Legal Considerations

  • John D. Blum
Part of the Industry and Health Care book series (SSIND, volume 6)


Corporations attempting to restructure employee health benefit plans may encounter certain legal problems, depending on the nature of the specific changes contemplated and on whether those changes are to be undertaken as sole or joint ventures. Because of the diversity of corporate approaches to employee health care, this chapter can only serve to outline some general areas of the law that need to be considered in restructuring health plans. Specifically, it addresses antitrust, preemption of state regulation under the Employee Retirement Income Security Act (ERISA), and confidentiality of medical records. These areas do not exhaust the legal questions companies could encounter in their efforts to reduce health care expenditures, but each is a major legal problem area and serves to highlight the complex ramifications under law that could result from misdirected use of corporate power in the health care system.


Federal Trade Commission Federal Court Benefit Plan Legal Consideration Ninth Circuit 
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    15 USC §§ 1–7.Google Scholar
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    15 USC §§ 12–27.Google Scholar
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    Ibid, pp. 196–197. A successful monopoly challenge which demonstrates that the defendants control prices and/or exclude competition is contingent on their having considerable market power.Google Scholar
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    Legal actions in the medical price-fixing area have focused on physician organizations that issue price guidelines to their competitor members. See Remarks of Jonathan E. Gaines, Assistant Director, Bureau of Competition, Federal Trade Commission, before the Professional Associations Council of the American Society of Association Executives, Washington, D.C., February 10, 1978.Google Scholar
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    In an action similar to Bell, Hemberlin v. V.I.P. Insurance Trust (434 F. Supp. 1196 [1977]), the beneficiaries of a group health and accident policy brought suit alleging violations of ERISA. The legal issue that underlay the action was whether the federal court had subject matter jurisdiction, given that it was questionable whether the plan at issue was covered by ERISA. The insurer of the original V.I.P. Trust, a multiple employer trust, canceled its group coverage, at which point defendant insurance brokers set up a self-funded plan with themselves acting as administrators at a 15 percent commission. The trust was run as a business enterprise of the insurance brokers with employers having no voice in its management, operation, or decisions to terminate; no employer contributions were made on behalf of employees. According to the court, “this trust [V.I.P. Trust] was purely an entrepreneurial plan put together by Galbraith and Green [insurance brokers] to protect business commissions they would have lost if the trust had not been restructured.” The decision continued, “there has been substantial national concern over the increase in the numbers of uninsured multiple employer trusts such as this which have avoided state supervision and failed, leaving sick or injured employees holding any empty bag.” The Hamberlin court ruled that ERISA could not be used as an umbrella to protect purely commercial plans from state regulation; thus the federal court denied that it had jurisdiction under ERISA to consider the merits of the claim.Google Scholar
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    S. 3017 also exempts the interest of an employee in an employee benefit plan from being characterized as a security under the Securities and Exchange Act, another area of jurisdictional controversy. It should also be noted that HMOs, according to the Department of Labor (Press Release 77–188), are to be classified as benefits and not employee benefit plans subject to ERISA. The Labor Department opinion has been supported in the Ninth Circuit opinion of Hewlett-Packard v. Barnes (425 F. Supp. 1294 [1977]).Google Scholar
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    John D. Blum, “Corporate Liability for Inhouse Medical Malpractice,” St. Louis University Law Journal, vol. 22 (Summer 1978).Google Scholar

Copyright information

© Springer-Verlag New York Inc. 1979

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  • John D. Blum

There are no affiliations available

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