In the case of Lori Pegram et al. v. Cynthia Herdrich in 1999, the U.S. Supreme Court ruled that health maintenance organizations (HMOs) cannot be sued for malpractice based on decisions made to limit care as a cost-saving measure under Employee Retirement Income Security Act (ERISA). The plaintiff, Cynthia Herdrich, had been forced to wait eight days for an ultrasound due to her HMO's policy and subsequently suffered from a ruptured appendix leading to peritonitis. She argued that this delay was caused by Carle Clinic Association’s financial incentives which prioritized cost-cutting over patient care - constituting breach of fiduciary duty under ERISA law. However, the court held in favor of the defendants with a unanimous decision stating that such incentive structures were common among HMOs and did not violate ERISA regulations because they are part-and-parcel of managed healthcare system designed to reduce costs while providing reasonable medical care.

In the dissenting opinion for Lori Pegram, et al. v. Cynthia Herdrich (1999), Justice Stevens argued that the majority's interpretation of ERISA was too narrow and failed to consider Congress' intent in enacting it - to protect beneficiaries from conflicts of interest by fiduciaries. He contended that Carle Clinic, as a health maintenance organization (HMO), acted both as an insurer and provider of medical services, creating a potential conflict between its duty to provide care for patients and its financial interests. This dual role made it susceptible to making decisions based on profit rather than patient welfare – precisely what ERISA aimed at preventing among fiduciaries managing employee benefit plans. Therefore, he believed HMOs should be held accountable under ERISA when they make treatment decisions influenced by their own financial considerations instead of solely focusing on patients’ best interests.