PEGRAM et al. v. HERDRICH

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Syllabus
PEGRAM et al. v. HERDRICH
certiorari to the united states court of appeals for
the seventh circuit
No. 98–1949. Argued February 23, 2000—Decided June 12, 2000
Petitioners (collectively Carle) function as a health maintenance organiza-
tion (HMO) owned by physicians providing prepaid medical services to
participants whose employers contract with Carle for coverage. Re-
spondent Herdrich was covered by Carle through her husband’s em-
ployer, State Farm Insurance Company. After petitioner Pegram, a
Carle physician, required Herdrich to wait eight days for an ultrasound
of her inflamed abdomen, her appendix ruptured, causing peritonitis.
She sued Carle in state court for, inter alia, fraud. Carle responded
that the Employee Retirement Income Security Act of 1974 (ERISA)
preempted the fraud counts and removed the case to federal court. The
District Court granted Carle summary judgment on one fraud count,
but granted Herdrich leave to amend the other. Her amended count
alleged that the provision of medical services under terms rewarding
physician owners for limiting medical care entailed an inherent or antici-
patory breach of an ERISA fiduciary duty, since the terms created an
incentive to make decisions in the physicians’ self-interest, rather than
the plan participants’ exclusive interests. The District Court granted
Carle’s motion to dismiss on the ground that Carle was not acting as an
ERISA fiduciary. The Seventh Circuit reversed the dismissal.
Held: Because mixed treatment and eligibility decisions by HMO physi-
cians are not fiduciary decisions under ERISA, Herdrich does not state
an ERISA claim. Pp. 218–237.
(a) Whether Carle is a fiduciary when acting through its physician
owners depends on some background of fact and law about HMO organi-
zations, medical benefit plans, fiduciary obligation, and the meaning of
Herdrich’s allegations. The defining feature of an HMO is receipt of a
fixed fee for each patient enrolled under the terms of a contract to pro-
vide specified health care if needed. Like other risk bearing organiza-
tions, HMOs take steps to control costs. These measures are commonly
complemented by specific financial incentives to physicians, rewarding
them for decreasing utilization of health-care services, and penalizing
them for excessive treatment. Hence, an HMO physician’s financial
interest lies in providing less care, not more. Herdrich argues that
Carle’s incentive scheme of annually paying physician owners the profit
resulting from their own decisions rationing care distinguishes its plan

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from HMOs generally, so that reviewing Carle’s decision under a fidu-
ciary standard would not open the door to claims against other HMOs.
However, inducement to ration care is the very point of any HMO
scheme, and rationing necessarily raises some risks while reducing oth-
ers. Thus, any legal principle purporting to draw a line between good
and bad HMOs would embody a judgment about socially acceptable
medical risk that would turn on facts not readily accessible to courts
and on social judgments not wisely required of courts unless resort can-
not be had to the legislature. Because courts are not in a position to
derive a sound legal principle to differentiate an HMO like Carle from
other HMOs, this Court assumes that the decisions listed in Herdrich’s
count cannot be subject to a claim under fiduciary standards unless all
such decisions by all HMOs acting through their physicians are judged
by the same standards and subject to the same claims. Pp. 218–222.
(b) Under ERISA, a fiduciary is someone acting in the capacity of
manager, administrator, or financial adviser to a “plan,” and Herdrich’s
count accordingly charged Carle with a breach of fiduciary duty in dis-
charging its obligations under State Farm’s medical plan. The common
understanding of “plan” is a scheme decided upon in advance. Here
the scheme comprises a set of rules defining a beneficiary’s rights and
providing for their enforcement. When employers contract with an
HMO to provide benefits to employees subject to ERISA, their agree-
ment may, as here, provide elements of a plan by setting out the rules
under which beneficiaries will be entitled to care. ERISA’s provision
that fiduciaries shall discharge their duties with respect to a plan “solely
in the interest of the participants and beneficiaries,” 29 U. S. C.
§ 1104(a)(1), is rooted in the common law of trusts, but an ERISA fidu-
ciary may also have financial interests adverse to beneficiaries. Thus,
in every case charging breach of ERISA fiduciary duty, the threshold
question is not whether the actions of some person providing services
under the plan adversely affected a beneficiary’s interest, but whether
that person was performing a fiduciary function when taking the action
subject to complaint. Pp. 222–226.
(c) Herdrich claims that Carle became a fiduciary, acting through its
physicians, when it contracted with State Farm. It then breached its
duty to act solely in the beneficiaries’ interest, making decisions affect-
ing medical treatment while influenced by a scheme under which the
physician owners ultimately profited from their own choices to minimize
the medical services provided. Herdrich’s count lists mixed eligibility
and treatment decisions: decisions relying on medical judgments in
order to make plan coverage determinations. Pp. 226–230.
(d) Congress did not intend an HMO to be treated as a fiduciary to
the extent that it makes mixed eligibility decisions acting through its

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physicians. Congress is unlikely to have thought of such decisions as
fiduciary. The common law trustee’s most defining concern is the pay-
ment of money in the beneficiary’s interest, and mixed eligibility deci-
sions have only a limited resemblance to that concern. Consideration
of the consequences of Herdrich’s contrary view leave no doubt as to
Congress’s intent. Recovery against for-profit HMOs for their mixed
decisions would be warranted simply upon a showing that the profit
incentive to ration care would generally affect such decisions, in deroga-
tion of the fiduciary standard to act in the patient’s interest without
possibility of conflict. And since the provision for profits is what makes
a for-profit HMO a proprietary organization, Herdrich’s remedy—return
of profit to the plan for the participants’ benefit—would be nothing less
than elimination of the for-profit HMO. The Judiciary has no warrant
to precipitate the upheaval that would follow a refusal to dismiss Her-
drich’s claim. Congress, which has promoted the formation of HMOs
for 27 years, may choose to restrict its approval to certain preferred
forms, but the Judiciary would be acting contrary to congressional policy
if it were to entertain an ERISA fiduciary claim portending wholesale
attacks on existing HMOs solely because of their structure. The Sev-
enth Circuit’s attempt to confine the fiduciary breach to cases where the
sole purpose of delaying or withholding treatment is to increase the
physician’s financial reward would also lead to fatal difficulties. The
HMO’s defense would be that its physician acted for good medical rea-
sons. For all practical purposes, every claim would boil down to a
malpractice claim, and the fiduciary standard would be nothing but the
traditional medical malpractice standard. The only value to plan par-
ticipants of such an ERISA fiduciary action would be eligibility for
attorney’s fees if they won. A physician would also be subject to suit
in federal court applying an ERISA standard of reasonable medical
skill. This would, in turn, seem to preempt a state malpractice claim,
even though ERISA does not preempt such claims absent a clear
manifestation of congressional purpose, New York State Conference of
Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U. S. 645.
Pp. 231–237.
154 F. 3d 362, reversed.
Souter, J., delivered the opinion for a unanimous Court.
Carter G. Phillips argued the cause for petitioners. With
him on the briefs were Virginia A. Seitz and Richard D.
Raskin.
James A. Feldman argued the cause for the United States
as amicus curiae urging reversal. With him on the brief

