Supreme Court Decision Limits Lawsuits Against HMOs in State Courts
The Supreme Court on Monday unanimously ruled that patients cannot file suit against HMOs in state court when they experience injuries as a result of administrative decisions related to treatment, a decision that marks a "major victory" for health insurers and the Bush administration, the Houston Chronicle reports (Reinert, Houston Chronicle, 6/22). In the case, which involved a 1997 Texas law, two state residents separately filed suit in state court against their HMOs, Aetna and Cigna Healthcare, over allegations that the companies made decisions related to treatment that resulted in injuries. In the Aetna case, Juan Davila received a prescription for Vioxx from his physician, but the rules of Aetna Health, a division of Aetna that operated his HMO, required Davila to take two less-expensive medications first. Davila had an adverse reaction to one of the medications that required him to receive care in the emergency department for bleeding ulcers. In the Cigna case, Ruby Calad underwent a hysterectomy, and although Cigna HealthCare of Texas, a division of Cigna that operated her HMO, specified coverage for only a one-day hospital stay, her surgeon recommended a longer stay. A hospital-discharge nurse employed by Cigna did not approve the longer hospital stay, and Calad was readmitted to the hospital several days after her discharge with complications from the hysterectomy. Both Davila and Calad filed suit in state court under state HMO laws (California Healthline, 3/24). In addition to Texas, nine other states -- Arizona, California, Georgia, Maine, New Jersey, North Carolina, Oklahoma, Washington and West Virginia -- have similar laws (Lane, Washington Post, 6/22).
The case involved a dispute over whether the Employee Retirement Income Security Act of 1974 preempts state laws that allow patients to file suit against HMOs for administrative decisions related to treatment that resulted in injuries (Henderson, Philadelphia Inquirer, 6/22). ERISA allows patients with employer-sponsored health insurance to file suit against HMOs in federal court and to sue only for the cost of coverage denied. However, the Texas Health Care Liability Act makes HMOs "liable for damages for harm" caused by a failure to "exercise ordinary care when making health care treatment decisions." In the Texas case, Aetna and Cigna argued that ERISA covered the lawsuits filed by Davila and Calad and had them transferred to Federal District Court in Dallas, which ruled in favor of the companies. However, the 5th U.S. Circuit Court of Appeals in New Orleans in 2002 ruled that Davila and Calad could file suit in state court because the decisions involved both federal law under ERISA and the regulation of medical care, which in most cases is regulated under state laws (California Healthline, 3/24).
The Supreme Court on Monday reversed the appeals court decision (Lane, Washington Post, 6/22). According to the court, both the Aetna and Cigna cases involved administrative decisions, not medical decisions that "would be subject to the same type of malpractice lawsuit in which doctors, nurses or other care providers are held accountable," the Baltimore Sun reports. In the opinion issued by the court, Justice Clarence Thomas wrote, "If a managed care entity correctly concluded that, under the terms of the relevant plan, a particular treatment was not covered, the managed care entity's denial of coverage would not be a proximate cause of any injuries arising from that denial. Rather, the failure of the plan itself to cover the requested treatment would be the proximate cause" (Little, Baltimore Sun, 6/22) "The fact that a benefits determination is infused with medical judgments does not alter this result," Thomas added (Lane, Washington Post, 6/22). Thomas indicated that the denial of coverage for medical procedures is not the same as the denial of the procedures themselves because HMO patients can pay for them and subsequently seek reimbursement under federal law (Baltimore Sun, 6/22).
In addition, Thomas wrote that a state law that "duplicates, supplements or supplants" the legal recourse available to HMO patients under federal law "conflicts with the clear congressional intent to make the ERISA remedy exclusive" (Greenhouse, New York Times, 6/22). The decision does not apply to HMO patients who file suit against their physicians for alleged malpractice or negligence, to patients who purchase individual health insurance policies or to government employees (Savage, Los Angeles Times, 6/22). In a separate opinion, Justices Ruth Bader Ginsburg and Stephen Breyer wrote that a "regulatory vacuum exists" in the area of patients' rights to file suit against HMOs (New York Times, 6/22). They called on Congress to "revisit what is an unjust and increasingly tangled" system for health insurance liability (Ramstack, Washington Times, 6/22). Patients require "some other way" to "fight their health insurers in court," according to Ginsburg and Breyer, the Sun reports (Baltimore Sun, 6/22).
