Supreme Court Decision Limits Lawsuits Against HMOs in State Courts

[CAL/AAEM News Service]

Supreme Court Decision Limits Lawsuits Against HMOs in State Courts 
  
June 22, 2004 

  
The Supreme Court on Monday unanimously ruled that patients cannot file suit 
against HMOs in state court when they experience injuries as a result of 
administrative decisions related to treatment, a decision that marks a "major 
victory" for health insurers and the Bush administration, the Houston Chronicle 
reports (Reinert, Houston Chronicle, 6/22). In the case, which involved a 1997 
Texas law, two state residents separately filed suit in state court against 
their HMOs, Aetna and Cigna Healthcare, over allegations that the companies 
made decisions related to treatment that resulted in injuries. In the Aetna 
case, Juan Davila received a prescription for Vioxx from his physician, but the 
rules of Aetna Health, a division of Aetna that operated his HMO, required 
Davila to take two less-expensive medications first. Davila had an adverse 
reaction to one of the medications that required him to receive care in the 
emergency department for bleeding ulcers. In the Cigna case, Ruby Calad 
underwent a hysterectomy, and although Cigna HealthCare of Texas, a division of 
Cigna that operated her HMO, specified coverage for only a one-day hospital 
stay, her surgeon recommended a longer stay. A hospital-discharge nurse 
employed by Cigna did not approve the longer hospital stay, and Calad was 
readmitted to the hospital several days after her discharge with complications 
from the hysterectomy. Both Davila and Calad filed suit in state court under 
state HMO laws (California Healthline, 3/24). In addition to Texas, nine other 
states -- Arizona, California, Georgia, Maine, New Jersey, North Carolina, 
Oklahoma, Washington and West Virginia -- have similar laws (Lane, Washington 
Post, 6/22). 
  
Case History 
The case involved a dispute over whether the Employee Retirement Income 
Security Act of 1974 preempts state laws that allow patients to file suit 
against HMOs for administrative decisions related to treatment that resulted in 
injuries (Henderson, Philadelphia Inquirer, 6/22). ERISA allows patients with 
employer-sponsored health insurance to file suit against HMOs in federal court 
and to sue only for the cost of coverage denied. However, the Texas Health Care 
Liability Act makes HMOs "liable for damages for harm" caused by a failure to 
"exercise ordinary care when making health care treatment decisions." In the 
Texas case, Aetna and Cigna argued that ERISA covered the lawsuits filed by 
Davila and Calad and had them transferred to Federal District Court in Dallas, 
which ruled in favor of the companies. However, the 5th U.S. Circuit Court of 
Appeals in New Orleans in 2002 ruled that Davila and Calad could file suit in 
state court because the decisions involved both federal law under ERISA and the 
regulation of medical care, which in most cases is regulated under state laws 
(California Healthline, 3/24). 
  
Decision Details 
The Supreme Court on Monday reversed the appeals court decision (Lane, 
Washington Post, 6/22). According to the court, both the Aetna and Cigna cases 
involved administrative decisions, not medical decisions that "would be subject 
to the same type of malpractice lawsuit in which doctors, nurses or other care 
providers are held accountable," the Baltimore Sun reports. In the opinion 
issued by the court, Justice Clarence Thomas wrote, "If a managed care entity 
correctly concluded that, under the terms of the relevant plan, a particular 
treatment was not covered, the managed care entity's denial of coverage would 
not be a proximate cause of any injuries arising from that denial. Rather, the 
failure of the plan itself to cover the requested treatment would be the 
proximate cause" (Little, Baltimore Sun, 6/22) "The fact that a benefits 
determination is infused with medical judgments does not alter this result," 
Thomas added (Lane, Washington Post, 6/22). Thomas indicated that the denial of 
coverage for medical procedures is not the same as the denial of the procedures 
themselves because HMO patients can pay for them and subsequently seek 
reimbursement under federal law (Baltimore Sun, 6/22). 
In addition, Thomas wrote that a state law that "duplicates, supplements or 
supplants" the legal recourse available to HMO patients under federal law 
"conflicts with the clear congressional intent to make the ERISA remedy 
exclusive" (Greenhouse, New York Times, 6/22). The decision does not apply to 
HMO patients who file suit against their physicians for alleged malpractice or 
negligence, to patients who purchase individual health insurance policies or to 
government employees (Savage, Los Angeles Times, 6/22). In a separate opinion, 
Justices Ruth Bader Ginsburg and Stephen Breyer wrote that a "regulatory vacuum 
exists" in the area of patients' rights to file suit against HMOs (New York 
Times, 6/22). They called on Congress to "revisit what is an unjust and 
increasingly tangled" system for health insurance liability (Ramstack, 
Washington Times, 6/22). Patients require "some other way" to "fight their 
health insurers in court," according to Ginsburg and Breyer, the Sun reports 
(Baltimore Sun, 6/22). 
  
Reaction 
In a statement on Monday, Cigna officials praised the Supreme Court decision, 
adding that the company for several years has used an appeals process to 
address patient concerns over coverage decisions. Aetna officials called the 
decision a "reaffirmation of the law applicable to employer-sponsored health 
plans" (Philadelphia Inquirer, 6/22). The companies said that by "affirming the 
role of ERISA in keeping employers' health care costs down ... the high court 
assured that workers will continue to receive affordable insurance through 
their jobs," the Chronicle reports (Houston Chronicle, 6/22). Miguel Estrada, 
the attorney who argued the case on behalf of Cigna and Aetna, said that the 
decision reduces the risk that health insurers and employers "will be subject 
to the randomness of the tort system" (Lueck/Greenberger, Wall Street Journal, 
6/22). However, Calad and Davila on Monday issued statements "decrying" the 
decision, the Sun reports. Calad said, "The court essentially looked the other 
way on the issue of HMO abuse. With this ruling, the HMOs can simply walk away 
from their responsibilities while Mr. Davila and I and millions of other 
Americans are left with the consequences" (Baltimore Sun, 6/22). The decision 
"provides the HMOs with another tool to be used against the millions of workers 
and their families covered by ERISA," George Parker Young, an attorney for the 
plaintiffs, said (Washington Times, 6/22). 
  