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214 PEGRAM v. HERDRICH
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were Solicitor General Waxman, Deputy Solicitor General
Kneedler, Allen H. Feldman, and Mark S. Flynn.
James P. Ginzkey argued the cause and filed a brief for
respondent.*
Justice Souter delivered the opinion of the Court.
The question in this case is whether treatment decisions
made by a health maintenance organization, acting through
its physician employees, are fiduciary acts within the mean-
ing of the Employee Retirement Income Security Act of 1974
(ERISA), 88 Stat. 832, as amended, 29 U. S. C. § 1001 et seq.
(1994 ed. and Supp. III). We hold that they are not.
*Briefs of amici curiae urging reversal were filed for the American
Association of Health Plans et al. by Stephanie W. Kanwit, Daly D. E.
Temchine, Kirsten M. Pullin, Jeffrey Gabardi, Louis Saccoccio, Stephen
A. Bokat, Robin S. Conrad, and Sussan Mahallati Kysela; and for the
Washington Legal Foundation by Lonie A. Hassel, William F. Hanrahan,
Daniel J. Popeo, and Richard A. Samp.
Briefs of amici curiae urging affirmance were filed for the State of
Illinois et al. by James E. Ryan, Attorney General of Illinois, Joel D. Ber-
tocchi, Solicitor General, Jacqueline Zydeck, Assistant Attorney General,
and Dan Schweitzer, and by the Attorneys General for their respective
States as follows: Bill Lockyer of California, M. Jane Brady of Delaware,
Robert A. Butterworth of Florida, Thomas J. Miller of Iowa, Tom Reilly
of Massachusetts, Mike Moore of Mississippi, Jeremiah W. (Jay) Nixon
of Missouri, Joseph P. Mazurek of Montana, Frankie Sue Del Papa of
Nevada, John J. Farmer, Jr., of New Jersey, Michael F. Easley of North
Carolina, Betty D. Montgomery of Ohio, W. A. Drew Edmondson of Okla-
homa, Mike Fisher of Pennsylvania, Sheldon Whitehouse of Rhode Island,
Paul G. Summers of Tennessee, and John Cornyn of Texas; for the Ameri-
can College of Legal Medicine et al. by Miles J. Zaremski; for Health Care
for All et al. by Wendy E. Parmet, S. Stephen Rosenfeld, and Clare D.
McGorrian; for Health Law, Policy, and Ethics Scholars by Louis R.
Cohen, Ruth E. Kent, and Carol J. Banta; and for the Ehlmann Plaintiffs
by George Parker Young.
Briefs of amici curiae were filed for the American Medical Association
by Gary W. Howell, Thomas Campbell, Michael L. Ile, Anne M. Murphy,
and Leonard A. Nelson; and for the AARP et al. by Mary Ellen Signo-
rille, Sarah Lenz Lock, Melvin Radowitz, Paula Brantner, Jeffrey Lewis,
and Vicki Gottlich.

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Opinion of the Court
I
Petitioners, Carle Clinic Association, P. C., Health Alliance
Medical Plans, Inc., and Carle Health Insurance Management
Co., Inc. (collectively Carle), function as a health mainte-
nance organization (HMO) organized for profit. Its owners
are physicians providing prepaid medical services to partici-
pants whose employers contract with Carle to provide such
coverage. Respondent, Cynthia Herdrich, was covered by
Carle through her husband’s employer, State Farm Insur-
ance Company.
The events in question began when a Carle physician, peti-
tioner Lori Pegram,1 examined Herdrich, who was experi-
encing pain in the midline area of her groin. Six days later,
Dr. Pegram discovered a six by eight centimeter inflamed
mass in Herdrich’s abdomen. Despite the noticeable in-
flammation, Dr. Pegram did not order an ultrasound diagnos-
tic procedure at a local hospital, but decided that Herdrich
would have to wait eight more days for an ultrasound, to be
performed at a facility staffed by Carle more than 50 miles
away. Before the eight days were over, Herdrich’s appendix
ruptured, causing peritonitis. See 154 F. 3d 362, 365, n. 1
(CA7 1998).
Herdrich sued Pegram and Carle in state court for medical
malpractice, and she later added two counts charging state-
law fraud. Carle and Pegram responded that ERISA pre-
empted the new counts, and removed the case to federal
court,2 where they then sought summary judgment on the
1 Although Lori Pegram, a physician owner of Carle, is listed as a peti-
tioner, it is unclear to us that she retains a direct interest in the outcome
of this case.
2 Herdrich does not contest the propriety of removal before us, and we
take no position on whether or not the case was properly removed. As
we will explain, Herdrich’s amended complaint alleged ERISA violations,
over which the federal courts have jurisdiction, and we therefore have
jurisdiction regardless of the correctness of the removal. See Grubbs v.
General Elec. Credit Corp., 405 U. S. 699 (1972); Mackay v. Uinta Develop-
ment Co., 229 U. S. 173 (1913).

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state-law fraud counts. The District Court granted their
motion as to the second fraud count but granted Herdrich
leave to amend the one remaining. This she did by alleging
that provision of medical services under the terms of the
Carle HMO organization, rewarding its physician owners for
limiting medical care, entailed an inherent or anticipatory
breach of an ERISA fiduciary duty, since these terms created
an incentive to make decisions in the physicians’ self-interest,
rather than the exclusive interests of plan participants.3
3 The specific allegations were these:
“11. Defendants are fiduciaries with respect to the Plan and under 29
[U. S. C. § ]1109(a) are obligated to discharge their duties with respect to
the Plan solely in the interest of the participants and beneficiaries and
“a. for the exclusive purpose of:
“i. providing benefits to participants and their beneficiaries; and
“ii. defraying reasonable expenses of administering the Plan;
“b. with the care, skill, prudence, and diligence under the circumstances
then prevailing that a prudent man acting in a like capacity and familiar
with such matters would use in the conduct of an enterprise of a like
character and like aims.
“12. In breach of that duty:
“a. CARLE owner/physicians are the officers and directors of HAMP
and CHIMCO and receive a year-end distribution, based in large part
upon, supplemental medical expense payments made to CARLE by
HAMP and CHIMCO;
“b. Both HAMP and CHIMCO are directed and controlled by CARLE
owner/physicians and seek to fund their supplemental medical expense
payments to CARLE:
“i. by contracting with CARLE owner/physicians to provide the medi-
cal services contemplated in the Plan and then having those contracted
owner/physicians:
“(1) minimize the use of diagnostic tests;
“(2) minimize the use of facilities not owned by CARLE; and
“(3) minimize the use of emergency and non-emergency consultation
and/or referrals to non-contracted physicians.
“ii. by administering disputed and non-routine health insurance claims
and determining:
“(1) which claims are covered under the Plan and to what extent;
“(2) what the applicable standard of care is;
“(3) whether a course of treatment is experimental;

