The Assault on Managed Care: Vicarious Liability, ERISA Preemption, and Class Actions

Public dissatisfaction with managed care has produced a number of legal initiatives that would increase the regulation of managed care organizations. Among other things, these initiatives would limit the scope of remedial preemption under the Employee Retirement and Income Security Act (ERISA), expand the doctrines of vicarious liability and implied agency, adopt a general “patient's bill of rights,” and subject managed care organizations to a mix of class actions by disappointed plan participants. This paper questions these initiatives and argues that for the most part they hold little realistic possibility of improving the performance of the health care system relative to the set of tort and contract doctrines already in place. The one area in which we are somewhat more agnostic pertains to ERISA preemption in disputes over the scope of insurance coverage, where the wisdom of allowing broader remedies turns on the question of whether they can be administered with reasonable accuracy.