Pegram v. Herdrich: On Peritonitis, Preemption, and the Elusive Goal of Managed Care Accountability

Managed care presents the paradox of organizations having real power over people's lives without there being clear or consistent means of ensuring accountability. In Pegram v. Herdrich, the United States Supreme Court struggled with whether “fiduciary duties” under the federal Employee Retirement Income Security Act (ERISA) could be used to counterbalance the incentives that HMOs have to deny necessary care. Given press coverage of the case, however, it was easy to get the impression that the managed care industry itself was on trial in Pegram. This report examines the political and legal forces underlying the dispute and analyzes the Supreme Court's unanimous rejection of the notion of federally imposed duties for HMOs. In the absence of ERISA fiduciary obligations, attention must now shift to developments in state tort law, the scope of federal ERISA preemption, and the prospect of legislative reform. The report concludes with an exploration of how the elusive goal of managed care accountability might be pursued in the wake of Pegram.