HMO LAWSUITS: Suits Threaten ‘Heart of Managed Care’
With three lawsuits against HMOs already filed, and "at least a dozen more .. in the works," legal experts are warning the managed care organizations to "take the threat seriously," as "most jurors have a stake in the health care system," the Los Angeles Times/Detroit News reports. Columbia University Law Professor John Coffee said, "[E]veryone wants to get good medical care and are distressed to learn they are getting less than the best. ... Juries get outraged when they hear about decisions (not to provide treatment) based on nonmedical criteria." He noted that tobacco companies were forced to settle their case even though 75% of the jurors were non-smokers (Rubin/Weinstein, 10/9). Many industry analysts are uncertain where the litigation will lead health care, particularly because the charges strike at "the very core of managed care." The once seemingly untouchable HMOs are vulnerable now that the 1974 Employees Retirement Income Security Act, which protected the insurers from most state regulations and lawsuits, has come under attack in the courts. Thomas Mayo, an expert on medicine and the law at Southern Methodist University, said, "This is really an attack on the underpinnings of the theory of managed care. It's pretty hard to do managed care if you can't set up gatekeeping and require prior authorization for non-emergency procedures and things like that." While consumer advocates applaud the attacks, some experts worry that litigation may result in HMOs passing costs on to employers. That causes some to worry that employers, fed up with escalating premiums, would drop insurance programs entirely, leaving more employees without insurance (Julien/Kauffman, Hartford Courant, 10/8).
Presumably in reaction to the federal lawsuit's effects on its stock price, Aetna Inc. announced Friday a plan to buy back $1 billion of its stock, about 20 million shares ( Dow Jones News Service/San Diego Daily Transcript, 10/8). The shares will be bought over the next two years (Reuters/New York Times, 10/9). Aetna shares slipped 18.8 cents Friday, closing at $52.50. David Shove, a Prudential Vector Healthcare Group analyst, said, "It was the kind of thing you would expect. The stock's cheap. It's a good use of their capital, it's a good return" (Gammill, Philadelphia Inquirer, 10/9).
Noting that the lawsuits "bring to the surface the long-held fears of many consumers that there is a dark side to managed health care, where the almighty bottom line rules and quality of care is secondary," Miami Herald columnist Bea Garcia questions whether "you can applaud the developments of the past week." Indicating that the tobacco settlement resulted in companies passing the cost "right on to consumers," Garcia contends that a similar scenario in the health care system "would be disastrous." While "higher rates will only force more people to go without health insurance," Garcia concludes that "the vicious cycle we already have would spin further out of control: more uninsured, a greater burden on the public health system and higher costs for local, state and federal governments" (10/10).
An editorial in the Financial Times asserts that the immunity from lawsuits HMOs have enjoyed is "now under siege and rightly so." Although the editorial concedes that the recently passed House bill would drive up costs, it argues that "it is no argument for maintaining HMO immunity." While the civil litigation is "grievously flawed" the editorial believes that the right to sue can be "limited without being rendered worthless" if punitive damages awards were capped and independent review boards were established. "The right to challenge HMOs in court is better than no right to challenge them at all. But there is a middle way: a limited right to sue for limited damages," the editorial concludes (10/11).