have yet to find one that was comprehensive, well sourced,
or sourced in fact at all.346 Many point to Medicare and Medicaid data.347
Some purport to have studied client markets.348 In general, open source data
comes from marketing products produced for niche markets, and often do not
hold up to a cursory interrogation.349
8. Summary of Claim Denial Prevalence and Lack of Transparency

As far as claim denial transparency is concerned, there is a strong
(last visited Jan. 22, 2023).

340
E-mail from Jacob Kline, NAIC Representative, to Francis Beifuss, author (Nov. 2, 2022, 12:06 EST) (on
file with author) (stating, “Thank you for reaching back out. To gain access to MCAS, a CoCode [an insurer
identifier] would be necessary to proceed with account creation. Any questions, please let us know. Thanks, Jacob
Kline, NAIC Service Desk, National Association of Insurance Commissioners Customer Service and
Support/Help Desk, 1100 Walnut St., Ste 1500, Kansas City, MO 64106-2197 P:
[816.783.8500|tel:8167838500].”).
341
See Freedom of Information Act, 5 U.S.C. § 552(b)(4).
342
Asudeh et al., supra note 254 (detailing how data can be manipulated through cherry-picking to show
seemingly accurate information that is highly misleading).
343
U.S. DEP’T. OF LAB. & U.S. DEP’T. OF HEALTH AND HUM. SERV., supra note 45.
344
Id.
345
CHANGE HEALTHCARE, The Change Healthcare 2022 Revenue Cycle Denials Index (2022);
Jacqueline LaPointe, Hospital Claim Denials Steadily Rising, Increasing 23% in 2020, TECHTARGET
(Feb. 4, 2021), https://www.revcycleintelligence.com/news/hospital-claim-denials-steadily-rising-
increasing-23-in-2020 [https://perma.cc/K4B2-4GFL] (these results are indicative of what is findable; it
pools all kinds of claims and is targeted toward hospitals, so they do not paint a clear picture of the ERISA
market. Other sites generally cite Kaiser research, which is on CMS markets and does not give data on
ERISA markets. One site that is now apparently defunct claimed 30% of ERISA claims were denied each
year, the NAIC claims its around 15% this past year, but provides no evidence. What is clear, is there is a
clear lack of reliable data.).
346
CHANGE HEALTHCARE, supra note 345; LaPointe, supra note 345.
347
348
349
CHANGE HEALTHCARE, supra note 345.
argument that there is none.350 There appears to be no open-source way to

determine whether certain insurers are worse than others.351 There also
appears to be no agency or department that actively tracks ERISA insurer
behavior.352 Instead, the agencies meant to handle complaints leave it to
individual consumers to send complaints.353
If the numbers look anything like the Medicare and Medicaid
numbers,354 somewhere around twenty percent of claims are denied on their
initial submission.355 Incentives are markedly different for an ERISA insurer
and Medicare claim administrator, so there is not a good reason to suspect
the numbers would be the same, especially considering ERISA insurers are
essentially unmonitored.356
Less than one percent of Medicare claims are appealed.357 If the
ERISA markets have a similar trend, or even at a much greater rate, consider
a 500% increase in appeals, would still mean over ninety five percent of
ERISA claim denials go without appeal.358 It is unlikely that more denials
generate complaints that make it to an actual regulating agency than are
actually appealed.359 What is more likely, however, is that some subset of
appeals, likely those that fail, eventually end up as complaints.360 According
to LexMachina® analytics, 2021 only saw 2,764 cases filed alleging
wrongful denials, including life and disability claims.361 Considering there
were over 178,000,000 people on ERISA health plans in 2021, that is a tiny
number.362 Without good reporting requirements, this problem will remain in
the shadowy space between un-and-underreporting.363
350
See infra discussion section (II)(C)(1)-(8).
351
Id.
352
Id.; see JANET L. YELLEN ET AL., supra note 267.
353
EBSA REPORTING GUIDE, supra note 27, at 5-8.
354
355
Id.
356
Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 128 (2008); Çagatay Koç, The Productivity of Healthcare and
Health Production Functions, 13 HEALTH ECON. 739, 741-743 (2004); see infra discussion section (III)(C)(1)-(8);
David McAdams & Michael Schwarz, Perverse Incentives in the Medicare Prescription Drug Benefit: 44 no.
2 INQUIRY: THE J. OF HEALTHCARE ORG. PROVISION & FIN.157 (2007).
357
358
See id.
359
See generally Andres Almazan et al., Firms’ Stakeholders and the Costs of Transparency (Nat’l Bureau of
Econ. Rsch., Working Paper No. 13647, 2007).
360
Id.
361
Michael T. Graham et al., 8 Best Practices for Handling ERISA Benefit Claims, LEXISNEXIS LAW 360 (Sept.
27, 2019), https://www.law360.com/articles/1203105/8-best-practices-for-handling-erisa-benefit-claims
[https://perma.cc/6MLG-6587].
362
KEISLER-STARKEY & BUNCH, supra note 18, at 4–5; Mark P. Cussen, Top 5 Reasons Why People Go
Bankrupt, INVESTOPEDIA (Mar. 4, 2021), https://www.investopedia.com/financial-edge/0310/top-5-reasons-
people-go-bankrupt.aspx [https://perma.cc/3U5L-G6VS].
363
See generally Almazan et al., supra note 359.
D. Preemption
The keystone holding up the other layers of insurer protection, is

express and conflict pre-emption. Federal preemption occurs when federal
law supersedes state law as a result of a conflict, whether express or implied,
between state law and federal law.364 ERISA § 1144(a) states:
Except as provided in subsection (b) of this section, the

provisions of this subchapter and subchapter III of this
chapter shall supersede any and all State laws insofar as they
may now or hereafter relate to any employee benefit plan
described in section 1003(a) of this title and not exempt
under section 1003(b) of this title.365
This means individual state legislatures have little to no ability to