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Herdrich sought relief under 29 U. S. C. § 1109(a), which
provides that
“[a]ny person who is a fiduciary with respect to a plan
who breaches any of the responsibilities, obligations, or
duties imposed upon fiduciaries by this subchapter shall
be personally liable to make good to such plan any losses
to the plan resulting from each such breach, and to re-
store to such plan any profits of such fiduciary which
have been made through use of assets of the plan by the
fiduciary, and shall be subject to such other equitable
or remedial relief as the court may deem appropriate,
including removal of such fiduciary.”
When Carle moved to dismiss the ERISA count for failure
to state a claim upon which relief could be granted, the Dis-
trict Court granted the motion, accepting the Magistrate
Judge’s determination that Carle was not “involved [in these
events] as” an ERISA fiduciary. App. to Pet. for Cert. 63a.
The original malpractice counts were then tried to a jury,
and Herdrich prevailed on both, receiving $35,000 in compen-
sation for her injury. 154 F. 3d, at 367. She then appealed
the dismissal of the ERISA claim to the Court of Appeals
for the Seventh Circuit, which reversed. The court held
that Carle was acting as a fiduciary when its physicians made
the challenged decisions and that Herdrich’s allegations were
sufficient to state a claim:
“Our decision does not stand for the proposition that the
existence of incentives automatically gives rise to a
breach of fiduciary duty. Rather, we hold that incen-
tives can rise to the level of a breach where, as pleaded
here, the fiduciary trust between plan participants and
plan fiduciaries no longer exists (i. e., where physicians
delay providing necessary treatment to, or withhold ad-
“(4) whether a course of treatment is reasonable and customary; and
“(5) whether a medical condition is an emergency.” App. to Pet. for
Cert. 85a–86a.

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ministering proper care to, plan beneficiaries for the sole
purpose of increasing their bonuses).” Id., at 373.
We granted certiorari, 527 U. S. 1068 (1999), and now
reverse the Court of Appeals.
II
Whether Carle is a fiduciary when it acts through its phy-
sician owners as pleaded in the ERISA count depends on
some background of fact and law about HMOs, medical bene-
fit plans, fiduciary obligation, and the meaning of Herdrich’s
allegations.
A
Traditionally, medical care in the United States has been
provided on a “fee-for-service” basis. A physician charges
so much for a general physical exam, a vaccination, a tonsil-
lectomy, and so on. The physician bills the patient for serv-
ices provided or, if there is insurance and the doctor is will-
ing, submits the bill for the patient’s care to the insurer, for
payment subject to the terms of the insurance agreement.
Cf. R. Rosenblatt, S. Law, & S. Rosenbaum, Law and the
American Health Care System 543–544 (1997) (hereinafter
Rosenblatt) (citing Weiner & de Lissovoy, Razing a Tower of
Babel: A Taxonomy for Managed Care and Health Insurance
Plans, 18 J. Health Politics, Policy & Law 75, 76–78 (Summer
1993)). In a fee-for-service system, a physician’s financial
incentive is to provide more care, not less, so long as pay-
ment is forthcoming. The check on this incentive is a phy-
sician’s obligation to exercise reasonable medical skill and
judgment in the patient’s interest.
Beginning in the late 1960’s, insurers and others developed
new models for health-care delivery, including HMOs. Cf.
Rosenblatt 546. The defining feature of an HMO is receipt
of a fixed fee for each patient enrolled under the terms of a
contract to provide specified health care if needed. The
HMO thus assumes the financial risk of providing the bene-

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fits promised: if a participant never gets sick, the HMO keeps
the money regardless, and if a participant becomes expen-
sively ill, the HMO is responsible for the treatment agreed
upon even if its cost exceeds the participant’s premiums.
Like other risk-bearing organizations, HMOs take steps to
control costs. At the least, HMOs, like traditional insurers,
will in some fashion make coverage determinations, scruti-
nizing requested services against the contractual provisions
to make sure that a request for care falls within the scope of
covered circumstances (pregnancy, for example), or that a
given treatment falls within the scope of the care promised
(surgery, for instance). They customarily issue general
guidelines for their physicians about appropriate levels of
care. See id., at 568–570. And they commonly require uti-
lization review (in which specific treatment decisions are re-
viewed by a decisionmaker other than the treating physician)
and approval in advance (precertification) for many types of
care, keyed to standards of medical necessity or the reason-
ableness of the proposed treatment. See Andresen, Is Utili-
zation Review the Practice of Medicine?, Implications for
Managed Care Administrators, 19 J. Legal Med. 431, 432
(Sept. 1998). These cost-controlling measures are commonly
complemented by specific financial incentives to physicians,
rewarding them for decreasing utilization of health-care
services, and penalizing them for what may be found to
be excessive treatment, see Rosenblatt 563–565; Iglehart,
Health Policy Report: The American Health Care System—
Managed Care, 327 New England J. Med. 742, 742–747 (1992).
Hence, in an HMO system, a physician’s financial interest
lies in providing less care, not more. The check on this in-
fluence (like that on the converse, fee-for-service incentive) is
the professional obligation to provide covered services with
a reasonable degree of skill and judgment in the patient’s
interest. See Brief for American Medical Association as
Amicus Curiae 17–21.

