American Manufacturers Mutual Insurance Co. v. Sullivan

Facts

Injured workers are challenging Pennsylvania’s recent changes to its workers compensation system that requires a third party to review the medical treatment for appropriateness before payment is rendered. The Pennsylvania Workers’ Compensation Act of 1915 requires all employers to (1) obtain insurance from a private insurer; (2) obtain insurance through the State Workers’ Insurance Fund or (3) obtain permission from the state to self insure. Once a claim is made and is uncontested, the insurer must pay for all “reasonable and necessary” medical treatment related to the workplace injury. To contain costs, a “utilization review” procedure was implemented in 1993. This required that all treatments be reviewed for reasonableness and necessity by a utilization review organization (URO). The Respondents are 10 individual employees and 2 employee organizations including Sullivan (Respondents), who claim that medical payments were withheld pursuant to the utilization review and deprived them of property in violation of due process. The District Court dismissed the action against the private insurers because they were not “state actors.” But, the Court of Appeals for the Third Circuit disagreed stating, “the state has enacted a complex and interwoven regulatory web enlisting the Bureau, the employers, and the insurance companies.”