curb maladaptive outcomes of ERISA.366 There are some actions state
legislatures can take through a complicated scheme of delegation that leaves
certain criteria to them, for fully-insured plans and claim administrators of
self-funded plans.367 States can dictate to some extent what an insurer can do
by making insurance industry-wide requirements, that avoid express
preemption, but likely do not avoid conflict preemption.368 States cannot
dictate reporting, administration standards, or generally enforce previsions,
and, after Gobeille v Liberty Mut. Inc., states cannot even enforce penalties
for insurer non-compliance with programs left to their discretion.369 State
statutory controls are impotent given their toothlessness and seemingly
nonexistent enforcement.370 The effect of preemption is calcification of the
circular protection created by the first two layers of immunity (i.e., damages
immunities and consulting physician malpractice immunity) and
institutionalizes the lack of transparency.371
364
Preemption, CORNELL L. SCH. LEGAL INFO. INST. (last visited Jan. 30, 2024),
https://www.law.cornell.edu/wex/preemption [https://perma.cc/LXQ2-TM23].
365
Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. § 1144(a).
366
Margaret G. Farrell, supra note 121, at 254–56.
367
See Humana Inc. v. Forsyth, 525 U.S. 299, 311–12 (1999) (discussing the place of the McCarran-Ferguson
Act, 15 U.S.C. §§ 1011–1015, in ERISA and when state reverse preemption may apply); and see N.Y. State
Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995) (holding that certain
state surcharge requirements avoiding preemption because they are insurance industry-wide).
368
Margaret G. Farrell, supra note 121, at 254–56; see also BARKER & KENT, supra note 10, at § 8.04(d)(i)-
(iii) (2nd 2022).
369
Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312 (2016); Farrell, supra note 121, at 254-256.
370
Contra Gobeille, 577 U.S. at 323 (“These various requirements are not mere formalities. Violation of any
one of them may result in both civil and criminal liability.”); see Peter K. Stris, supra note 8, at 396–98; and see
Sharon J. Arkin, supra note 20.
371
See Gobeille, 577 U.S. at 323; see also discussion infra Sections II.A––C.
ERISA preemption has made this problem unavoidable in all

American territories.372 Its pervasiveness makes Dawn’s story not a lone
anecdote, but a representation of an unknown number of patients unable to
access needed care.373 The number is unknown because there is no agency
that tracks denials of ERISA health claims.374 What is known, however, is
that around sixty percent of personal bankruptcies filed in the U.S. are due to
medical expenses, yet only around eight and a half percent of the country is
without health insurance.375
1. Reverse Preemption and McCarran-Ferguson Act
Insurance has a strange history when it comes to preemption.376

Insurers are allowed to share information in ways that would normally violate
anti-trust laws.377 The rationale is a public policy concern: insurance policies
and investments are heavily regulated to ensure solvency.378 These policies
and investments are supposed to provide a societal safety net, even if
privately paid for.379 In that effort, minimum rates can be more accurately set
if markets are better understood.380 Insurance companies were shaken when
anti-trust laws were instituted, but, shortly thereafter, the McCarran-
Ferguson Act was instituted to abate their worries.381
The McCarran-Ferguson Act left regulating “the business of
insurance” to the states,382 meaning states could avoid federal control of
insurance.383 This notion of giving states control over one aspect of the
traditionally federally dominated (i.e., preempted) field of insurance is
known as “reverse preemption.”384 When Congress enacted ERISA in 1974,
it created another wrinkle in the preemption law.385 For employer sponsored
healthcare plans, ERISA preempts state laws regarding some aspects of what
plans must cover, like emergency care; and it preempts, in entirety,
administration and enforcement of plans. Much of plan construction,
372
See Gobeille, 577 U.S. at 323; and see Forsyth, 525 U.S. at 311–12.
373
See Bryant, supra note 1; see U.S. DEP’T OF LAB. & U.S. DEP’T OF HEALTH AND HUM. SERV., supra note
45; see also discussion infra Section II.(C).
374
See EBSA REPORTING GUIDE, supra note 27, at 5–8; see also infra discussion section (II)(C).
375
KEISLER-STARKEY & BUNCH, supra note 18, at 4–5; Lina Velikova, supra note 194.
376
377
Id.
378
Id.
379
Id.
380
Id.
381
Id.
382
383
Id.; see also McCarran-Ferguson Act, 15 U.S.C. §§ 1011–1015.
384
BARKER & KENT, supra note 10, at § 8.04(d).
385
See generally Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. §§ 1001–1461; and
see BARKER & KENT, supra note 10, at § 8.04(d).
however, is still left largely to the states, because of reverse preemption

granted through the McCarran-Ferguson Act.386
2. Preemption By Plan Type and Component
There is another layer of division regarding self-funded and fully-