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The adequacy of professional obligation to counter finan-
cial self-interest has been challenged no matter what the
form of medical organization. HMOs became popular be-
cause fee-for-service physicians were thought to be provid-
ing unnecessary or useless services; today, many doctors and
other observers argue that HMOs often ignore the individual
needs of a patient in order to improve the HMOs’ bottom
lines. See, e. g., 154 F. 3d, at 375–378 (citing various critics
of HMOs).4 In this case, for instance, one could argue that
Pegram’s decision to wait before getting an ultrasound for
Herdrich, and her insistence that the ultrasound be done at
a distant facility owned by Carle, reflected an interest in
limiting the HMO’s expenses, which blinded her to the need
for immediate diagnosis and treatment.
B
Herdrich focuses on the Carle scheme’s provision for a
“year-end distribution,” n. 3, supra, to the HMO’s physician
owners. She argues that this particular incentive device of
annually paying physician owners the profit resulting from
their own decisions rationing care can distinguish Carle’s or-
ganization from HMOs generally, so that reviewing Carle’s
decisions under a fiduciary standard as pleaded in Herdrich’s
complaint would not open the door to like claims about other
HMO structures. While the Court of Appeals agreed, we
think otherwise, under the law as now written.
Although it is true that the relationship between sparing
medical treatment and physician reward is not a subtle one
under the Carle scheme, no HMO organization could survive
without some incentive connecting physician reward with
treatment rationing. The essence of an HMO is that sala-
ries and profits are limited by the HMO’s fixed membership
fees. See Orentlicher, Paying Physicians More To Do Less:
Financial Incentives to Limit Care, 30 U. Rich. L. Rev. 155,
4 There are, of course, contrary perspectives, and we endorse neither
side of the debate today.

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174 (1996). This is not to suggest that the Carle provisions
are as socially desirable as some other HMO organizational
schemes; they may not be. See, e. g., Grumbach, Osmond,
Vranigan, Jaffe, & Bindman, Primary Care Physicians’ Expe-
rience of Financial Incentives in Managed-Care Systems, 339
New England J. Med. 1516 (1998) (arguing that HMOs that
reward quality of care and patient satisfaction would be pref-
erable to HMOs that reward only physician productivity).
But whatever the HMO, there must be rationing and induce-
ment to ration.
Since inducement to ration care goes to the very point of
any HMO scheme, and rationing necessarily raises some
risks while reducing others (ruptured appendixes are more
likely; unnecessary appendectomies are less so), any legal
principle purporting to draw a line between good and bad
HMOs would embody, in effect, a judgment about socially
acceptable medical risk. A valid conclusion of this sort
would, however, necessarily turn on facts to which courts
would probably not have ready access: correlations between
malpractice rates and various HMO models, similar correla-
tions involving fee-for-service models, and so on. And, of
course, assuming such material could be obtained by courts
in litigation like this, any standard defining the unacceptably
risky HMO structure (and consequent vulnerability to claims
like Herdrich’s) would depend on a judgment about the ap-
propriate level of expenditure for health care in light of the
associated malpractice risk. But such complicated factfind-
ing and such a debatable social judgment are not wisely re-
quired of courts unless for some reason resort cannot be had
to the legislative process, with its preferable forum for com-
prehensive investigations and judgments of social value, such
as optimum treatment levels and health-care expenditure.
Cf. Turner Broadcasting System, Inc. v. FCC, 512 U. S. 622,
665–666 (1994) (plurality opinion) (“Congress is far bet-
ter equipped than the judiciary to ‘amass and evaluate the
vast amounts of data’ bearing upon an issue as complex

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and dynamic as that presented here” (quoting Walters v. Na-
tional Assn. of Radiation Survivors, 473 U. S. 305, 331, n. 12
(1985))); Patsy v. Board of Regents of Fla., 457 U. S. 496, 513
(1982) (“[T]he relevant policy considerations do not invari-
ably point in one direction, and there is vehement disagree-
ment over the validity of the assumptions underlying many
of them. The very difficulty of these policy considerations,
and Congress’ superior institutional competence to pursue
this debate, suggest that legislative not judicial solutions are
preferable” (footnote omitted)).
We think, then, that courts are not in a position to derive
a sound legal principle to differentiate an HMO like Carle
from other HMOs.5 For that reason, we proceed on the as-
sumption that the decisions listed in Herdrich’s complaint
cannot be subject to a claim that they violate fiduciary stand-
ards unless all such decisions by all HMOs acting through
their owner or employee physicians are to be judged by the
same standards and subject to the same claims.
C
We turn now from the structure of HMOs to the require-
ments of ERISA. A fiduciary within the meaning of ERISA
must be someone acting in the capacity of manager, admin-
istrator, or financial adviser to a “plan,” see 29 U. S. C.
§§ 1002(21)(A)(i)–(iii), and Herdrich’s ERISA count accord-
ingly charged Carle with a breach of fiduciary duty in dis-
charging its obligations under State Farm’s medical plan.
App. to Pet. for Cert. 85a–86a. ERISA’s definition of an em-
ployee welfare benefit plan is ultimately circular: “any plan,
fund, or program . . . to the extent that such plan, fund, or
program was established . . . for the purpose of providing . . .
through the purchase of insurance or otherwise . . . medical,
5 They are certainly not capable of making that distinction on a motion
to dismiss; if we accepted the Court of Appeals’s reasoning, complaints
against any flavor of HMO would have to proceed at least to the summary
judgment stage.

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surgical, or hospital care or benefits.” § 1002(1)(A). One is
thus left to the common understanding of the word “plan” as
referring to a scheme decided upon in advance, see Webster’s
New International Dictionary 1879 (2d ed. 1957); Jacobson &
Pomfret, Form, Function, and Managed Care Torts: Achiev-
ing Fairness and Equity in ERISA Jurisprudence, 35 Hous-
ton L. Rev. 985, 1050 (1998). Here the scheme comprises a
set of rules that define the rights of a beneficiary and provide
for their enforcement. Rules governing collection of premi-
ums, definition of benefits, submission of claims, and resolu-
tion of disagreements over entitlement to services are the
sorts of provisions that constitute a plan. See Hansen v.
Continental Ins. Co., 940 F. 2d 971, 977 (CA5 1991). Thus,
when employers contract with an HMO to provide benefits
to employees subject to ERISA, the provisions of documents
that set up the HMO are not, as such, an ERISA plan; but
the agreement between an HMO and an employer who pays
the premiums may, as here, provide elements of a plan by
setting out rules under which beneficiaries will be entitled
to care.
D
As just noted, fiduciary obligations can apply to managing,
advising, and administering an ERISA plan, the fiduciary
function addressed by Herdrich’s ERISA count being the ex-
ercise of “discretionary authority or discretionary responsi-
bility in the administration of [an ERISA] plan,” 29 U. S. C.
§ 1002(21)(A)(iii). And as we have already suggested, al-
though Carle is not an ERISA fiduciary merely because it
administers or exercises discretionary authority over its own
HMO business, it may still be a fiduciary if it administers
the plan.
In general terms, fiduciary responsibility under ERISA is
simply stated. The statute provides that fiduciaries shall
discharge their duties with respect to a plan “solely in the
interest of the participants and beneficiaries,” § 1104(a)(1),
that is, “for the exclusive purpose of (i) providing benefits to

