- The Washington Times - Tuesday, June 22, 2004

The Supreme Court ruled unanimously yesterday that patients cannot sue managed care companies for malpractice when they are denied benefits prescribed by their doctors.

The ruling dealt a setback to patients of managed care plans who have retained lawyers and sought large lawsuit damages from health maintenance organizations, or HMOs.

The case, which could affect 72 million patients covered by HMOs, involved two Texas patients who sued their HMOs under a state patient-protection law.

The Supreme Court said the patients could sue their HMOs only under federal law for violations of their medical-benefits agreements.

Even then, they can recover no more than the value of any benefit the HMO denied them, rather than larger amounts of money for punitive damages or for pain and suffering, the court said.

Justice Clarence Thomas, writing for the court, said the federal Employee Retirement Income Security Act (ERISA) pre-empts any state laws.

Congress approved ERISA in 1974 to protect employee pensions and other benefits. Now, courts extend it to the managed care industry.

“The purpose of ERISA is to provide a uniform regulatory regime over employee-benefit plans,” the court opinion said.

ERISA shows that Congress intended to make the laws over the managed health care plans that cover Americans “exclusively a federal concern,” Justice Thomas wrote.

ERISA allows a patient to sue a health plan “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan or to clarify his rights to future benefits under the terms of the plan.”

Removing the right to sue HMOs for malpractice also diminishes the ability of personal- injury lawyers to collect large fees.

Some lawyers predicted patients would be exploited by HMOs as a result of the Supreme Court ruling.

“The court provides the HMOs with another tool to be used against the millions of workers and their families covered by ERISA,” said George Parker Young, attorney for the plaintiffs.

Lawyers for the insurance companies said patients can resolve their disputes with HMOs through administrative procedures instead of filing lawsuits.

“There is a whole range of remedies under federal law,” said Miguel Estrada, attorney for Aetna Health, one of the two companies that had been sued.

Congress has tried to confront health-plan liability by proposing patients’ rights legislation. It has never mustered enough votes to pass such a bill.

Eleven states have enacted patient-protection laws, but they set varying standards for liability.

Insurers try to avoid state courts because the juries often grant larger awards to people they perceive as victims of corporations compared with disputes between individuals.

“Without this decision, employers would have in effect lost the ability to design uniform benefit plans covering all of their employees in any state where they may reside, because each state court would have been free to interpret differently a health plan’s terms of coverage,” said James A. Klein, president of the American Benefits Council, a trade association for companies that provide employee benefits.

The Supreme Court’s decision involved a patient who was sent home earlier than her doctor advised after a hysterectomy, but was later forced to return to a hospital for emergency care. The other plaintiff, Juan Davila, was compelled to take a cheaper painkiller than the one prescribed by his doctor. He developed internal bleeding.

“My life is not the same and may have been cut short because of the HMO’s decision to play doctor,” Mr. Davila said.

The two cases were filed against Aetna and Cigna.

Texas law allows lawsuits against HMOs for failing to provide “ordinary care” to beneficiaries.

President Bush signed the legislation while he was governor of Texas, but supported the insurance companies before the Supreme Court.

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,” said the Bush administration’s brief to the Supreme Court.

Mr. Bush’s presumptive opponent, Democratic Sen. John Kerry of Massachusetts, voted for legislation in 2001 that would have given patients a broad right to sue their health insurers.

Mr. Bush opposed the bill, saying it would increase health care costs. Negotiations between Senate Democrats and the White House stalled without resolving the dispute.

Justice Ruth Bader Ginsburg said yesterday in a concurring opinion that Congress needs to resolve managed-care liability issues.

“A regulatory vacuum exists,” she wrote. “I also join the rising judicial chorus urging that Congress and this court revisit what is an unjust and increasingly tangled” system for health insurance liability.

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