funded plans.387 It is simpler to first understand that plans are split into two
parts: administration and funding.388 The entity that actually pays the medical
bill—the funding component—is the insurer.389 The administrator is the
entity that files forms, receives claims, manages some degree of records, and
carries on other general administration duties.390 This arrangement can be
confusing because the employer is also technically the plan administrator,
while the insurance companies that actually administer plans are referred to
as claim administrators.391
In a fully-funded plan, the distinction between plan and claim
administration are much less clear, but the terms hold.392 In the more common
version of self-funded plans, the insurer is the employer, and the
administrator is a hired contractor—typically a major insurance carrier.393 A
normal self-funded arrangement works as follows: large firm employers like
Amazon or Target pay for the medical bills of their employee, but the
employee probably has an Aetna, Humana, or other insurance card in their
wallet.394 Insurance companies, in this example, likely manage plans more
efficiently than their client-firms, so they manage claims and interface with
care providers. There is a final category. Although seemingly very
uncommon, except possibly for employees of insurance companies or large
healthcare firms, self-funded plans are self-administered.395 It would seem
this scenario would also make the distinction moot.396
386
See BARKER & KENT, supra note 10, at § 8.04(d); see also McCarran-Ferguson Act, 15 U.S.C. §§ 1011–
1015.
387
Rebecca Wilson, Self Funded vs Fully Insured vs Level Funded Plans, BLUE RIDGE RISK PARTNERS (Aug.
10, 2021), https://www.blueridgeriskpartners.com/blog/eb-types-of-health-plans [https://perma.cc/G9S8-2Z3S].
388
The Basics of an ERISA Life, Health, and Disability Insurance Claim—Part Three: Plan and Claims
Administrators, MCKENNON L. GRP. PC, https://mslawllp.com/the-basics-of-an-erisa-life-health-and-disability-
insurance-claim-part-three-plan-and-claims-
administrators/#:~:text=In%20contrast%20to%20the%20Plan,and%20dismemberment%20insurance%20benefit
s%2C%20etc. [https://perma.cc/H5N9-RPGA] (last visited Feb. 20, 2024).
389
Id.
390
Id.
391
See id.
392
Id.
393
Wilson, supra note 387; see Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. §
1002(16); see also U.S. DEP’T OF LAB. & U.S. DEP’T OF HEALTH AND HUM. SERV., supra note 45, at 2.
394
395
Id.; see Wilson supra note 387.
396
See id.
Fully-funded plans are preempted by ERISA in a multilayered

system of preemption and reverse preemption, where states can mandate how
the plans may be written except in the ways ERISA dictates, by its Savings
Clause; and they are entirely preempted as to administration and
enforcement; allowing insurers to enjoy the effective immunity granted to
them through ERISA. 397
Self-funded employer-insurer plans are fully preempted, by ERISA’s
Deemer Clause, which means they can be written almost however the
employer-insurer wants, so long as they include the relatively few
requirements of ERISA.398 However, the claim administrator may only be
preempted as they would if they were part of a fully-funded plan.399 ERISA
plan requirements are narrow and meant to cure specific problems or holes
in state guidelines.400 This means self-funded may be the worst of both
worlds, because they can legally deny coverages that their home states would
normally require while enjoying administrative immunities.401
3. Consequences of Express Preemption
Preemption has made it impossible to meaningfully impact wrongful

insurer practices for decades.402 Aetna v. Davila is the hallmark case in which
the Supreme Court unanimously held that state causes of action for bad faith
were preempted by ERISA.403 The reasoning was that for claims of negligent
administration of duties, there was no way to separate the claims of the state
law violation and the implicit ERISA violation.404 The Court determined
Congress’s intent was to have a single system of enforcement, which has
grown to mean that even state civil causes of action for conspiracy, fraud,
and breach of fiduciary duty are also preempted.405 In effect, the Davila
holding forces litigants to work within the bounds of ERISA’s statutorily
defined remedies, which are few and diminutive.406
The determination made in Gobeille left uncertainty about the
397
See generally Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (2008); and see generally Gobeille v. Liberty Mut.
Ins. Co., 577 U.S. 312 (2016); see Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. §
1144(a); see also BARKER & KENT, supra note 10, at § 8.04(d).
398
29 U.S.C. §§ 1144(b)(2)(A)–(B); see also Edward Alburo Morrissey, Deem and Deemer: ERISA Preemption
Under the Deemer Clause as Applied to Employer Health Care Plans with Stop-Loss Insurance; Legislative
Reform., 23 J. of Legis., no. 2, 307, 308–309 (1997).
399
29 U.S.C. §§ 1144(b)(2)(A)–(B).
400
29 U.S.C. §§ 1191(a).
401
Id.
402
Id.; see Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. § 1144(b)(2)(A)-(B);
Morrissey, supra note 398; and see Metro Life Ins. Co., 554 U.S. 105.
403
See generally Aetna Health Inc. v. Davila, 542 U.S. 200 (2004).
404
Id. at 212–14.
405
BARKER & KENT, supra note 10, at § 8.04(d)(ii).
406
Id.
efficacy of state reporting agencies that now run on assumed goodwill by

insurers.407 An example of how preemption has impacted efforts in
transparency may be seen in The Agency for Healthcare Quality and
Research (AHRQ); they collect all the participating states’ data and produce
comprehensive reports annually.408 In their report, there are no mentions of
claim success or denial rates—in the AHRQ’s most recent 224-page report,
the word claim(s) only appears once.409
Preemption calcifies the issues created by ERISA’s circular
immunity structures by obstructing the system whenever a state attempts to
cure the problem in any meaningful capacity.410 The statutory construction
suffocates the Supreme Court of the United States by keeping them from
providing any constitutional relief, or at least it has up to this point.411 So far,
the Court has upheld that (1) reporting systems cannot impose fines; (2) state
laws cannot be used to create penalties of their own for ERISA protected
plans; and (3) insureds cannot receive treble, consequential, or punitive
damages in most cases.412 But, ERISA preemption may also be the best
vehicle for rapid sweeping correction of the problems, because reforms
would supersede similarly problematic state law while resolving ERISA’s
inherent issues.413
III. SYNTHESIS OF THE ISSUES
Because of the immunities available for insurers of ERISA plans,