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224 PEGRAM v. HERDRICH
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participants and their beneficiaries; and (ii) defraying reason-
able expenses of administering the plan,” § 1104(a)(1)(A).6
These responsibilities imposed by ERISA have the familiar
ring of their source in the common law of trusts. See Cen-
tral States, Southeast & Southwest Areas Pension Fund v.
Central Transport, Inc., 472 U. S. 559, 570 (1985) (“[R]ather
than explicitly enumerating all of the powers and duties of
trustees and other fiduciaries, Congress invoked the common
law of trusts to define the general scope of their authority
and responsibility”). Thus, the common law (understood
as including what were once the distinct rules of equity)
charges fiduciaries with a duty of loyalty to guarantee bene-
ficiaries’ interests: “The most fundamental duty owed by the
trustee to the beneficiaries of the trust is the duty of
loyalty. . . . It is the duty of a trustee to administer the trust
solely in the interest of the beneficiaries.” 2A A. Scott &
W. Fratcher, Trusts § 170, p. 311 (4th ed. 1987) (hereinafter
Scott); see also G. Bogert & G. Bogert, Law of Trusts and
Trustees § 543 (rev. 2d ed. 1980) (“Perhaps the most funda-
mental duty of a trustee is that he must display throughout
the administration of the trust complete loyalty to the inter-
ests of the beneficiary and must exclude all selfish interest
and all consideration of the interests of third persons”); Cen-
tral States, supra, at 570–571; Meinhard v. Salmon, 249 N. Y.
458, 464, 164 N. E. 545, 546 (1928) (Cardozo, J.) (“Many
6 In addition, fiduciaries must discharge their duties
“(B) with the care, skill, prudence, and diligence under the circum-
stances then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise of a
like character and with like aims;
“(C) by diversifying the investments of the plan so as to minimize the
risk of large losses, unless under the circumstances it is clearly prudent
not to do so; and
“(D) in accordance with the documents and instruments governing the
plan insofar as such documents and instruments are consistent with the
provisions of this subchapter and subchapter III of this chapter.” 29
U. S. C. § 1104(a)(1).

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forms of conduct permissible in a workaday world for those
acting at arm’s length, are forbidden to those bound by fidu-
ciary ties. A trustee is held to something stricter than the
morals of the market place. Not honesty alone, but the
punctilio of an honor the most sensitive, is then the standard
of behavior”).
Beyond the threshold statement of responsibility, however,
the analogy between ERISA fiduciary and common law
trustee becomes problematic. This is so because the trustee
at common law characteristically wears only his fiduciary hat
when he takes action to affect a beneficiary, whereas the
trustee under ERISA may wear different hats.
Speaking of the traditional trustee, Professor Scott’s trea-
tise admonishes that the trustee “is not permitted to place
himself in a position where it would be for his own benefit
to violate his duty to the beneficiaries.” 2A Scott § 170, at
311. Under ERISA, however, a fiduciary may have financial
interests adverse to beneficiaries. Employers, for example,
can be ERISA fiduciaries and still take actions to the disad-
vantage of employee beneficiaries, when they act as employ-
ers (e. g., firing a beneficiary for reasons unrelated to the
ERISA plan), or even as plan sponsors (e. g., modifying the
terms of a plan as allowed by ERISA to provide less gen-
erous benefits). Nor is there any apparent reason in the
ERISA provisions to conclude, as Herdrich argues, that this
tension is permissible only for the employer or plan spon-
sor, to the exclusion of persons who provide services to an
ERISA plan.
ERISA does require, however, that the fiduciary with two
hats wear only one at a time, and wear the fiduciary hat
when making fiduciary decisions. See Hughes Aircraft Co.
v. Jacobson, 525 U. S. 432, 443–444 (1999); Varity Corp. v.
Howe, 516 U. S. 489, 497 (1996). Thus, the statute does not
describe fiduciaries simply as administrators of the plan, or
managers or advisers. Instead it defines an administra-
tor, for example, as a fiduciary only “to the extent” that he

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226 PEGRAM v. HERDRICH
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acts in such a capacity in relation to a plan. 29 U. S. C.
§ 1002(21)(A). In every case charging breach of ERISA fi-
duciary duty, then, the threshold question is not whether the
actions of some person employed to provide services under
a plan adversely affected a plan beneficiary’s interest, but
whether that person was acting as a fiduciary (that is, was
performing a fiduciary function) when taking the action sub-
ject to complaint.
E
The allegations of Herdrich’s ERISA count that identify
the claimed fiduciary breach are difficult to understand. In
this count, Herdrich does not point to a particular act by any
Carle physician owner as a breach. She does not complain
about Pegram’s actions, and at oral argument her counsel
confirmed that the ERISA count could have been brought,
and would have been no different, if Herdrich had never had
a sick day in her life. Tr. of Oral Arg. 53–54.
What she does claim is that Carle, acting through its phy-
sician owners, breached its duty to act solely in the interest
of beneficiaries by making decisions affecting medical treat-
ment while influenced by the terms of the Carle HMO
scheme, under which the physician owners ultimately profit
from their own choices to minimize the medical services pro-
vided. She emphasizes the threat to fiduciary responsibility
in the Carle scheme’s feature of a year-end distribution to
the physicians of profit derived from the spread between sub-
scription income and expenses of care and administration.
App. to Pet. for Cert. 86a.
The specific payout detail of the plan was, of course, a fea-
ture that the employer as plan sponsor was free to adopt
without breach of any fiduciary duty under ERISA, since
an employer’s decisions about the content of a plan are not
themselves fiduciary acts. Lockheed Corp. v. Spink, 517
U. S. 882, 887 (1996) (“Nothing in ERISA requires employers
to establish employee benefit plans. Nor does ERISA man-
date what kind of benefits employers must provide if they

