ERISA: Appeals Court Ruling Sides with Chicago Woman
A ruling by the U.S. 7th Court of Appeals in Chicago last week could take a "small bite out of a federal law" that HMOs have used "as a major weapon" against lawsuits, the Chicago Tribune reports. The court ruled in favor of Debra Moran, who sued Rush- Prudential HMO for failing to "abide by and pay for the recommendations" of an independent physician. In 1998, Moran's primary care physician recommended a nerve surgery performed by a doctor outside the plan's network. The plan denied the treatment, instead offering a different treatment performed within its own network. A lower court ordered Rush-Prudential and Moran to go before an outside medical consultant who determined the treatment was needed. But the HMO still refused to pay for the surgery, claiming that "its benefit offerings were protected by ERISA" -- the Employee Retirement Income Security Act of 1974 -- which prohibits patients from suing HMOs in state courts and "limits damages in federal lawsuits to the cost of treatment that was denied." Moran paid $95,000 for the surgery and, in hopes of receiving reimbursement, sued the health plan under the Illinois HMO Act, which "mandates a mechanism for review by an independent physician when the patient's primary-care doctor and the HMO disagree about what is medically necessary." A lower federal court initially ruled in favor of Rush-Prudential, agreeing that the insurer was protected under ERISA. But the appeals court last week overturned that ruling, saying that the HMO "agreed to state insurance regulations and therefore had to abide by the HMO Act."
Rush-Prudential's parent company, Wellpoint Health Networks, Inc., may continue to appeal the decision because there was "strong dissension from respected judges." Dissenting judges argued that mandating outside arbitration could "deter some employers from offering health insurance at all." Although this case only affects "insured plans" (in which HMOs cover the cost of claims) rather than "self-insured plans" (which are used by most corporate employers) the plaintiff's lawyers do not think the "crack they found in ERISA will go unnoticed." Attorney Mark Rust said, "There is previously no case that made it clear that HMOs ... had to follow this sort of outside review. It's now the law in 27 states. It's also the most central issue to the public policy fight going on in Washington over the patients' bill of rights" (Japsen, Chicago Tribune, 10/24) To read the case, type http://www.dol.gov/dol/pwba/public/pubs/ab/moranfin.txt into your Web browser.