Additional Reaction 
Karen Ignagni, president of America's Health Insurance Plans, said, "Today's 
ruling by the Supreme Court represents a victory for consumers and employers 
who otherwise faced the prospect of higher health care costs without added 
benefit" (Los Angeles Times, 6/22). She added, "This 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" (Baltimore Sun, 6/22). Carlton 
Carl, a spokesperson for the Association of Trial Lawyers of America, said, 
"Basically, this decision insulates HMOs from any responsibility for delaying 
or denying care that injures patients and shifts responsibility unfairly to 
doctors and others ... who are told what medical care they can give by the 
HMOs" (Flandez, Washington Post, 6/22). Ron Pollack, executive director of 
Families USA, added, "This is an enormous step backward, not simply because now 
there's no recourse for patients, but also because it establishes all of the 
economic incentives in the wrong direction" (Baltimore Sun, 6/22). Dr. John 
Nelson president of the American Medical Association, said, "This is a sad day 
for America's patients and the physicians who care for them" (Los Angeles 
Times, 6/22). Wendy Mariner, a professor of law at Boston University, said, 
"The ruling tries to paint a black-and-white picture: Insurers make contract 
decisions, and doctors make medical decisions. But in fact, it doesn't work 
that way." Gregg Bloche, professor of law at Georgetown University, said that 
the decision could prompt HMOs to return to more restrictive coverage policies. 
However, according to Paul Ginsburg of the Center for Studying Health System 
Change, HMOs likely will not revise their policies because they "ultimately are 
less worried about liability than what they can sell," USA Today reports 
(Appleby, USA Today, 6/22). 
  
New Federal Patients' Rights Legislation? 
According to USA Today, the Supreme Court decision likely will "put more 
pressure on Congress to broaden ERISA to allow greater remedies for injured 
patients" (Biskupic, USA Today, 6/22). The decision also "may well reignite the 
political battle over the long-stalled patients' bill of rights in Congress," 
the Los Angeles Times reports (Los Angeles Times, 6/22). Congressional efforts 
to pass patients' rights legislation "fizzled" in 2001, in part because some 
states had enacted their own laws and because "health plans were already 
offering broader coverage and the ability to appeal decisions," according to CQ 
Today (Schuler, CQ Today, 6/21). Rep. John Dingell (D-Mich.) on Monday 
introduced patients' rights legislation identical to a bill that the Senate 
passed in 2001 (Heil, CongressDaily, 6/22). The bill would allow patients to 
file suit against HMOs in state court for unlimited damages or in federal court 
with damages limited to $5 million (California Healthline, 2/6/03). 
Dingell said, "HMOs, foreign diplomats and the mentally insane are the only 
people in this country who are exempt from the consequences of their decisions. 
Now we need to do our job and legislate to clear the air, otherwise the Supreme 
Court will have to act over and over again." (CongressDaily, 6/22). "Millions 
of working people still have nowhere to go when HMO bureaucrats overrule their 
doctors' decisions," Sen. John Edwards (D-N.C.) said (Los Angeles Times, 6/22). 
Senator Edward Kennedy (D-Mass.) added, "Unfortunately, under current law, HMOs 
can escape accountability for their harmful conduct. Congress must act now to 
correct this injustice by passing a patients' bill of rights that will allow 
seriously injured patients to seek compensation from the HMOs that caused their 
injuries." Rep. Charlie Norwood (R-Ga.) said, "Today's Supreme Court decision 
will serve as an opportunity to renew and reinvigorate our efforts to press on 
in the battle to deliver patients' rights once and for all" (Heil, 
CongressDaily, 6/21). However, Senate Majority Leader Bill Frist (R-Tenn.) said 
that he expects "little chance of action" on patients' rights legislation in 
the Senate this year, according to Frist spokesperson Nick Smith, USA Today 
reports. 
  
Impact on Presidential Election? 
The Supreme Court decision also "might revive a potentially powerful issue in 
the 2004 presidential campaign," USA Today reports (Welch, USA Today, 6/22). 
According to the Inquirer, President Bush promoted the Texas law under 
consideration in the case as a model for a federal patients' rights law in his 
election campaign in 2000 (Philadelphia Inquirer, 6/22). However, in the case, 
the Bush administration and the Justice Department supported the position of 
the health insurers. In a brief filed with the court, the Bush administration 
said that state laws should not apply to cases "where, as here, the HMO and its 
representatives are not treating the patient, but are making benefits 
determinations" (Washington Times, 6/22). Bush spokesperson Trent Duffy said on 
Monday that the president continues to support a federal patients' rights law 
that would allow patients to file suit against HMOs "as a last resort," adding, 
"He would preserve the right to sue, but with reasonable caps on damages" (Los 
Angeles Times, 6/22). However, presumptive Democratic presidential nominee Sen. 
John Kerry (Mass.) on Monday in Denver "took Bush to task" for his position on 
the issue and said that if elected, he would call for a federal patients' 
rights law to "ensure that Americans are protected from HMO misconduct" 
(Philadelphia Inquirer, 6/22). 


Source: California Healthline (http://www.californiahealthline.org/)


=====
Cyrus Shahpar & Brian Potts 
Managing Editors, CAL/AAEM News Service 
UC-Irvine



		
__________________________________
Do you Yahoo!?
Yahoo! Mail - You care about security. So do we.
http://promotions.yahoo.com/new_mail