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choose to have such a plan”).7 Likewise it is clear that there
was no violation of ERISA when the incorporators of the
Carle HMO provided for the year-end payout. The HMO is
not the ERISA plan, and the incorporation of the HMO pre-
ceded its contract with the State Farm plan. See 29 U. S. C.
§ 1109(b) (no fiduciary liability for acts preceding fiduciary
status).
The nub of the claim, then, is that when State Farm con-
tracted with Carle, Carle became a fiduciary under the plan,
acting through its physicians. At once, Carle as fiduciary
administrator was subject to such influence from the year-
end payout provision that its fiduciary capacity was necessar-
ily compromised, and its readiness to act amounted to antici-
patory breach of fiduciary obligation.
F
The pleadings must also be parsed very carefully to under-
stand what acts by physician owners acting on Carle’s behalf
are alleged to be fiduciary in nature.8 It will help to keep
7 It does not follow that those who administer a particular plan design
may not have difficulty in following fiduciary standards if the design is
awkward enough. A plan might lawfully provide for a bonus for adminis-
trators who denied benefits to every 10th beneficiary, but it would be diffi-
cult for an administrator who received the bonus to defend against the
claim that he had not been solely attentive to the beneficiaries’ interests
in carrying out his administrative duties. The important point is that
Herdrich is not suing the employer, State Farm, and her claim cannot be
analyzed as if she were.
8 Herdrich argues that Carle is judicially estopped from denying its fi-
duciary status as to the relevant decisions, because it sought and sucess-
fully defended removal of Herdrich’s state action to the Federal District
Court on the ground that it was a fiduciary with respect to Herdrich’s
fraud claims. Judicial estoppel generally prevents a party from prevail-
ing in one phase of a case on an argument and then relying on a contradic-
tory argument to prevail in another phase. See Rissetto v. Plumbers &
Steamfitters Local 343, 94 F. 3d 597, 605 (CA9 1996). The fraud claims in
Herdrich’s initial complaint, however, could be read to allege breach of a
fiduciary obligation to disclose physician incentives to limit care, whereas

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228 PEGRAM v. HERDRICH
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two sorts of arguably administrative acts in mind. Cf.
Dukes v. U. S. Healthcare, Inc., 57 F. 3d 350, 361 (CA3 1995)
(discussing dual medical/administrative roles of HMOs).
What we will call pure “eligibility decisions” turn on the
plan’s coverage of a particular condition or medical procedure
for its treatment. “Treatment decisions,” by contrast, are
choices about how to go about diagnosing and treating a pa-
tient’s condition: given a patient’s constellation of symptoms,
what is the appropriate medical response?
These decisions are often practically inextricable from one
another, as amici on both sides agree. See Brief for Wash-
ington Legal Foundation as Amicus Curiae 12; Brief for
Health Law, Policy, and Ethics Scholars as Amici Curiae 10.
This is so not merely because, under a scheme like Carle’s,
treatment and eligibility decisions are made by the same per-
son, the treating physician. It is so because a great many
and possibly most coverage questions are not simple yes-
or-no questions, like whether appendicitis is a covered condi-
tion (when there is no dispute that a patient has appendici-
tis), or whether acupuncture is a covered procedure for pain
relief (when the claim of pain is unchallenged). The more
common coverage question is a when-and-how question. Al-
her amended complaint alleges an obligation to avoid such incentives. Al-
though we are not presented with the issue here, it could be argued that
Carle is a fiduciary insofar as it has discretionary authority to administer
the plan, and so it is obligated to disclose characteristics of the plan and
of those who provide services to the plan, if that information affects bene-
ficiaries’ material interests. See, e. g., Glaziers and Glassworkers Union
Local No. 252 Annuity Fund v. Newbridge Securities, Inc., 93 F. 3d 1171,
1179–1181 (CA3 1996) (discussing the disclosure obligations of an ERISA
fiduciary); cf. Varity Corp. v. Howe, 516 U. S. 489, 505 (1996) (holding that
ERISA fiduciaries may have duties to disclose information about plan
prospects that they have no duty, or even power, to change).
But failure to disclose is no longer the allegation of the amended com-
plaint. Because fiduciary duty to disclose is not necessarily coextensive
with fiduciary responsibility for the subject matter of the disclosure, Carle
is not estopped from contesting its fiduciary status with respect to the
allegations of the amended complaint.

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though coverage for many conditions will be clear and vari-
ous treatment options will be indisputably compensable, phy-
sicians still must decide what to do in particular cases. The
issue may be, say, whether one treatment option is so supe-
rior to another under the circumstances, and needed so
promptly, that a decision to proceed with it would meet the
medical necessity requirement that conditions the HMO’s ob-
ligation to provide or pay for that particular procedure at
that time in that case. The Government in its brief alludes
to a similar example when it discusses an HMO’s refusal
to pay for emergency care on the ground that the situation
giving rise to the need for care was not an emergency, Brief
for United States as Amicus Curiae 20–21.9 In practical
terms, these eligibility decisions cannot be untangled from
physicians’ judgments about reasonable medical treatment,
and in the case before us, Dr. Pegram’s decision was one of
that sort. She decided (wrongly, as it turned out) that Her-
drich’s condition did not warrant immediate action; the con-
sequence of that medical determination was that Carle would
not cover immediate care, whereas it would have done so if
Dr. Pegram had made the proper diagnosis and judgment
to treat. The eligibility decision and the treatment decision
were inextricably mixed, as they are in countless medical
administrative decisions every day.
The kinds of decisions mentioned in Herdrich’s ERISA
count and claimed to be fiduciary in character are just such
mixed eligibility and treatment decisions: physicians’ conclu-
sions about when to use diagnostic tests; about seeking con-
sultations and making referrals to physicians and facilities
other than Carle’s; about proper standards of care, the ex-
9 ERISA makes separate provision for suits to receive particular bene-
fits. See 29 U. S. C. § 1132(a)(1)(B). We have no occasion to discuss the
standards governing such a claim by a patient who, as in the example in
text, was denied reimbursement for emergency care. Nor have we reason
to discuss the interaction of such a claim with state-law causes of action,
see infra, at 235–237.

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230 PEGRAM v. HERDRICH
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perimental character of a proposed course of treatment, the
reasonableness of a certain treatment, and the emergency
character of a medical condition.
We do not read the ERISA count, however, as alleging
fiduciary breach with reference to a different variety of ad-
ministrative decisions, those we have called pure eligibility
determinations, such as whether a plan covers an undisputed
case of appendicitis. Nor do we read it as claiming breach
by reference to discrete administrative decisions separate
from medical judgments; say, rejecting a claim for no other
reason than the HMO’s financial condition. The closest Her-
drich’s ERISA count comes to stating a claim for a pure,
unmixed eligibility decision is her general allegation that
Carle determines “which claims are covered under the Plan
and to what extent,” App. to Pet. for Cert. 86a. But this
vague statement, difficult to interpret in isolation, is given
content by the other elements of the complaint, all of which
refer to decisions thoroughly mixed with medical judgment.
Cf. 5A C. Wright & A. Miller, Federal Practice and Proce-
dure § 1357, pp. 320–321 (1990) (noting that, where specific
allegations clarify the meaning of broader allegations, they
may be used to interpret the complaint as a whole). Any
lingering uncertainty about what Herdrich has in mind is
dispelled by her brief, which explains that this allegation,
like the others, targets medical necessity determinations.
Brief for Respondent 19; see also id., at 3. 10
10 Though this case involves a motion to dismiss under Federal Rule of
Civil Procedure 12(b)(6), and the complaint should therefore be construed
generously, we may use Herdrich’s brief to clarify allegations in her com-
plaint whose meaning is unclear. See C. Wright & A. Miller, Federal
Practice and Procedure § 1364, pp. 480–481 (1990); Southern Cross Over-
seas Agencies, Inc. v. Wah Kwong Shipping Group Ltd., 181 F. 3d 410,
428, n. 8 (CA3 1999); Alicke v. MCI Communications Corp., 111 F. 3d
909, 911 (CADC 1997); Early v. Bankers Life & Cas. Co., 959 F. 2d 75, 79
(CA7 1992).