through damages immunities, consulting physician malpractice immunity,
and lack of transparency, calcified by the current preemption structure, there
is a clear perverse incentive for insurers to wrongfully deny claims.414 The
cost of a long-term patient is exorbitant.415 The goal of an insurer is to have
as few dollars in claims awarded as possible.416 The best way to achieve that
is to have insureds in hospitals or treatment facilities as little as possible.
There are two basic ways to achieve this: (1) to take steps to have a healthier
pool of insured, and (2) deny care for insureds.417 The first method can be
407
See generally Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312 (2016).
408
AGENCY FOR HEALTHCARE RSCH. & QUALITY, supra note 154.
409
See G. EDWARD MILLER ET AL., supra note 154; Id. at 26.
410
See generally BARKER & KENT, supra note 10, at § 8.04.
411
See, e.g., Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312 (2016); Metro. Life Ins. Co. v. Glenn, 554 U.S.
105 (2008); Aetna Health Inc. v. Davila, 542 U.S. 200 (2004).
412
See Gobeille, 577 U.S. at 312; Glenn, 554 U.S. at 105; Aetna Health Inc., 542 U.S. at 200.
413
See Gobeille, 577 U.S. at 312; Glenn, 554 U.S. at 105; Aetna Health Inc., 542 U.S. at 200.
414
See, e.g., Glenn, 554 U.S. at 123–24 (Roberts, C.J., concurring).
415
See AM. CANCER SOC’Y, supra note 201; see infra discussion section (II)(B).
416
See infra discussion section (I)(D).
417
See Steve Aldana, 18 Wellness Program Incentive Ideas from the Best Corporate Wellness Programs In
2023, WELLSTEPS (Feb. 7, 2023) https://www.wellsteps.com/blog/2020/01/02/wellness-program-incentive-ideas/
accomplished by incentivizing health initiatives like movement programs,

where insureds receive discounts on their premiums for meeting movement
goals, tracked through pedometers, smartphones, smartwatches, etcetera.418
Healthy lifestyles undoubtedly reduce the aggregate need for healthcare.419 It
does not, however, guarantee health; and health is a moving target for most,
with periods of greater and lesser attention to it.420
The second way to keep people out of hospitals is to deny their care,
especially diagnostic care.421 Diagnostic care identifies expensive illnesses
like cancer or genetic illnesses.422 But, treatments like chemotherapy are not
covered unless they are medically necessary.423 Medical necessity cannot be
established without diagnostics.424 Diagnostics are frequently cost
prohibitive, without insurance.425 For example, a single MRI screening may
cost $10,000.426 By the time cancer becomes symptomatic, patients are often
in somewhat advanced stages, and other diseases, like Lupus or Lou Gehrig’s
disease, may not become symptomatic until a steep decline in the insured’s
health or crisis is imminent.427 If diagnoses are delayed for a few months by
a denial, that may be the difference between whole stages of cancer,
operability or inoperability, and preventable suffering or catastrophic loss.428
There is a cynical reading that makes clear economic sense. For
health insurers, they must only cover claims made during a policy year.429 If
an employee becomes horribly ill, they have a great propensity to be unable
to work.430 If they are unable to work, they probably will not stay employed
very long.431 People with serious conditions like late-stage cancer move to
Medicare or Medicaid, where their care is government subsidized and mostly
[https://perma.cc/Z7NV-XU8B].
418
Id.
419
Id.
420
Id.
421
See discussion infra Sections I.D.–II.A-B.
422
See AM. CANCER SOC’Y, supra note 201; 29 C.F.R. §§ 2590.715-2719; 29 U.S.C. §§ 1181-1191(d).
423
SARA ROSENBAUM ET AL., U.S. DEP’T OF HEALTH AND HUMAN SERV., MEDICAL NECESSITY IN PRIVATE
HEALTH PLANS: IMPLICATIONS FOR BEHAVIORAL HEALTH CARE 30 (“Similarly, when the denial is based on
medical necessity, the rule requires the plan either to explain the scientific or clinical judgment used in applying
the plan’s terms or to include a statement that such an explanation will be provided free of charge if requested.”).29
C.F.R. §§ 2590.715-2719; 29 U.S.C. §§ 1181-1191(d).
424
29 U.S.C. § 1144(b)(2)(A); Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (2008).
425
426
See Nick Versaw, How Much Does an MRI Cost? COMPARE.COM (Feb. 1, 2022),
https://www.compare.com/health/healthcare-resources/how-much-does-an-mri-cost [https://perma.cc/M9E8-
LBHL].
427
See AM. CANCER SOC’Y, supra note 201; LUPUS FOUND. OF AM., Lupus Facts and Statistics
https://www.lupus.org/resources/lupus-facts-and-statistics [https://perma.cc/4MWW-HJM7] (last visited Jan. 22,
2022).
428
429
Rebecca Wilson, supra note 387.
430
431
Id.
no longer the problem of large insurers. 432 So, if insurers can keep insureds
from being diagnosed with a serious illness until their illness is so out of hand
that disability, hospice, or death are the outcome, insurers can save
tremendous amounts of money.433 In these cases, insurers may have to cover
some costs they previously denied, and pay their attorneys’ billable hours.434
But even the high cost of defense is much cheaper than the cost of taking an
insured through a multi-decade fight with recuring cancer, especially if the
ratio of denials to legal action are as low as they appear.435 Without serious
penalty exposures from injured parties, the parties with a motivation for
seeking correction—the people affected by insurers’ casual indifference—
will continue to be treated like infrequent, inexpensive parking tickets in a
very, very, expensive parking lot.436
IV. SOLUTIONS
A. Transparency and Data
Insurers should have to forward all claim denials to a governing

agency; the EBSA is a logical choice that should produce a report similar to
the CMS system, which systemically documents claim denials under the
Medicaid and Medicare systems.437 In addition to denials, insurers should
send a total number of claims received, processed, dollars paid, and an
estimate of dollars denied to EBSA. While requiring that volume of data
would be a large task, there is already a road map for how it could be
accomplished.438 CMS has the system and knowledge base—since CMS
plans are generally administered by large insurance companies, these
companies already know how to comply with the tentative procedural
requirements.439 Thus, the solution is a matter of resource allocation rather
than issue-based legislation.440 This solution would be the easiest step toward
improving the ERISA health insurance market.
In addition to borrowing from CMS’ roadmap regarding claim
denials, EBSA should also utilize the AHRQ’s interactive reports through
their Medical Expenditure Panel Survey Insurance Component Data Tool.441
432
Id. at 14.
433
See infra discussion Sections (II)(A),(B).
434
Id.
435
Id.; AM. AM. CANCER SOC’Y, supra note. 201; Karen Pollitz et al, supra note 43.
436
See infra discussion section (I)(D).
437
See Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. § 1143; Karen Pollitz et al.,
supra note 43.
438
Id.
439
Id.
440
29 U.S.C. § 1143.
441
AGENCY FOR HEALTHCARE RSCH. & QUALITY, supra note 154.
This solution would be an ideal landing page for the data collected by the
EBSA.442 Making data about claim denial rates public would help provide a
market solution.443 With trustworthy data, it would be easier for employers
to make informed decision on which insurers provide quality service.444
B. Removal of Immunities
1. Civil Penalties
The prohibition of consequential and punitive damages must be

