Supreme Court To Hear Cases on HMO Suits in State Court

The Supreme Court on Monday agreed to hear the appeals of two related cases -- Aetna Health v. Davila and Cigna v. Calad et al. -- to determine whether patients can file suit against HMOs for malpractice or other torts in state court, the Washington Post reports. In addition, the cases will determine whether the administrative decisions of HMOs are protected from state lawsuits under the 1974 Employee Retirement Income Security Act, under which the federal government has the exclusive authority to regulate employee benefit plans (Lane, Washington Post, 11/4). The issues are "at the core of the tension between insurers' efforts to rein in health care costs and patients' fears that they might be denied needed treatment," the Baltimore Sun reports (Salganik, Baltimore Sun, 11/4). The decision in the cases will determine the legal rights of the more than 130 million U.S. residents enrolled in employer- or union-sponsored HMOs, according to the Los Angeles Times (Savage, Los Angeles Times, 11/4).

In the Aetna case, Texas resident 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 room for bleeding ulcers (Greenberger, Wall Street Journal, 11/4). In the Cigna case, Texas resident 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, but the health insurers argued that ERISA covered the cases and had them transferred to Federal District Court in Dallas, which ruled in favor of the companies (Greenhouse, New York Times, 11/4). However, the 5th Circuit Court of Appeals in New Orleans ruled in 2002 that Davila and Calad could file suit in state court because "decisions on whether to pay for a particular treatment are decisions about both insurance," which is regulated under ERISA, and medical care, which is regulated under state laws, the Post reports (Washington Post, 11/4). Under ERISA, plaintiffs can sue HMOs in federal court for the cost of denied treatments but not for damages (Baltimore Sun, 11/4).

Aetna and Cigna appealed the decision of the 5th U.S. Circuit Court of Appeals to the Supreme Court based on arguments that HMO coverage decisions are only about insurance, not about medical care, and as a result, are regulated under ERISA (Washington Post, 11/4). "The very reason for the HMOs' existence is to maximize the cost-efficiency of the health care services provided to their members," Aetna said in a brief filed with court, adding, "Cost-efficiency necessarily involves the institution of cost-management policies like the one at issue in this case, which holds certain more expensive prescription medications in reserve and gives more readily accessible medications a chance to work" (Baltimore Sun, 11/4). In a friend-of-the-court brief, AAHP/HIAA, the U.S. Chamber of Commerce, the National Association of Manufacturers and the American Benefits Council warned that if the court rules that patients can file suit against HMOs in state courts, consumers will face "higher copayments, deductibles and premiums, while being subject to restricted benefits and drug selection" (Washington Post, 11/4). The brief added that Congress passed ERISA "to ensure that plans were not subject to a costly patchwork of conflicting and open-ended state law remedies" (Wall Street Journal, 11/4). Stephanie Kanwit, legal counsel to AAHP/HIAA, said that "there is an important legal distinction to be made" about medical care decisions and coverage decisions, the Sun reports. However, George Parker Young, the attorney for Davila and Calad, said, "How can they say a medical necessity decision is not a medical decision? That's goofy. That's double-speak" (Baltimore Sun, 11/4). A brief filed on behalf of the plaintiffs argues that Congress did not pass ERISA to exempt HMOs from "the duties imposed on all medical decision-makers by the states," the Post reports. "ERISA has 'nothing to say' about medical standards of ordinary care, a topic left entirely to the states," according to the brief (Washington Post, 11/4). The Supreme Court will likely hear oral arguments in the cases early next year and issue a decision by July (Lemke, Washington Times, 11/4).

CNN's "Lou Dobbs Tonight" on Monday reported on the Supreme Court decision to hear the cases. The segment includes comments from Joanne Doroshow, executive director of the Center for Justice and Democracy; Robert Hunter, director of insurance at the Consumer Federation of America; and AAHP/HIAA spokesperson Susan Pisano (Viles, "Lou Dobbs Tonight," CNN, 11/3). The full transcript of the program is available online.