U.S. Supreme Court To Hear Arguments in Case on HMO Lawsuits
The U.S. Supreme Court on Tuesday will hear oral arguments in a case related to a 1997 Texas law that allows patients to file suit against HMOs in state court when they experience injuries as a result of administrative decisions, USA Today reports (Appleby, USA Today, 3/22). In the case, two Texas residents separately filed suit in state court against their HMOs, Aetna and Cigna Healthcare, alledging 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, 1/28).
The Texas case will help determine whether the 1974 Employee Retirement Income Security Act protects the administrative decisions of HMOs from state laws. Under ERISA, the federal government, not state governments, has the exclusive authority to regulate employee benefit plans (USA Today, 3/22). As a result, patients who have employer-sponsored health insurance can file suit against HMOs only in federal court and can only sue for the cost of coverage denied, not for punitive damages, as state court allows. About 160 million employees and their dependents, as well as 16 million retirees, have employer-sponsored health insurance, the AP/Philadelphia Inquirer reports (Brown, AP/Philadelphia Inquirer, 3/20). In the Texas case, Aetna and Cigna argued that ERISA covered the lawsuits filed by Devila 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 in regulated under state laws (California Healthline, 1/28).
George Parker Young, an attorney for Davila and Calad, said that HMOs make medical decisions when they establish prescription drug formularies or determine when patients should leave the hospital. "The best outcome would be that states like Texas can regulate HMOs when they make these medical decisions," Young said (USA Today, 3/22). Davila and Calad have received support from the American Medical Association, AARP, 39 members of Congress and 21 state attorneys general. Gary Howell, an attorney for AMA, said, "HMOs disingenuously argue that they do not make health care treatment decisions," adding that the actions in the cases of Davila and Calad are "health care treatment decisions." Sarah Lenz Lock, an attorney for AARP, said that the potential for increased health care costs because of increased lawsuits against HMOs does not "begin to compare with the cost of stripping consumers of their rights" to sue in state court.
However, Aetna and Cigna maintain that in the cases of Davila and Calad, "they were carrying out contracts" with employers, "not making medical decisions, and thus are shielded from lawsuits" in state court, the Hartford Courant reports. "Cost efficiency necessarily involves the institution of cost-management policies like the one at issue in (the Davila) case, which holds certain more expensive prescription medications in reserve and gives more readily accessible medications a chance to work," Miguel Estrada, an attorney for Aetna, said (MacDonald, Hartford Courant, 3/21). According to a Supreme Court brief filed on behalf of Aetna, "Aetna does not itself provide any medical services," adding that health care providers, who independently contract with the company, are "solely responsible for any health services rendered" (USA Today, 3/22). David Carter, an Aetna spokesperson, said that ERISA "provides employees a prompt, responsive way to address disputes while still receiving care," adding, "The court system is a poor and costly substitute" (AP/Philadelphia Inquirer, 3/20). In addition, health insurers maintain that without ERISA protection, HMOs would face more lawsuits, which could lead to higher premiums (USA Today, 3/22). Stephanie Kanwit, special counsel for the America's Health Insurance Plans, said that ERISA provides "some sense of predictability" for employers and HMOs when they establish premiums. However, she said that such predictability "would be destroyed ... if every state could establish its own liability standard," the Courant reports. Elliott Pollack, a health care attorney at the law firm Pullman & Comley, said, "If HMOs were exposed to these suits in state courts, they would be less likely to say 'no' when making decisions about what procedures and medications to cover," adding, "That could put further pressure on health care costs" (Hartford Courant, 3/21). Ten states -- Arizona, California, Georgia, Maine, New Jersey, North Carolina, Oklahoma, Texas, Washington and West Virginia -- to date have passed legislation to allow patients to file suit against HMOs in state court over coverage decisions (USA Today graphic, 3/22).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.