expressly repealed.445 This, by itself, would greatly alter the terrain of ERISA
markets.446 Actual penalties would change the cost-benefit analysis of every
denial by incentivizing insurers to be diligent in their claim merit analysis.
Moreover, the solution would democratize advocacy for insureds by making
contingency representation viable.447 Expressly authorizing attorneys’ fees
would also be a positive step, but it would not be as complete as authorizing
special damages.448 Part of the problem is there is little to no incentive for
aggrieved patients to sue insurers if it is too late for them to benefit from the
denied treatment—like a cancer patient who is now too advanced to benefit
from interventions, and, instead moves to hospice.449 That loss of chance is
not accounted for by attorneys’ fees, but it would improve the availability of
representation for many.450
Medical consultants working for insurers who make claim decisions
need to have their decisions weighed as either descriptive or diagnostic.451
Descriptive decisions determine if a claim stated what it purports to claim.452
For example, a claim states a patient has a broken tibia in their left shoulder—
442
See id.
443
See generally Asudeh et al., supra note 254; see also discussion infra Sections I.(D), II.(C). Publicizing
accurate denial rate data could diffuse some insurer benefits for operating as a cartel. Insurers would be subject to
informed consumer market inputs and would have to carefully balance anti-competitive behavior against drawing
regulator attention. In other words, they could uniformly have high denial rates, which would be more likely to
draw the attention of regulators, or they could compete with each other.
444
Asudeh et al., supra note 254;
445
See 29 U.S.C. § 1132; and see Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 148 (1985) (“Thus, the
relevant text of ERISA, the structure of the entire statute, and its legislative history all support the conclusion that
in § 409(a) Congress did not provide, and did not intend the judiciary to imply, a cause of action for extracontractual
damages caused by improper or untimely processing of benefit claims.”).
446
See infra discussion I.(D), II.(A).
447
Id.; DERFNER & WOLF, supra note 193.
448
DERFNER & WOLF, supra note 193.
449
See AM. CANCER SOC’Y, supra note 201, at 22–23.
450
See What is the ‘Loss of Chance’ Doctrine in Medical Malpractice Cases?, POWERS & SANTOLA, LLP,
https://www.powers-santola.com/blog/loss-of-
chance/#:~:text=Under%20the%20loss%20of%20chance,is%20harmed%20by%20the%20disease.
[https://perma.cc/X9KP-FTAE] (last visited Feb. 21, 2024).
451
See 29 C.F.R. §§ 2590.715-2719 (2022); see also ROSENBAUM ET AL., supra note 423.
452
ROSENBAUM ET AL., supra note 423.
of course shoulders do not have tibias, so, if a consulting physician were to

point this out, it would merely be descriptive.
Diagnostic decisions determine medical necessity.453 For example, if
a claim for an MRI is denied on grounds of medical necessity, the consulting
physician making that determination would own it, as would any other
physician seeing a patient.454 When consulting physicians’ decisions are
subject to medical malpractice, the relationship between insurers’ physicians
and practitioners should be less adversarial because incentives to deny valid
claims would be countered by the disincentives of malpractice exposure.455
If insurers want to deny claims based on medical necessity, then they
should have some skin in the game.456 If insurers want one of their physicians
to provide a second opinion, then that must be done in a reasonable time
frame and without burden to their insureds, given the context of a specific
diagnosis, and under a looming hammer of bad faith.457
Additionally, if an insurer makes a determination for non-medical
necessity reasons—like a specific service is not covered—and it is
determined that it is medically necessary and should have been covered,
insurers should be subject to medical malpractice as would a hospital that
oversees the misdiagnosis of a patient.458 Denial or delay, whether from an
insurer or a care provider, are differences without distinction in terms of
outcome.459 These changes would shift the incentives for consulting
physicians and insurers, towards a greater emphasis on expeditious and
effective treatments that produce a pool of healthier insureds.460 It might even
create an incentive for research and development of inexpensive, long-term
curative treatments that are normally not clearly incentivized by the
healthcare industry.461
453
ROSENBAUM ET AL., supra note 423.
454
See RESTATEMENT (THIRD) OF TORTS § 3(e) (AM. L. INST. 1997).
455
Id.
456
See infra discussion sections (I)(D), (II)(B).
457
But see 29 C.F.R. §§ 2590.715-2719 (2022); but see 29 U.S.C. § 1132 (2022).
458
See infra discussion section (II)(B).
459
Id.; Vukadin, supra note 121, at 12–13.
460
See Aldana, supra note 417. See generally Anna Chorniy et al., Regulatory Review Time and Pharmaceutical
Research and Development, 30 HEALTH ECON. no. 1, 113 (Jan. 2021).
461
See Chorniy et al., supra note 460 (detailing contemporary financial issues in pharmaceutical research and
development, which lead to high prescription drug costs). One of the primary effects of high research and
development costs is that it makes pharmaceutical companies capital intensive. For pharmaceutical companies with
the traditional incentive to find treatments, there is an incentive to develop innovative treatments only if there is a
subsequent profit sufficient to justify not investing that capital in other market sectors. This makes the barrier
finding treatments for rare disease or creative solutions less desirable, or possibly untenable, from the perspective
of a traditional pharmaceutical company. However, for an insurance company, the incentives are reversed: its
incentive is to have people have as little and as inexpensive care as possible by denying claims and refusing to pay.
2. Criminal penalties
There is only one criminal statute under ERISA and it requires

willful intent.462 This willful intent standard should be adjusted to a
progressive intent standard, starting at strict liability. This would be in
addition to—or superseding when incompatible—the current fine
structure.463 Strict liability may seem harsh, but the purpose of strict liability
is typically to capture wrongful omissions of a duty.464 As the punishment
structure would be progressive, the penalties for violations that were merely
due to inadequate care in performing statutory obligations would be relatively
low, saving the greater punishments for more egregious behavior.465
3. Enforcement
There are too many organizations responsible for regulating the

