High Court Poised to Rule On HMO Lawsuit Exemption

APA has signed onto a friend-of-the-court brief with the American Medical Association (AMA) and the Texas Medical Association (TMA) in support of two combined cases before the U.S. Supreme Court involving patients’ rights to hold HMOs liable for decisions about their medical care.

The cases involve Aetna Health Inc. and Cigna Healthcare of Texas. One tests whether a health plan can mandate use of a certain drug, despite side effects and against the physician’s best judgment.

The other tests a health plan’s determination of medical necessity for a hospital stay, again against the physician’s best judgment.

Both patients sued under the Texas Health Care Liability Act, which grants patients the right to sue a health plan for negligent medical-necessity decisions. The U.S. Fifth Circuit Court of Appeals remanded the cases back to state court, and the health plans are appealing that decision to the U.S. Supreme Court. Aetna and Cigna want the cases heard in federal court, where mandatory awards are more limited than in state courts, according to the TMA.

Neither of the plaintiffs were psychiatric patients, but Renée Binder, M.D, chair of APA’s Committee on Judicial Action, said APA has a keen interest in efforts to hold HMOs accountable for medical decisions.

HMOs Can’t Duck Responsibility

“It is a very important case,” Binder told Psychiatric News. “We need to hold managed care companies accountable for their decisions. They are not just making financial decisions; they are making decisions that impact people’s ability to receive health care. Whoever has the authority to make these decisions has to be responsible for those decisions.”

She is a professor of psychiatry at the University of California, San Francisco School of Medicine, and director of its Psychiatry and the Law Program.

Binder and Richard Taranto, legal counsel to the Committee on Judicial Action, explained that the committee reviews cases that are scheduled to be heard by the Supreme Court—primarily those that could impact psychiatrists and their patients—and determines whether to offer an opinion on the basis of the relevance of the case to psychiatry and medicine.

In the Texas cases, the friend-of-the court brief in support of the patients was written by the AMA.

“The legal issues apply generally to patients who are denied care by HMOs,” Taranto told Psychiatric News. “It doesn’t matter that the patients don’t happen to be psychiatric patients. The AMA and APA have a common interest in wanting HMOs to be essentially liable for malpractice in the same way that a physician who makes a bad treatment decision would be.”

ERISA Limits at Issue

At the heart of the two Texas cases is the interpretation of federal Employee Retirement Income Security Act (ERISA) regulations as they apply to health plans. ERISA, passed in 1974, was originally designed to protect employee pension plans from fraud and mismanagement, and it includes rules exempting companies from state regulations when those companies operate in multiple states.

In 1997 Texas passed the Texas Health Care Liability Act, the first-in-the-nation law guaranteeing patients the right to sue a health plan for negligent medical-necessity decisions. But health plans have claimed exemption, under ERISA, from such state laws.

“The issue in these cases is whether insurers can hide behind federal ERISA rules in an attempt to deny timely, adequate patient care, and without accountability as mandated by the state of Texas,” said Rocky Wilcox, J.D., TMA general counsel.

“Logic at the time ERISA passed was that it adds costs when multistate health plans have to meet the regulatory requirements of all the states in which they operate,” Wilcox said. “A single federal law made sense. But in this instance, we contend ERISA has no bearing. Once an individual has been accepted into a health plan, he or she then becomes a patient.

“ERISA continues to regulate the individual’s status as a ‘participant’ in the employee benefit plan, but ERISA does not preempt state law if the health plan’s actions equate to negligent diagnosis or treatment,” Wilcox maintained. ▪