Both sides ready for HMO liability fight

Physicians and patients are looking forward to a U.S. Supreme Court ruling expected to settle the question of whether patients can sue HMOs in state court for injuries incurred when plans deny doctor-recommended treatments. But insurers and businesses are looking forward to it, too.

The opposing sides just hope the decision the court makes this year goes their way.

Doctors and patients say an HMO should be held responsible in state court if its decision ventures into medical decision-making. Insurers and businesses argue that the federal Employee Retirement Income Security Act of 1974 preempts state lawsuits because HMOs make plan determinations, not medical decisions.

The two camps spelled out their opinions in seven friend-of-the-court briefs. In all, about a dozen groups weighed in on the debate, which has been brewing at the state and federal level for more than a decade.

The high court has taken up two Texas cases on the HMO liability issue. Both cases involve patients who sued health plans under a 1997 Texas law that was the first in the nation to give patients the right to sue. The decision would impact similar laws in Arizona, California, Georgia, Maine, New Jersey, North Carolina, Oklahoma, Oregon, Washington and West Virginia.

A lower court already has ruled that the two Texas patients have the right to sue. The Supreme Court is scheduled to hear oral arguments March 23.

Both sides agree that this is an opportunity for the court to offer clarification. In several rulings in recent years, the Supreme Court has said ERISA doesn't offer the blanket protection from lawsuits that it once did. But it is unclear whether the federal act would prevent state lawsuits in these situations.

Physicians argue that holding health plans accountable in state court for decisions that affect medical outcomes is essential for high-quality patient care.

"We want everyone to be accountable in the system," said American Medical Association President Donald J. Palmisano, MD. "Managed care companies have to do what is correct and not substitute their decisions for the physician's."

Health plans say letting patients sue HMOs in state court would create an unpredictable insurance market and further drive up quickly rising health care costs.

"This case allows the court to clarify that these are coverage decisions," said Susan Pisano, a spokeswoman for the American Assn. of Health Plans-Health Insurance Assn. of America. "Employers will be able to rely on contracts made with insurers, and insurers will be able to carry them out."

What is a medical decision?

The answer to the debate might come down to what the court says a medical decision actually is.

Several medical associations and the American College of Legal Medicine say that a medical decision is a judgment based on specific facts about a patient. They say health plans make these decisions and should be held accountable in state courts, just as a physician or other health care professional would be held accountable.

In a friend-of-the-court brief, the AMA, Texas Medical Assn. and American Psychiatric Assn. argue that once a person seeks "medical diagnosis or treatment, that person is a patient." And as a patient, they say, the person is entitled to the protections provided by state laws.

That is what Texas patients Juan Davila and Ruby R. Calad deserve, the physician groups argue.

Arthritis patient Davila filed a lawsuit against Aetna Health Inc. alleging that he almost died after the insurer required him to try two different drugs on a formulary before it would pay for Vioxx, a drug he had been taking without complications.

Calad sued CIGNA Healthcare of Texas Inc. after the insurer denied the longer hospital stay that her physician recommended following Calad's complicated hysterectomy. She was discharged and several days later went to the emergency department with complications, according to court records.

"They were injured patients alleging that the HMOs made treatment decisions that violated Texas law standards for such decisions," the AMA, TMA and APA brief states. "This has nothing to do with any payment or reimbursement from an ERISA plan."

The American College of Legal Medicine, an organization primarily made up of people who hold degrees in both law and medicine, agrees.

"A prospective decision about what is or is not a medically necessary treatment ... is a discretionary judgment about medical necessity, rather than a determination incidental to a finding of whether a plan beneficiary is entitled to a benefit under the plan," the ACLM said in its brief.

The arguments against liability

Health plans don't view their rulings as medical decision-making. They argue that each decision is made based on whether the insurance plan covers the proposed treatment.

The decisions made in the Davila and Calad cases are no different from the "medical necessity" decisions made by indemnity plans, the AAHP-HIAA, the BlueCross BlueShield Assn. and the American Benefits Council state in their brief. What's different, they say, is that managed care plans make the decision before the care is given, rather than after.

The decisions "are simply more structured and better timed," the groups argue in their brief. "Pre-utilization review of coverage protects both beneficiaries and health care providers from incurring expenses based on an unjustified expectation that a third-party payer will agree that those expenses fall within its reimbursement obligations."

The groups explain that similar to traditional indemnity insurers, managed care organizations usually decide whether they will pay for services based on whether the care is medically necessary and appropriately priced.

Because that decision is not a question of medical decision-making, ERISA should prevent state suits, according to briefs by health plans, the U.S. Chamber of Commerce and the U.S. government. The Dept. of Labor is responsible for enforcing and administering ERISA.

"The court should not alter these traditional preemption principles out of concern for the state's interest in regulating the practice of medicine," the Chamber of Commerce said. "Doing so would substantially increase the cost of health care coverage and reduce the availability of affordable health care insurance nationwide, contrary to ERISA's purposes."