ERISA market and no clear leader.466 There needs to be a single program
manager that can lean on other organizations for appropriate support.467 The
EBSA already does this in a very limited extent.468 They should be
empowered with resources and a mandate requiring them to fill a similar
role for benefits plans as the SEC does in monitoring securities fraud.469
The scope of the EBSA’s concern needs to be expanded and modified to
enforce against claim administrators, as opposed their current role primarily
pursuing employers and making employers do the heavy lifting at their own
expense.470 In removing barriers to individual civil recovery, the
expectation of massive increase in the EBSA’s case load, or whichever
agency ultimately bears the burden, would be greatly reduced.471
C. The Question of Preemption
Express preemption, while terrible in its current form, could be a

double-edged sword: By leaving it in place, market-wide changes could be
462
29 U.S.C. 1131 (2022).
463
Id.; 29 U.S.C. 1132 (2022).
464
4 ARKIN, BUSINESS CRIME: CRIMINAL LIABILITY OF THE BUSINESS COMMUNITY ¶16.01 (Matthew Bender
ed., 2022).
465
Id.
466
See infra discussion section (II)(C).
467
Id.
468
See generally YELLEN ET AL., supra note 267.
469
See What We Do, SEC. EXCH. COMM’N, https://www.sec.gov/about/what-we-do [https://perma.cc/C2YC-
EE94] (last visited Mar. 1, 2023).
470
See generally YELLEN ET AL. supra note 267; see infra discussion section (II)(C).
471
See DERFNER & WOLF, supra note 193 (discussing the ban of awarding attorneys’ fees under ERISA as an
obstacle to recovery).
implemented rapidly; though leaving preemption completely intact is not

necessary to have such rapid reform.472
Selectively curtailing the express preemption clause could allow for
rapid sweeping change. By modifying the Deemer and Savings clauses,473 the
worst examples of abusive plan writing in self-funded markets could be
curtailed as they are in fully-funded markets, without becoming
overburdensome to employers.474 ERISA already meets its stated objective
of standardizing requirements for multistate employers by the fact that
employee plans can all relate to a single state, generally the employing
organization’s state of issuance.475 This removes the justification to disallow
specific state consumer protection regulations as seen in Aetna v. Davila.476
Modifications should make clear where states have been given the burden of
regulation they have the benefit of enforcement powers and would solve the
issue of all-payer databases not having any ability to enforce data collection
on denials.477 Empowering state administrations, while allowing the federal
government to set minimum standards, floor preemption, appears the most
appealing option for ERISA health insurance beneficiaries.478
Removing the preemption clause would not completely remove
preemption; it would, however, send employer-sponsored health insurance
into field preemption, and there would at least be the robust amount of
conflict preemption.479 The McCarran-Ferguson Act would make the
outcome a mess of small battles over state versus federal power.480 This
option would take a considerable rethinking of the current regulatory
landscape and would likely cause national instability and uncertainty in the
short term. It would also leave consumers in some states with few
protections.481 Accordingly, selective modifications of the current express
preemption ERISA landscape are an optimal solution.
472
See Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. § 1144.
473
29 U.S.C. § 1144(b)(2)(B); 29 U.S.C. § 1144(b)(2)(A).
474
29 U.S.C. § 1144 (b)(2)(B); Morrissey, supra note 398.
475
29 U.S.C. § 1001.
476
See Aetna Health Inc. v. Davila, 542 U.S. 200, 201 (2004).
477
See Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312, 323 (2016); and see CARMAN ET AL., supra note 109.
478
William W. Buzbee, Asymmetrical Regulation: Risk, Preemption, and The Floor/Ceiling Distinction, 82
N.Y.UNIV. L. REV. 1547, 1558 (Dec. 2007).
479
See BARKER & KENT, supra note 10, at § 8.04(d).
480
See generally McCarran-Ferguson Act, 15 U.S.C. §§ 1011–1015; see Humana Inc. v. Forsyth, 525 U.S. 299,
308 (1999) (noting that, because the McCarran-Ferguson Act gives the sates powers in a reverse preemption
scheme, modern implicit preemption would not apply to this Act under the field preemption doctrine but may still
apply under conflict preemption if there is a direct conflict between the Act and state statutes where meeting both
standards is impossible).
481
Id.
D. Market Stabilization
The aforementioned proposed solutions (e.g., imposing civil and

