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Legal; Managed Care; Managed Care Contracting


This Report, prepared for the Substance Abuse and Mental Health Services Administration, provides a brief overview of the United States Supreme Court's landmark decision in Pegram v Herdrich (hereinafter referred to as Herdrich). This report begins with a brief overview of the debate in the courts over how to distinguish between legal challenges to the conduct of managed care companies in which all state remedies are preempted by ERISA and those that may proceed under state law. It then summarizes the facts of the Herdrich case and the Court's holding. The report concludes with a discussion of the implications of the decision for federal and state consumer protection legislation.

A point of caution should be raised. The Herdrich decision is so new, and its implications so potentially far-reaching, that legal scholars, policy makers, lawyers, and judges undoubtedly will be pondering and debating its meaning and reach for years. However, in light of the enormous attention now focused on managed care accountability, the decision will attract a great deal of attention. Consequently, at least a preliminary analysis is warranted.


Funder: Substance Abuse and Mental Health Services Administration (SAMHSA).

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