TEXAS: Court Backs Patients’ Right to Sue HMOs

      A federal appeals court Tuesday upheld Texans' right to sue their HMOs -- given to them in a 1997 state law -- but struck down a key provision of the legislation that allows patients to appeal coverage decisions to an independent panel of doctors, the Ft. Worth Star-Telegram reports. The ruling, by the three-judge panel of the 5th U.S. Circuit Court of Appeals in New Orleans, limits the law to allow Texas patients to sue their HMOs for malpractice, but not for a health plans' decisions on claims and benefits, such as if a plan claims treatment is medically unnecessary. The ruling allows patients to sue an HMO for: offering financial incentives to doctors to limit care; making medical decisions and permitting "demonstrably bad doctors" to join the plan (Lunday, 6/21).

ERISA Exemption
      Subsidiaries of Aetna Inc. challenged the Texas law in 1997, arguing that the federal law known as the Employee Retirement Income Security Act of 1974 pre-empted lawsuits over coverage decisions (Ornstein/Fairbank, Dallas Morning News, 6/22). But the circuit court upheld a 1998 ruling by a U.S. District judge, saying that an "HMO's liability for malpractice wasn't pre-empted by ERISA," and that the provision giving patients the right to sue "was a proper exercise of the state's regulatory authority." The court wrote, "The act simply codifies Texas' already existing standards regarding medical care. These standards of care are at the heart of Texas' regulatory power." But the panel did agree that ERISA pre-empted the independent review process (Robison, Houston Chronicle, 6/21).

Characterizing Coverage
      Texas Attorney General John Cornyn (R) called the decision "very good for consumers," adding that it "reaffirms the state's ability to regulate HMOs and the quality of medical decisions that HMOs make" (Ft. Worth Star-Telegram, 6/21). Hank Greely, a Stanford University law professor, predicted that the ruling would bring about bickering over "what's a coverage decision and what isn't a coverage decision," saying that federal law would eventually have to make that determination. Cornyn said that lawyers and litigants will have to decide how to present different cases in court and then, depending "on how they do that and how the court accepts those characterizations, those lawsuits will either be pre-empted or not" (Dallas Morning News, 6/22). According to an Aetna spokesperson, the company was satisfied with the court's ruling because it limited the circumstances under which plans can be sued (Ft. Worth Star-Telegram, 6/21).

Eliminating Review
      Some patients' advocates were not as pleased with the ruling, taking issue with the elimination of an independent review, which means that patients will have to take their cases directly to court. Calling the decision a "casualty" and a "shame," Lisa McGiffert, a health policy expert at Consumers Union in Austin, said that patients who urgently need insurance decisions will be hurt because "courts take too long to settle the issue" (Fairbank/Ornstein, Dallas Morning News, 6/22). About 1,000 cases have gone through an independent review since the law passed, with about half the rulings in patients' favor. HMOs can still voluntarily agree to an independent review, but McGiffert said she thought few of them would (Houston Chronicle, 6/21). Aetna said that it would continue to participate in the review process that it had announced last year (Ft. Worth Star-Telegram, 6/21).