In a statement on Monday, Cigna officials praised the Supreme Court decision, adding that the company for several years has used an appeals process to address patient concerns over coverage decisions. Aetna officials called the decision a "reaffirmation of the law applicable to employer-sponsored health plans" (Philadelphia Inquirer, 6/22). The companies said that by "affirming the role of ERISA in keeping employers' health care costs down ... the high court assured that workers will continue to receive affordable insurance through their jobs," the Chronicle reports (Houston Chronicle, 6/22). Miguel Estrada, the attorney who argued the case on behalf of Cigna and Aetna, said that the decision reduces the risk that health insurers and employers "will be subject to the randomness of the tort system" (Lueck/Greenberger, Wall Street Journal, 6/22). However, Calad and Davila on Monday issued statements "decrying" the decision, the Sun reports. Calad said, "The court essentially looked the other way on the issue of HMO abuse. With this ruling, the HMOs can simply walk away from their responsibilities while Mr. Davila and I and millions of other Americans are left with the consequences" (Baltimore Sun, 6/22). The decision "provides the HMOs with another tool to be used against the millions of workers and their families covered by ERISA," George Parker Young, an attorney for the plaintiffs, said (Washington Times, 6/22).
Karen Ignagni, president of America's Health Insurance Plans, said, "Today's ruling by the Supreme Court represents a victory for consumers and employers who otherwise faced the prospect of higher health care costs without added benefit" (Los Angeles Times, 6/22). She added, "This ruling puts the brakes on efforts by trial lawyers to turn every question about the scope of an individual's coverage into a costly lawsuit" (Baltimore Sun, 6/22). Carlton Carl, a spokesperson for the Association of Trial Lawyers of America, said, "Basically, this decision insulates HMOs from any responsibility for delaying or denying care that injures patients and shifts responsibility unfairly to doctors and others ... who are told what medical care they can give by the HMOs" (Flandez, Washington Post, 6/22). Ron Pollack, executive director of Families USA, added, "This is an enormous step backward, not simply because now there's no recourse for patients, but also because it establishes all of the economic incentives in the wrong direction" (Baltimore Sun, 6/22). Dr. John Nelson president of the American Medical Association, said, "This is a sad day for America's patients and the physicians who care for them" (Los Angeles Times, 6/22). Wendy Mariner, a professor of law at Boston University, said, "The ruling tries to paint a black-and-white picture: Insurers make contract decisions, and doctors make medical decisions. But in fact, it doesn't work that way." Gregg Bloche, professor of law at Georgetown University, said that the decision could prompt HMOs to return to more restrictive coverage policies. However, according to Paul Ginsburg of the Center for Studying Health System Change, HMOs likely will not revise their policies because they "ultimately are less worried about liability than what they can sell," USA Today reports (Appleby, USA Today, 6/22).
According to USA Today, the Supreme Court decision likely will "put more pressure on Congress to broaden ERISA to allow greater remedies for injured patients" (Biskupic, USA Today, 6/22). The decision also "may well reignite the political battle over the long-stalled patients' bill of rights in Congress," the Los Angeles Times reports (Los Angeles Times, 6/22). Congressional efforts to pass patients' rights legislation "fizzled" in 2001, in part because some states had enacted their own laws and because "health plans were already offering broader coverage and the ability to appeal decisions," according to CQ Today (Schuler, CQ Today, 6/21). Rep. John Dingell (D-Mich.) on Monday introduced patients' rights legislation identical to a bill that the Senate passed in 2001 (Heil, CongressDaily, 6/22). The bill would allow patients to file suit against HMOs in state court for unlimited damages or in federal court with damages limited to $5 million (California Healthline, 2/6/03).
