Hawaii physicians can sue state's biggest health plan

Doctors say a court decision allowing their lawsuit to go forward is an important step in battling insurers' wrongful payment practices.

By Amy Lynn Sorrel — Posted Nov. 13, 2006

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Hawaii doctors will not have to individually arbitrate payment concerns they have with the state's dominant health plan. Instead, the Hawaii Medical Assn. can bring one lawsuit on its physician members' behalf, the state's high court ruled.

The HMA sued Hawaii Medical Service Assn. in 2002, accusing the health plan of arbitrarily overruling doctors' medical decisions, and instituting policies for underpaying or denying physicians' claims.

The HMA claims that the insurer breached its contracts with doctors and violated state unfair competition laws, according to the lawsuit.

The health plan argued that doctors should have to arbitrate their payment claims individually, not pursue a collective lawsuit. The high court disagreed, however, and ruled that the doctors' accusations fall outside of the scope of the arbitration clause. The court said the arbitration clause was meant to address decisions related to individual physicians, not broad-based "systemic practices" used to make those decisions.

The HMA said the decision was a significant step in challenging health insurance companies' wrongful reimbursement practices that interfere with doctors' ability to provide patient care.

"The physicians felt strongly that they were not getting any relief from the state Legislature and not seeing any improvements in the health insurance market with respect to competition," said HMA Executive Director Paula Arcena. "Their last remaining relief was through the court system."

The case is one among many across the country in which physicians or medical societies have sought court help in battles against major insurers.

Hawaii physicians say restrictive arbitration mandates put them in a "take it or leave it" position of accepting whatever terms insurers set without an opportunity to negotiate.

But the Hawaii Medical Service Assn. maintains that its participating doctors are bound by the dispute resolution requirement in their agreements and is asking the high court to reconsider its decision.

"We believe the arbitration clause serves the community the best ... [because] it's not nearly as expensive for both parties to litigate," said Cliff K. Cisco, a senior vice president of Hawaii Medical Service Assn.

Cisco did not have anything to add in response to the allegations in the HMA lawsuit. The case will return to the First Circuit trial court if the high court ruling stands.

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