The Fifth Circuit Court of Appeals (the "Court") recently modified an earlier decision to hold that Texas's independent review organization ("IRO") provisions, which grant patients the right to seek independent review of an HMO's medical necessity determinations, are not preempted by the federal Employee Retirement Income Security Act of 1974 ("ERISA"). The Court's modification, released on December 16, 2002, reverses the portion of the Court's June 2000 decision in Corporate Health Insurance, Inc. v. Texas Department of Insurance that had struck down the IRO provisions as preempted by ERISA. This modification was prompted by a June 24, 2002, U.S. Supreme Court decision Rush Prudential HMO, Inc. v. Moran, which holds that a similar Illinois independent review process is not preempted by ERISA. However, the Court proceeded to hold that ERISA does preempt the IRO rules as applied to self-funded ERISA plans, which means that a self-funded employer welfare plan is not subject to the IRO rules.

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