criminal penalties and selectively modifying ERISA’s express preemption)
will likely increase the cost of employer-sponsored healthcare.482 Although,
premiums are determined on the pretext of normal risk, these solutions will
impact net profits for insurers.483 Despite the inevitable criticism that these
proposed changes will make health insurance less affordable, if the market
operated in good faith it should not. Because these changes simply hold
welfare benefits insurers accountable for not honoring their obligations, as
every other type of insurer already must.484 For insurers who do not act in
bad faith, these changes should have little to no impact on their
profitability.485 In fact, such changes would provide a market advantage for
lawful insurers because they could underwrite premiums without the level of
consideration for litigation as their dubious competition would have to.486
It is important that these changes do not adversely affect insureds and
the overall labor market, and the following few realistic solutions present
themselves, given current political will and public opinion.487 First, health
insurance companies are already subject to regulations that are meant to
curtail what their margins on premiums can be, although it appears this rule
has had a negligible impact.488 Applying this concept, existing regulations
could be adjusted to tighten gaps and base the premiums margin limit to a
before-litigation-is-factored-in amount, with some level of allowance for
normative litigation costs for large firms.489 The worst offenders would not
be able to shift the total of their litigation costs into their overall profitability,
but firms within a normative range would be able to.490 This would
incentivize insurers to avoid litigation, and the best way to do this would be
to provide valid care.491
Second, expanding existing ACA individual plan markets may be
able to balance the risk pooling and insurance burden between employers and
the public sector, while keeping rates for healthcare low through public-
482
See discussion infra Sections II.D, III.A-B, & IV.B-C. If insurance firms are no longer able to elude
accountability, they will likely become less profitable, and these costs would be passed on to consumers.
483
ABRAHAM & SCHWARCZ, supra note 85, at 383-384.
484
See infra discussion section (IV).
485
See generally BARKER & KENT, supra note 10, at § 8.04; see discussion infra Section IV.
486
BARKER & KENT, supra note 10, at § 8.04.
487
See infra discussion sections (I)(E), (II).
488
See Steve Cicala et al., Regulating Markups in US Health Insurance, 11 AM. ECON. J. OF APPLIED ECON.,
71, 71–72 (2019).
489
Id.
490
Id.
491
Id.
private competition.492 This may be much more welcomed by the health

insurance lobby if the statutory changes to liability immunities suggested
were implemented.493 If it is harder to avoid honoring coverages and the
associated penalties are significant, then having a public option that may be
more appealing to chronically ill patients could blunt their losses.494
Australia uses a model that may be a good model for the U.S. to
evaluate for a public program.495 The Australian model is analogous to the
U.S. education system, where everyone pays for the public system, but may
choose to use a private option in actual practice. For the U.S., in healthcare it
may be more politically palatable to have a system where people can revert
to the base tax rate if they opt-out by purchasing a private healthcare plan.496
If they do not opt-out by purchasing a private plan, then their rate would be
progressive and based on a bracket.497 The goal would be to maintain a much
more cost-effective option, that curtails cost by reduced administrative
burdens and a not-for-profit incentive scheme.498
Third, a less expansive stop gap would be to expand Medicare and
Medicaid subsidies.499 Subsidizing certain claims through Medicare or
Medicaid, burdens on employers would be limited, and the incentives to
block diagnostic care would be reduced.500 ACA individual plan markets
already do this, where certain drugs or treatments may be covered through
additional government coverage.501 This solution would, therefore, be
mutually beneficial for both insurers as private markets would keep people
longer and retain a larger share of patients who would otherwise end up
completely covered under public healthcare once they were no longer able to
work.502 But, private markets would also be alleviated from some of the
catastrophic costs of some insureds—similar to an outside umbrella policy.503
Overall, therefore, the perverse incentives existing within the ERISA
landscape—from damages immunities, consulting physician malpractice
492
See Matthew Fiedler, Designing A Public Option That Would Reduce Health Care Provider Prices, UCS
LEONARD D. SHAEFFER CTR. FOR HEALTH POL’Y & ECON. & BROOKINGS (2021),
https://www.brookings.edu/essay/designing-a-public-option-that-would-reduce-health-care-provider-prices/
[https://perma.cc/77WQ-QR8B].
493
Id.; see also Cicala et al., supra note 488.
494
See Cicala et al., supra note 488.
495
See generally STEPHEN DUCKETT, THE AUSTRALIAN HEALTH CARE SYSTEM (6th ed. 2022).
496
Id.
497
Id.
498
Id.
499
See Cynthia Cox et al., Nine Changes to Watch in ACA Open Enrollment 2023, KAISER FAM. FOUND. (Oct.
27, 2022) https://www.kff.org/policy-watch/nine-changes-to-watch-in-open-enrollment-2023/
[https://perma.cc/ZU88-4YUR].
500
Id.; see infra discussion (I)(B).
501
Cox et al., supra note 499.
502
Id.; see Cicala et al., supra note 488.
503
Cox et al., supra note 499; ABRAHAM & SCHWARCZ, supra note 85, at 667.
immunity, lack of transparency, and preemption—would be significantly

