Legal News
Court Strengthens Shield That Protects HMOs From Patient Lawsuits
Psychiatric News
Volume 39 Number 14 page 2-35

FIG1 The patients' rights movement suffered a severe setback last month when the U.S. Supreme Court ruled unanimously that patients do not have a right to sue their HMO in state court, even if they suffered harm as the result of a decision the HMO made about their medical care.

Anchor for JumpAnchor for Jump

Renée Binder, M.D.: "The decision is a blow to the cause of patients' rights." 

The Court sided with the insurance and managed care industries, which argued that the 1974 federal Employment Retirement Income Security Act, commonly referred to as ERISA, limited lawsuits by insurance beneficiaries to federal courts only. Patients' rights advocates objected to this interpretation because federal courts limit the amount of monetary damages plaintiffs can receive in ERISA-based suits, since patients are barred from suing for compensatory damages and limited to recovery of the insurance payments themselves.

"The decision is a blow to the cause of patients' rights," said Renée Binder, M.D., past chair of the APA Committee on Judicial Action." Managed care organizations ended up the winners" and will continue to have the power to decide which medical treatments they will pay for and which they will refuse to cover.

APA had joined the AMA and the Texas Medical Association (the suits originated in Texas) in an amicus curiae brief on behalf of the two patients who filed suit. The briefs called on the Court to rule that health plans can be held liable for what is essentially malpractice in the same way physicians are.

Lawsuits brought by two health plan beneficiaries were combined when they reached the Supreme Court level, since the key issue was identical, though the details of the cases varied (Psychiatric News, March 5).

In one suit a patient sued Aetna Health Inc., and in the other the defendant was Cigna Healthcare of Texas. In the former case, the insurer substituted a prescription drug for the one chosen by the patient's physician, and serious medication-related side effects ensued. In the latter case, the patient allegedly suffered harm when the insurer overruled a physician's judgment on the required length of a hospital stay in conjunction with a hysterectomy.

The two patients sued under the terms of the Texas Health Care Liability Act, a powerful piece of patients' rights legislation that became law in 1997, though then-governor George W. Bush declined to sign the bill. The law grants patients the right to sue in state court when they maintain that their health plan made a medical-necessity decision that resulted in harm. The law, along with those in nine other states, equates such cases with medical-malpractice ones, which are the jurisdiction of state courts.

Ironically, though Bush cited this bill during his 2000 presidential campaign as evidence of his strong support for patients' rights, his administration joined the insurance industry in urging the high court to rule against the Texas law's legitimacy.

ERISA placed employee benefit programs within the purview of the federal government so that companies that operate in more than one state would not be subject to a variety of laws and regulations. It was enacted long before managed care was a gleam in insurers' eyes and was designed to cover just pension benefit plans.

In the ensuing decades HMOs and other health plans came to rely on ERISA to protect them from lawsuits based on what they contend are coverage-related rather than medical-necessity decisions. The Supreme Court has now validated this interpretation.

"Almost everyone in our society who commits a negligent act can be held responsible for the consequences of his or her negligence," said Paul Appelbaum, M.D., chair of the APA Council on Psychiatry and Law and former APA president. "Among the few exceptions are insurers and HMOs, who have been insulated from liability by the Court's interpretation of the federal ERISA law."

He emphasized that "potential liability for negligence is usually thought of as providing an incentive to people and organizations to behave reasonably, so as not to harm others. HMOs and other insurers continue to face no deterrent to arbitrary denials of payment for care."

Karen Ignani, president and CEO of America's Health Insurance Plans, the trade organization that represents the managed care industry, hailed last month's ruling as "a victory for consumers and employers who otherwise faced the prospect of higher health care costs without added benefit. The ruling puts the brakes on efforts by trial lawyers to turn every question about the scope of an individual's coverage into a costly lawsuit."

Families USA, a nonprofit organization that advocates on behalf of health care consumers, had a very different take from Ignani on the ruling's implications. Its executive director, Ron Pollack, said the decision "is a big step backward for insured patients seeking quality care."

Pollack stated that it "takes HMOs off the hook from any liability when they deny needed health care—even when improper denials have tragic consequences."

The high court's June 21 decision stemmed from a ruling by the 5th Circuit Court of Appeals that in enacting ERISA Congress's intent was to protect beneficiaries from having insurers breach the terms of benefit contracts. Congress did not see ERISA as a way to preempt state-level lawsuits arising from allegations of negligent care on the part of health plans, the appeals court ruled in upholding the Texas law.

The decision inAetna Health Inc., fka Aetna U.S. Healthcare Inc. et al. v. Davila[No. 02-1845] andCigna Health-Care of Texas v. Calad[No. 03-83] is posted online at<http://supct.law.cornell.edu/supct/html/02-1845.ZS.html>.

Anchor for JumpAnchor for Jump

Renée Binder, M.D.: "The decision is a blow to the cause of patients' rights." 

Interactive Graphics


Citing articles are presented as examples only. In non-demo SCM6 implementation, integration with CrossRef’s "Cited By" API will populate this tab (http://www.crossref.org/citedby.html).
Related Articles