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III
A
Based on our understanding of the matters just discussed,
we think Congress did not intend Carle or any other HMO
to be treated as a fiduciary to the extent that it makes mixed
eligibility decisions acting through its physicians. We begin
with doubt that Congress would ever have thought of a
mixed eligibility decision as fiduciary in nature. At common
law, fiduciary duties characteristically attach to decisions
about managing assets and distributing property to benefi-
ciaries. See Bogert & Bogert, Law of Trusts and Trustees
§§ 551, 741–747, 751–775, 781–799; 2A Scott §§ 176, 181; 3 id.,
§§ 188–193; 3A id., § 232. Trustees buy, sell, and lease in-
vestment property, lend and borrow, and do other things to
conserve and nurture assets. They pay out income, choose
beneficiaries, and distribute remainders at termination.
Thus, the common law trustee’s most defining concern histor-
ically has been the payment of money in the interest of the
beneficiary.
Mixed eligibility decisions by an HMO acting through its
physicians have, however, only a limited resemblance to the
usual business of traditional trustees. To be sure, the physi-
cians (like regular trustees) draw on resources held for oth-
ers and make decisions to distribute them in accordance with
entitlements expressed in a written instrument (embodying
the terms of an ERISA plan). It is also true that the ob-
jects of many traditional private and public trusts are ulti-
mately the same as the ERISA plans that contract with
HMOs. Private trusts provide medical care to the poor;
thousands of independent hospitals are privately held and
publicly accountable trusts, and charitable foundations make
grants to stimulate the provision of health services. But
beyond this point the resemblance rapidly wanes. Tradi-
tional trustees administer a medical trust by paying out

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232 PEGRAM v. HERDRICH
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money to buy medical care, whereas physicians making
mixed eligibility decisions consume the money as well. Pri-
vate trustees do not make treatment judgments, whereas
treatment judgments are what physicians reaching mixed
decisions do make, by definition. Indeed, the physicians
through whom HMOs act make just the sorts of decisions
made by licensed medical practitioners millions of times
every day, in every possible medical setting: HMOs, fee-for-
service proprietorships, public and private hospitals, mili-
tary field hospitals, and so on. The settings bear no more
resemblance to trust departments than a decision to operate
turns on the factors controlling the amount of a quarterly
income distribution. Thus, it is at least questionable
whether Congress would have had mixed eligibility decisions
in mind when it provided that decisions administering a plan
were fiduciary in nature. Indeed, when Congress took up
the subject of fiduciary responsibility under ERISA, it con-
centrated on fiduciaries’ financial decisions, focusing on pen-
sion plans, the difficulty many retirees faced in getting the
payments they expected, and the financial mismanagement
that had too often deprived employees of their benefits.
See, e. g., S. Rep. No. 93–127, p. 5 (1973); S. Rep. No. 93–383,
p. 17 (1973); id., at 95. Its focus was far from the subject of
Herdrich’s claim.
Our doubt that Congress intended the category of fidu-
ciary administrative functions to encompass the mixed deter-
minations at issue here hardens into conviction when we con-
sider the consequences that would follow from Herdrich’s
contrary view.
B
First, we need to ask how this fiduciary standard would
affect HMOs if it applied as Herdrich claims it should be
applied, not directed against any particular mixed decision
that injured a patient, but against HMOs that make mixed
decisions in the course of providing medical care for profit.
Recovery would be warranted simply upon showing that the

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profit incentive to ration care would generally affect mixed
decisions, in derogation of the fiduciary standard to act solely
in the interest of the patient without possibility of conflict.
Although Herdrich is vague about the mechanics of relief,
the one point that seems clear is that she seeks the return
of profit from the pockets of the Carle HMO’s owners, with
the money to be given to the plan for the benefit of the par-
ticipants. See 29 U. S. C. § 1109(a) (return of all profits is an
appropriate ERISA remedy). Since the provision for profit
is what makes the HMO a proprietary organization, her rem-
edy in effect would be nothing less than elimination of the
for-profit HMO. Her remedy might entail even more than
that, although we are in no position to tell whether and to
what extent nonprofit HMO schemes would ultimately sur-
vive the recognition of Herdrich’s theory.11 It is enough to
recognize that the Judiciary has no warrant to precipitate
the upheaval that would follow a refusal to dismiss Her-
drich’s ERISA claim. The fact is that for over 27 years the
Congress of the United States has promoted the formation
of HMO practices. The Health Maintenance Organization
Act of 1973, 87 Stat. 914, 42 U. S. C. § 300e et seq., allowed
the formation of HMOs that assume financial risks for the
provision of health-care services, and Congress has amended
the Act several times, most recently in 1996. See 110 Stat.
1976, 42 U. S. C. § 300e (1994 ed., Supp. III). If Congress
wishes to restrict its approval of HMO practice to certain
11 Herdrich’s theory might well portend the end of nonprofit HMOs as
well, since those HMOs can set doctors’ salaries. A claim against a non-
profit HMO could easily allege that salaries were excessively high because
they were funded by limiting care, and some nonprofits actually use incen-
tive schemes similar to that challenged here, see Pulvers v. Kaiser Foun-
dation Health Plan, 99 Cal. App. 3d 560, 565, 160 Cal. Rptr. 392, 393–394
(1979) (rejecting claim against nonprofit HMO based on physician in-
centives). See Brody, Agents Without Principals: The Economic Con-
vergence of the Nonprofit and For-Profit Organizational Forms, 40
N. Y. L. S. L. Rev. 457, 493, and n. 152 (1996) (discussing ways in which
nonprofit health providers may reward physician employees).