Dingell said, "HMOs, foreign diplomats and the mentally insane are the only people in this country who are exempt from the consequences of their decisions. Now we need to do our job and legislate to clear the air, otherwise the Supreme Court will have to act over and over again." (CongressDaily, 6/22). "Millions of working people still have nowhere to go when HMO bureaucrats overrule their doctors' decisions," Sen. John Edwards (D-N.C.) said (Los Angeles Times, 6/22). Senator Edward Kennedy (D-Mass.) added, "Unfortunately, under current law, HMOs can escape accountability for their harmful conduct. Congress must act now to correct this injustice by passing a patients' bill of rights that will allow seriously injured patients to seek compensation from the HMOs that caused their injuries." Rep. Charlie Norwood (R-Ga.) said, "Today's Supreme Court decision will serve as an opportunity to renew and reinvigorate our efforts to press on in the battle to deliver patients' rights once and for all" (Heil, CongressDaily, 6/21). However, Senate Majority Leader Bill Frist (R-Tenn.) said that he expects "little chance of action" on patients' rights legislation in the Senate this year, according to Frist spokesperson Nick Smith, USA Today reports.
The Supreme Court decision also "might revive a potentially powerful issue in the 2004 presidential campaign," USA Today reports (Welch, USA Today, 6/22). According to the Inquirer, President Bush promoted the Texas law under consideration in the case as a model for a federal patients' rights law in his election campaign in 2000 (Philadelphia Inquirer, 6/22). However, in the case, the Bush administration and the Justice Department supported the position of the health insurers. In a brief filed with the court, the Bush administration said that state laws should not apply to cases "where, as here, the HMO and its representatives are not treating the patient, but are making benefits determinations" (Washington Times, 6/22). Bush spokesperson Trent Duffy said on Monday that the president continues to support a federal patients' rights law that would allow patients to file suit against HMOs "as a last resort," adding, "He would preserve the right to sue, but with reasonable caps on damages" (Los Angeles Times, 6/22). However, presumptive Democratic presidential nominee Sen. John Kerry (Mass.) on Monday in Denver "took Bush to task" for his position on the issue and said that if elected, he would call for a federal patients' rights law to "ensure that Americans are protected from HMO misconduct" (Philadelphia Inquirer, 6/22).
Several recent television and radio programs included segments on the Supreme Court decision:
- ABC's "World News Tonight": The segment includes comments from Calad, Ignagni and Pollack (Medrano, "World News Tonight," ABC, 6/21). Excerpts from the segment are available online in RealPlayer and Windows Media.
- CBS' "Evening News": The segment includes comments from Ignagni, Calad and Texas Attorney General Greg Abbott (R) (Andrews, "Evening News," CBS, 6/21). The complete segment is available online in RealPlayer.
- NBC's "Nightly News": The first of two segments includes comments from Ignagni, Calad and Pollack; the second segment includes comments from Dingell and AARP attorney Sara Lenz Lock (Williams/Reid, "Nightly News," NBC, 6/21). The first and second segments are available online.
- "Nightly Business Report": The segment includes comments from ATLA attorney Jeffrey White, U.S. Chamber of Commerce attorney Ellen Dunham Bryant and Project Hope health policy analyst Gail Wilensky (Woods, "Nightly Business Report," 6/21). The complete transcript of the segment is available online.
- NPR "All Things Considered": The segment features comments from Ignagni, Dingell and George Washington University School of Public Health law professor Sarah Rosenbaum (Rovner, "All Things Considered," NPR, 6/21). The segment is available online in RealPlayer.
- PBS' "NewsHour with Jim Lehrer": The segment includes comments from National Law Journal reporter Marcia Coyle (Brown, "NewsHour with Jim Lehrer," PBS, 6/21). The segment is available online in RealPlayer.