Lawsuits against health plans crumble in wake of Supreme Court ruling

Federal appeals courts in New York and Georgia have dismissed cases that they originally said could go forward.

By Tanya Albert amednews correspondent — Posted Nov. 15, 2004

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Worries in the physician community that a Supreme Court ruling would undermine patients' ability to sue their health plans are starting to become reality.

Two federal appeals courts recently reversed decisions that originally gave subscribers the right to go forward with such cases. The rulings both take into consideration the high court's June decision that Texas patients could not proceed with their HMO lawsuits.

The Supreme Court in Aetna Health Inc. v. Davila said the federal Employee Retirement Income Security Act of 1974 pre-empted the Texas law allowing health plan liability cases and, as expected, lower courts are now following suit. Ten other states have similar laws.

"The fallout is that patients only have limited remedies when these companies make negligent decisions to deny necessary care," said Donald J. Palmisano, MD, American Medical Association immediate past president. "It's a loss for patients."

The insurance industry says the Davila ruling and the decisions that followed are positive for patients.

"We were always concerned about the possibility of every benefit determination being turned into an expensive lawsuit," said Susan Pisano, spokeswoman for America's Health Insurance Plans. "ERISA was designed to protect consumers through prompt and fair settlement of claims."

Pisano and some legal experts noted that patients who disagree with a health plan have recourse through external and independent review laws that many states have passed.

The legal landscape isn't expected to change anytime soon.

"There is no question that people will try to file lawsuits, but I don't think it will make a difference," said Bryan Liang, MD, PhD, a professor at California Western School of Law in San Diego and an adjunct associate professor of anesthesiology at the University of California San Diego School of Medicine. "Congress is going to have to act."

Many other legal experts agree that only Congress could give patients the right to sue health plans to recover awards beyond the cost of the denied procedure.

The AMA continues to support legislation to give patients adequate remedies under the law, said Dr. Palmisano.

Some lower courts had interpreted a U.S. Supreme Court ruling from 2000 as being less restrictive in what types of lawsuits ERISA might pre-empt. That high court ruling addressed a situation in which a health plan made a decision about both eligibility under the plan and treatment. Some lower courts believed that decision opened a way for lawsuits to go forward against health plans if it appeared that medical treatment decisions were involved.

Consequently, at least two federal courts gave patients the right to proceed with their lawsuits. Neither state had a right-to-sue law.

In one case, an 11th U.S. Circuit Court of Appeals panel in Georgia in 2003 ruled that a Florida man could sue CIGNA for negligence in the care and treatment of his infection.

A cat bit Robbie Lee Land's hand, and his physicians admitted him to the hospital for aggressive antibiotic treatment and monitoring after an antibiotic injection and a prescription of antibiotics didn't clear up his infection. Shortly after Land went into the hospital, a CIGNA approval nurse permitted intravenous antibiotics but determined that Land didn't need to be hospitalized, court records show. The infection worsened, and doctors amputated Land's middle finger.

In the other case, a three-judge panel of the 2nd U.S. Circuit Court of Appeals in New York in 2003 ruled that a widow could sue an HMO for medical malpractice in a state court. Bonnie Cicio sued Vytra Healthcare and its medical director after the insurer would approve only a less-aggressive, single-cell transplant cancer treatment when her husband's physician recommended a tandem stem cell transplant.

The Medical Society of the State of New York and the Litigation Center of the American Medical Association/State Medical Societies issued a friend-of-the-court brief in the Cicio case. They argued that the medical director, Brent Spears, MD, should be held accountable in state court.

But in light of the Davila case, both courts reversed their decisions.

In its Davila ruling, the Supreme Court vacated the 11th Circuit Court's decision in Land v. CIGNA Healthcare of Florida and sent it back to the appeals court.

As a result, the 11th Circuit in late August ruled that the logic it first applied to the case was no longer relevant. The court originally said Land's case couldn't be characterized as contract claims to recover benefits he did not receive. Instead, his claims were based on the duty of care he was owed, which the court said didn't fall under ERISA.

"In Davila, the Supreme Court found that the duties imposed by state law regarding the handling of coverage decisions did not arise independently of ERISA or the terms of the plans in question," the 11th Circuit concluded in August. "In light of the Supreme Court's conclusions, we find that Land's causes of action ... fall within the scope of, and are completely pre-empted by ERISA."

The 2nd Circuit in late September vacated its earlier decision in Cicio v. Vytra Healthcare and Brent Spears, MD, for similar reasons and dismissed the lawsuit.

As the 2nd Circuit reconsidered the Cicio case, the MSSNY and the Litigation Center asked the court not to dismiss the claim against Dr. Spears under ERISA because it involves allegations against a licensed physician who reviewed Cicio's medical records, made a diagnosis and used his medical expertise to deny one treatment and recommend another.

"We tried to distinguish Cicio as much as we could from Davila," said Donald R. Moy, MSSNY's general counsel. "Here the medical director went beyond an eligibility decision."

But the appellate court still said the actions fell under ERISA protection. "Neither of the defendants was actually providing medical care to Mr. Cicio," the court stated.

Looking ahead

Legal experts were not surprised that the appellate courts changed their rulings in the wake of the Davila decision, and most believe patients will have a hard time succeeding in suing their health plans, given the high court's 9-0 decision.

But George Parker Young, the Texas attorney who represented the two patients in the case before the Supreme Court this summer, said lawyers have been discussing other claims that could be made against HMOs in state courts.

For example, one Supreme Court justice raised the question of suing under the idea of fiduciary duty.

"It's going to be an interesting court fight," Young said.

Still, many experts expect federal courts to continue to reject state court claims against health plans for the time being. "Now that the Supreme Court has clarified the legal standard, courts are going to dismiss or reject claims based on what the Supreme Court said," said Michael B. Richman, counsel with Reed Smith LLP.

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HMO liability in question

Texas was the first state to pass a law allowing subscribers to sue their health plans in state court. The U.S. Supreme Court ruling against that law this summer set a precedent for how courts will view these laws. The following states have laws giving citizens the right to sue their HMOs: Arizona, California, Georgia, Maine, New Jersey, North Carolina, Oklahoma, Oregon, Texas, Washington, West Virginia.

Note: In Oregon, patients can sue if the health plan doesn't agree to an external review or if it ignores the decision of an independent review panel.

Source: National Conference of State Legislatures

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