Independent Review Trumps ERISA Law, High Court Rules
The U.S. Supreme Court voted 5-4 last month to uphold an Illinois law guaranteeing patients an independent medical review in disputes involving benefits denied by their health plans.
The American Medical Association and APA hailed the Supreme Court ruling as a victory for patients’ rights.
Renée Binder, M.D.: “This is a victory for patients who are trying to get their HMOs to pay for care that they and their physicians think is medically necessary.”
AMA President-elect Donald Palmisano, M.D., said in a press release, “The action by the U.S. Supreme Court in Rush Prudential HMO v. Moran represents a major victory for America’s patients and their physicians.”
AMA, the Illinois Medical Society, and APA filed a friend-of-the-court brief on behalf of Debra Moran and the state of Illinois last year in the U.S. Superior Court of Appeals for the 7th Circuit. The circuit court sided with Moran, and Rush Prudential, Moran’s HMO, appealed the case to the U.S. Supreme Court (Psychiatric News, March 1).
Case History
Moran’s troubles with Rush Prudential began in 1997 when the HMO refused to approve shoulder surgery recommended by her primary care physician. This physician had referred her to a specialist outside of the plan’s provider network.
Moran requested an independent review of the benefit denial under the state’s 1986 HMO Act. When the HMO refused, Moran sued the HMO in state court to compel compliance with the statute.
The HMO Act requires an HMO to provide a timely, independent review by a physician not affiliated with the HMO when there is a dispute between the patient’s primary care physician and the HMO regarding the medical necessity of a covered service, according to the brief.
An independent reviewer determined that the surgery was medically necessary, but Rush Prudential continued to deny coverage. In 1998 Moran had the surgery at her own expense, which cost about $95,000.
In 1999 Moran sought to have a state court order the HMO to reimburse her for this cost, citing as justification the state law, the independent reviewer’s determination, and the binding process required of the HMO. She maintained that the law was not preempted by the Employee Retirement Income Security Act (ERISA), a 1974 federal law that regulates employee health benefit plans.
The case was heard in U.S. District Court in Illinois in 2000 as an ERISA claim. The court dismissed Moran’s claim, finding that ERISA preempts state law relating to employee benefit plans.
The 7th Circuit reversed that decision and upheld the Illinois law.
Rush Prudential appealed to the U.S. Supreme Court, which heard the case in January. The Court accepted the case because the 7th Circuit’s decision conflicted with a 2000 decision by the U.S. Court of Appeals for the 5th Circuit in Corporate Health Insurance Inc. v. Texas Dept. of Ins., states the ruling.
The 5th Circuit decided that a Texas regulation allowing for independent reviews was preempted by ERISA, leaving a “significant gap in the regulation of managed care organizations and in the protection of insureds and patients,” states the AMA and APA in their brief.
ERISA Preemption?
The Supreme Court focused on whether ERISA preempts a state law that regulates health insurance. Justice David Souter wrote for the majority that Rush Prudential met the Illinois law’s definition of an HMO, which is “providing or arranging for one or more health care plans under a system [that] causes any part of the risk of health care delivery to be borne by the organization or providers.”
“Rush contends that seeing an HMO as an insurer distorts the nature of an HMO, which is, after all, a health care provider too,” Souter wrote. “Although ERISA preempts state laws that ‘broadly relate to’ employee benefit plans, it doesn’t preempt state laws that regulate insurance such as the Illinois HMO Act.”
The justices who ruled in favor of Moran were, in addition to Souter, John Paul Stevens, Sandra Day O’Connor, Ruth Ginsburg, and Stephen Breyer. The dissenting justices were Clarence Thomas, William Rehnquist, Anthony Kennedy, and Antonin Scalia.
The ruling’s impact on the stalled patients’ bill of rights in Congress is unclear (Psychiatric News, August 17, 2001).
Titled the Bipartisan Patient Protection Act, the bill is designated HR 2563 in the House and S 1052 in the Senate.
The Health Benefits Coalition, which represents 3 million employers and more than 100 million employees and their families, criticized the Supreme Court ruling for “forcing employers and health plans to adhere to potentially 50 different conflicting state external review requirements.”
“Given the Supreme Court’s decision, it is now even more important for our elected leaders in Washington not to act on any legislation that would increase health costs further,” states the coalition’s press release.
Rep. Charles Norwood (R-Ga.), a sponsor of HR 2563, hailed the Supreme Court ruling as “a clear victory for the states and patients’ rights,” according to a press release.
Norwood called on members of the House and Senate to reach an agreement on the legislation. “We must not forget the estimated 56 million people in self-insured plans not included in the ruling” or people in eight states without independent-review laws, he noted.
The House and Senate versions of the legislation provide for an internal and external independent-review process, access to an array of services including specialty care, emergency room treatment at any hospital, care provided under clinical trials, and temporary continued care when a doctor leaves an insurance network, according to the legislation.
A major sticking point between Republicans and Democrats is the limit that should be placed on the amount of money patients could collect from lawsuits against health insurers.
The Senate bill would give patients a broad right to sue health insurers in state court for poor medical care and in federal court when there is a question about whether the service was covered. The liability cap in federal court is $5 million. The House bill would set a liability limit of $1.5 million in state and federal courts for “pain and suffering” and $1.5 million in punitive damages in state court.
“I know the president has been very concerned about the consequences of a patients’ bill of rights for insurers,” said Norwood’s press release. “For years, insurers have screamed ‘no’ to everything, but now look what it has gotten them. The president needs to step in and cut a deal on the patients’ bill of rights to save insurers from themselves.”
The U.S. Supreme Court opinion in Rush Prudential HMO Inc. v. Morancan be accessed on the Web at www.supremecourtus.gov/opinions/01slipopinion.html by clicking on the name of the case in the table of recent opinions. The text of HR 2563 can be accessed on the Web at http://thomas.loc.gov by entering “HR 2563” in the “Bill Number” search box. The text of S 1052 can be accessed at the same site by entering “S 1052” in the “Bill Number” search box. ▪