reduced through a multitude of remedies, most already available to the public
and some through legislation, such as through removing civil damages
immunities, requiring EBSA reporting of claims denials, selective
modifications to express preemption clause under ERISA, and making the
aforementioned adjustments for price increases for insurers and insureds.
CONCLUSION
ERISA has created an untenable healthcare landscape by allowing
insurers to profiteer off a completely asymmetrical legal and procedural
scheme. Mechanisms of accountability have been hollowed out, leaving only
an illusory bulwark for consumers and a very real wall guarding insurers’
profits.504 As a result, insurers have a license to steal from over half the
country that seems to be completely un-tracked.505
Currently, insurers are immune from claims of bad faith.506 If caught,
they only pay for what they promised in the first place.507 It is unknown how
many claims are actually denied annually, but, if the CMS system where
claim administrators are not nearly as conflicted as they are in fully-funded
insurance plans deny around 18% of claims annually, it belies rationality to
think a less monitored and more conflicted claim administrator would deny
fewer than 18% of claims.508 Consider the volume of 20% of claims
generated by 178,000,000 people.509 If the CMS data holds for ERISA plan
appeals, then less than 1% of that massive number is appealed.510 Even a
generous margin of error is given, say between 0.5% and 5% of claims are
appealed, or otherwise circumvented, that still leaves 95% or more denied
claims left alone.511 How many of those are for diagnostic treatments?512
In addition to lacking accountability through lacking data on claims
denials, insurers are faced with perverse incentives: when held liable for the
tiny fraction of claims they face, they are only subjected to paying some
defense attorney’s fees, which pales in comparison to the cost of a thirty-
year-old, like Dawn Smith, who would have otherwise beat her first cancer
504
See Cicala et al., supra note 488; see infra discussion section II.
505
See infra discussion section II.(C).
506
See Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. § 1132; and see Mass. Mut.
Life Ins. Co. v. Russell, 473 U.S. 134, 148 (1985).
507
Karen Pollitz et al, supra note 43; see infra discussion section II.(A).
508
Karen Pollitz et al, supra note 43; see infra discussion section II.(C).
509
Karen Pollitz et al, supra note 43; see infra discussion section II.(C).
510
Karen Pollitz et al, supra note 43.
511
Id.
512
U.S. DEP’T. OF LAB. & U.S. DEP’T. OF HEALTH AND HUM. SERV., supra note 45 (finding claim denials to
diagnostic testing where more commonly frivolous than others).
diagnosis.513 Even by delaying the process of care, insurers can cut a lot of
working years off of a claimant’s life. Once someone is too sick to work, the
common trend is to leave the ERISA market and to enter into either Medicare
or Medicaid.514 Even if insureds stay on their ERISA plan for one reason or
another, one round of hospice is a lot cheaper than a lifetime of chronic illness
or multiple rounds of catastrophic care.515 Belief in a comforting illusion, that
other predatory markets only normalized because industry leaders had
sudden changes of heart, will not fix our deranged healthcare market.516
Fixing our national issues regarding access to healthcare will take
deliberate, forceful, and thoughtful interventions.517 We can start by
immediately instituting a comprehensive tracking system for denials of care
and, ideally, by eventually removing civil damages immunities, selectively
repealing express preemption under ERISA, and controlling for the increase
in price that will cause for care. If we can do that, the illusion of the redress
for wronged beneficiaries might be dispelled, stirring the sedated legislators,
so they can get to the business of stripping immunities and holding insurers
to do no harm. So, hopefully, people like Dawn can focus more on acquiring
essential treatment and diagnoses, rather than on being consumed with
wrongful claim denials from their insurers, in order to receive the care that
they so clearly deserve.518
513
See AM. CANCER SOC’Y, supra note 201; see Bryant, supra note 1.
514
See AM. CANCER SOC’Y, supra note 201, at 8.
515
Id. at 23.
516
See Tim Devaney, Dem Bill Cracks Down on Payday Lenders, THE HILL (Apr. 7, 2016, 1:52 PM EST),
https://thehill.com/regulation/legislation/275499-dem-bill-cracks-down-on-payday-lenders/
[https://perma.cc/DW66-RMKN].
517
See, e.g., Fiedler, supra note 492; see, e.g., Cicala et al., supra note 488.
518
See Bryant, supra note 1.

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ILLUSORY REMEDIES: WHY LACKING OVERSIGHT AND

PENALTIES LEAVE HALF THE COUNTRY WITH ONLY A SHADOW

Dawn Smith suffered for years from debilitating brain cancer,

healthcare through an Employee Retirement Income Security Act (ERISA)

Many regulated markets are largely untracked by the government;

(ACA) world.47 It will also discuss basic economic theory necessary to

life insurance.53 ERISA was, therefore, meant to consolidate employee

organization insurance, and Veterans Affairs may be offered as an employee

C. Claims and Denials

healthcare coverage includes the function of access to routine and

Medicare and Medicaid Services (CMS) have instituted denial reporting in a

a. Denials due to lack of prior authorization or referral,

D. Economics and Incentives

Coercion can come from regulatory or unofficial channels.148

E. Movements to Cure Deficiencies in ERISA Healthcare

Landmark legislation affecting ERISA over the past three decades,

insurance providers to treat mental healthcare on more equal footing with

II. ANALYSIS OF THE INDIVIDUAL ISSUES

A. Wrongful Denial Damages Immunities

1. Source of Authority for Recoverability and Standing

beneficiary (generally the employee’s dependent), a Secretary of State, the

2. Barriers to Recovery and Limitations on Awards

ERISA-backed plan insurers are immune from consequential and

system of semi-mandatory reporting to the Department of Labor (DOL),

task to find representation.

3. Costs of Seeking Care and Redress

If claimants make it to a court room or win at arbitration and they

4. Blocking and Cost-Effective Medical Malpractice

A hidden figure in the wrongful denial picture are subsequent claims

When a claim for care is sent to an insurer, it is almost always done

for these consulting physicians vary by state.210

[A] person is a fiduciary with respect to a plan to the extent[:]

By this rule, physicians consulting on behalf of welfare benefits plans are

Court’s acknowledgement that decisions of treatment and eligibility are

2. Controlling Opinion and Valid Roles in Medical Consultation

Of course, there are legitimate differences in opinion on appropriate

to patients’ health outcomes.229 It is a baffling determination, then, that a

3. Consequences of Doctors Acting Only as Fiduciaries

Treating consulting physicians only as fiduciaries is flawed for two

malpractice done by their employees, making it especially pernicious.240 As

C. Prevalence and Transparency

2. Stake Holding Agencies and The Common Tragedy

The tangled web of preemption and statutory regulation fractures

3. The Employee Benefit Security Administration

The Employee Benefit Security Administration (EBSA) is a sub-

requirement for claim denials to be monitored proactively, or the system is

4. Department of the Treasury

however, health insurance outside of Medicare and Medicaid is generally

5. State Enforcement Mechanisms

As states bear the burden of monitoring insurers in most cases.302 In

6. The National Association of Insurance Commissioners

The National Association of Insurance Commissioners (NAIC) is a

existing in a prisoners’ dilemma.323 As long as insurance companies all avoid

In 2011 the Rand Institute published a short article reinforcing the

8. Summary of Claim Denial Prevalence and Lack of Transparency

(last visited Jan. 22, 2023).

argument that there is none.350 There appears to be no open-source way to

The keystone holding up the other layers of insurer protection, is

Except as provided in subsection (b) of this section, the