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234 PEGRAM v. HERDRICH
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preferred forms, it may choose to do so. But the Federal
Judiciary would be acting contrary to the congressional pol-
icy of allowing HMO organizations if it were to entertain
an ERISA fiduciary claim portending wholesale attacks on
existing HMOs solely because of their structure, untethered
to claims of concrete harm.
C
The Court of Appeals did not purport to entertain quite
the broadside attack that Herdrich’s ERISA claim thus en-
tails, see 154 F. 3d, at 373, and the second possible conse-
quence of applying the fiduciary standard that requires our
attention would flow from the difficulty of extending it to
particular mixed decisions that on Herdrich’s theory are fi-
duciary in nature.
The fiduciary is, of course, obliged to act exclusively in the
interest of the beneficiary, but this translates into no rule
readily applicable to HMO decisions or those of any other
variety of medical practice. While the incentive of the HMO
physician is to give treatment sparingly, imposing a fiduciary
obligation upon him would not lead to a simple default rule,
say, that whenever it is reasonably possible to disagree about
treatment options, the physician should treat aggressively.
After all, HMOs came into being because some groups of
physicians consistently provided more aggressive treatment
than others in similar circumstances, with results not per-
ceived as justified by the marginal expense and risk associ-
ated with intervention; excessive surgery is not in the pa-
tient’s best interest, whether provided by fee-for-service
surgeons or HMO surgeons subject to a default rule urging
them to operate. Nor would it be possible to translate fidu-
ciary duty into a standard that would allow recovery from
an HMO whenever a mixed decision influenced by the HMO’s
financial incentive resulted in a bad outcome for the patient.
It would be so easy to allege, and to find, an economic influ-
ence when sparing care did not lead to a well patient, that

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any such standard in practice would allow a factfinder to
convert an HMO into a guarantor of recovery.
These difficulties may have led the Court of Appeals to
try to confine the fiduciary breach to cases where “the sole
purpose” of delaying or withholding treatment was to in-
crease the physician’s financial reward, ibid. But this at-
tempt to confine mixed decision claims to their most egre-
gious examples entails erroneous corruption of fiduciary
obligation and would simply lead to further difficulties that
we think fatal. While a mixed decision made solely to bene-
fit the HMO or its physician would violate a fiduciary duty,
the fiduciary standard condemns far more than that, in its
requirement of “an eye single” toward beneficiaries’ inter-
ests, Donovan v. Bierwirth, 680 F. 2d 263, 271 (CA2 1982).
But whether under the Court of Appeals’s rule or a straight
standard of undivided loyalty, the defense of any HMO would
be that its physician did not act out of financial interest but
for good medical reasons, the plausibility of which would re-
quire reference to standards of reasonable and customary
medical practice in like circumstances. That, of course, is
the traditional standard of the common law. See W. Keeton,
D. Dobbs, R. Keeton, & D. Owens, Prosser and Keeton on
Law of Torts § 32, pp. 188–189 (5th ed. 1984). Thus, for all
practical purposes, every claim of fiduciary breach by an
HMO physician making a mixed decision would boil down
to a malpractice claim, and the fiduciary standard would be
nothing but the malpractice standard traditionally applied in
actions against physicians.
What would be the value to the plan participant of having
this kind of ERISA fiduciary action? It would simply apply
the law already available in state courts and federal diversity
actions today, and the formulaic addition of an allegation of
financial incentive would do nothing but bring the same
claim into a federal court under federal-question jurisdiction.
It is true that in States that do not allow malpractice actions
against HMOs the fiduciary claim would offer a plaintiff a

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236 PEGRAM v. HERDRICH
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further defendant to be sued for direct liability, and in some
cases the HMO might have a deeper pocket than the physi-
cian. But we have seen enough to know that ERISA was
not enacted out of concern that physicians were too poor to
be sued, or in order to federalize malpractice litigation in the
name of fiduciary duty for any other reason. It is difficult,
in fact, to find any advantage to participants across the
board, except that allowing them to bring malpractice ac-
tions in the guise of federal fiduciary breach claims against
HMOs would make them eligible for awards of attorney’s
fees if they won. See 29 U. S. C. § 1132(g)(1). But, again,
we can be fairly sure that Congress did not create fiduciary
obligations out of concern that state plaintiffs were not suing
often enough, or were paying too much in legal fees.
The mischief of Herdrich’s position would, indeed, go fur-
ther than mere replication of state malpractice actions with
HMO defendants. For not only would an HMO be liable as
a fiduciary in the first instance for its own breach of fiduciary
duty committed through the acts of its physician employee,
but the physician employee would also be subject to liability
as a fiduciary on the same basic analysis that would charge
the HMO. The physician who made the mixed admin-
istrative decision would be exercising authority in the
way described by ERISA and would therefore be deemed
to be a fiduciary. See 29 CFR §§ 2509.75–5, Question D–1;
2509.75–8, Question D–3 (1993) (stating that an individual
who exercises authority on behalf of an ERISA fiduciary in
interpreting and administering a plan will be deemed a fidu-
ciary). Hence the physician, too, would be subject to suit
in federal court applying an ERISA standard of reasonable
medical skill. This result, in turn, would raise a puzzling
issue of preemption. On its face, federal fiduciary law apply-
ing a malpractice standard would seem to be a prescription
for preemption of state malpractice law, since the new
ERISA cause of action would cover the subject of a state-law
malpractice claim. See 29 U. S. C. § 1144 (preempting state

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237 Cite as: 530 U. S. 211 (2000)
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laws that “relate to [an] employee benefit plan”). To be sure,
New York State Conference of Blue Cross & Blue Shield
Plans v. Travelers Ins. Co., 514 U. S. 645, 654–655 (1995),
throws some cold water on the preemption theory; there, we
held that, in the field of health care, a subject of traditional
state regulation, there is no ERISA preemption without
clear manifestation of congressional purpose. But in that
case the convergence of state and federal law was not so
clear as in the situation we are positing; the state-law stand-
ard had not been subsumed by the standard to be applied
under ERISA. We could struggle with this problem, but
first it is well to ask, again, what would be gained by opening
the federal courthouse doors for a fiduciary malpractice
claim, save for possibly random fortuities such as more favor-
able scheduling, or the ancillary opportunity to seek attor-
ney’s fees. And again, we know that Congress had no such
haphazard boons in prospect when it defined the ERISA
fiduciary, nor such a risk to the efficiency of federal courts
as a new fiduciary malpractice jurisdiction would pose in
welcoming such unheard-of fiduciary litigation.
IV
We hold that mixed eligibility decisions by HMO physi-
cians are not fiduciary decisions under ERISA. Herdrich’s
ERISA count fails to state an ERISA claim, and the judg-
ment of the Court of Appeals is reversed.
It is so ordered.