High Court To Review Patients' Right To Sue

A physician prescribed Vioxx for a Texas man’s arthritis, but the patient’s insurance company said he first had to try two less expensive medications before they would cover the one the doctor ordered.

After three weeks on the company-approved treatment program, the man was rushed to the hospital with a bleeding ulcer that caused a near heart attack. He spent five days in critical care and can no longer take medication absorbed through the stomach.

A Texas woman underwent a hysterectomy with rectal, bladder and vaginal repair, and her surgeon requested an extension of the one-day standard hospital stay. But the insurance company’s discharge nurse decided the one-day stay was sufficient.

A few days later, the woman was readmitted under emergency condition with serious complications.

Both patients sued under the Texas Health Care Liability Act, which gives patients a right to seek damages for insurance decisions that "affect the quality of the diagnosis, care or treatment provided to the plan’s insureds or enrollees." They alleged that the insurers failed to use ordinary care in making medically-necessary decisions.

Texas is one of 14 states that allows patients to sue their HMOs. The Texas insurers removed the two cases to federal court, citing exemption from state law claims under the Employee Retirement Income Security Act (ERISA). The district courts dismissed the plaintiffs’ claims, but the Fifth Circuit Court of Appeals reversed the rulings and remanded the cases to state court.

The U.S. Supreme Court agreed in November to hear the consolidated appeal in a case that could affect the rights of an estimated 160 million people covered by employer or union-provided group health plans. Aetna Health v. Davila, No. 02-1485; Cigna HealthCare of Texas v. Calad, No. 03-83.

At issued is whether people who believe they have suffered harm because insurers refuse to cover certain medically-necessary care have a right to sue companies for malpractice or other torts provided for under various state statues.

That contention is at odds with ERISA, an outdated 1974 federal law that gives the federal government wide-ranging power to regulate employee benefit plans.

Health maintenance organizations embrace ERISA, but the law was enacted by Congress long before managed care developed into a field where decisions about treatment and insurance coverage regularly interwine.

ERISA allows plan participants to be reimbursed for a denied procedure they had to pay out of their own pockets when wrong decision are made, but it allows no compensation for injuries that flow from the denial of care. Some federal courts, where ERISA lawsuits are heard, do not even allow the patient to recover the benefit levels called for in the plan.

Congress has stalled on allowing patients a right to sue health insurance companies in a federal Patients’ Bill of Rights, so it is doubtful it will soon revisit the problems emanating from ERISA’s gaping holes.

Now, though, the Supreme Court apparently is willing to act. It has recognized the changing medical insurance landscape with several recent decisions that are fair for all parties. One of those cases emanated from Illinois.

In Prudential HMO Inc. v. Moran, 536 U.S. 355 (2002), the court held that ERISA did not preempt an Illinois statute entitling participants to an independent review to collect benefits for a procedure which an HMO deemed medically unnecessary. The federal law’s language expressly prohibits its application to any state laws regulating insurance, the court held. Several federal circuits subsequently have cited Moran in utilizing state law schemes to resolve disputes regarding medical necessity.

A unanimous U.S. Supreme Court also said in New York State Conference of Blue Cross and Blue Shield Plans v. Travelers Ins. Co. that "nothing in the language of the Act [ERISA] or the context of its passage indicates that Congress chose to displace general health care regulation, which historically has been a matter of local concern." 514 U.S. 645, 661 (1995).

As expected, the business community, including the American Association of Health Plans and the U.S. Chamber of Commerce, have filed amicus briefs in the appeal of the Texas cases. They threaten "higher co-payments, deductibles and premiums, while being subject to restricted benefits and drug selection" if the patients are successful.

From a policy standpoint, though, it is significant to note what trial lawyers have been contending all along; the impact of civil lawsuits on managed care and physician malpractice premiums is negligible. A recently published, well researched study once again proved this to be the case.

Mark A. Hall, professor of law and public health at Wake Forest University, and Gail Agrawal, associate dean and professor at the University of North Carolina School of Law, published the results of a survey that examined 10 states that enacted statutes since the mid-1990s creating tort liability for patient harm caused by managed care organizations. They asked 85 experts – including HMO administrators, in-house counsel, industry analysis and defense counsel – about the impact of these state laws.

They concluded that these statutes resulted in little or no litigation and did not view them as creating any fundamentally new type of liability exposure, particularly given the costs and complexities of suing a health plan.

"To date – there is no evidence of the ‘flood of litigation’ that was predicted when states began to enact right-to-sue laws." Health Affairs, "The Impact of State Managed Care Liability Statutes," Sept./Oct. 2003.

Once physicians were accused of ordering unnecessary procedures in what was termed "defensive medicine" tactics to avoid being sued. Now, it appears the pendulum is swinging the other way as the HMOs have taken over the decision-making, often erring on the side of refusing to cover medical tests or procedures, then counting on the protection of ERISA to shield them from liability.

It is good to see the nation’s highest court agree to hear the consolidated appeal. At the very least, it is sure to offer some guidelines on challenging managed care organizations’ decisions when negligence occurs involving the eligibility questions under a plan, the appropriateness of a treatment and the delivery of care, and what happens when these elements intermingle.

It is hoped that accountability will be at the core of the court’s reasoning.