Class 10 – ERISA
A controversial issue deals with the Employee Retirement Income Secuirty Act of 1974 (ERISA) law. Under this law, certain cases involving employee benefits must be held in federal court and not in state court. What this means, among other implications, could be that, for example, state courts might award punitive damages in a particular case whereas federal courts in such case due to the applicable laws would not be able to. Often, HMOs will use the ERISA laws as a strategic tactical defense maneuver and petition a court to move a case from state court to federal court so that federal laws, specifically ERISA, would apply.
About 160 million Americans are currently still prohibited from suing their HMOs in state courts or collecting damages in federal suits because of Employee Retirement Income Secuirty Act of 1974 (ERISA).
The article by Laura B. Benko, “Ohioans Could Vote on HMO Liability,“ Modern Healthcare (May 1, 2000), looks at the approach of changing laws such as through state legislation or as described in this article by public vote (because the state legislation is Republican controlled and the particular issue never seems to get passed in state legislature). For example, the right to sue HMOs proposed amendment to the Ohio constitution is being sponsored by the Ohio AFL-CIO American Federation of Labor and Congress of Industrial Organizations) that has more than 800,000 members.
According to this article, the Ohio Association of Health Plans and the Ohio Hospital Association said they would oppose the ballot issue because it would put the issue in an already overburdened judicial system, increase premium costs due to insurers having to defend themselves in court. Employers worried about being named in lawsuits over decision made about their workers’ healthcare coverage. So far only Arizona, California, Georgia, Texas and Washington are the only states that allow patients to sue their HMOs. Many states are expected to pass similar bills this year.
The article by Richard A. Oppel, “New HMO Fight: Medical Discipline; Insurer Sues Over State Rebuke of its Doctor,” The New York Times (May 28, 2000): Section 3, Page 1 and the article in American Health Line (June 1, 2000), “HMO Lawsuits: Texas Case Could Set Tone for Reform,” raise some issues including licensure issues – when is it the practice of medicine as well as some ERISA issues.
This article looks at a situation in which a medical director for a HMO in Texas denies to cover care for a sick child, and the question is can the physician be held responsible. The doctor denied coverage stating that it was custodial care rather than working “towards resolution of a specific health problem”.
The parents of the child filed a complaint with the Texas state medical board and board officials found that the doctor was engaging in the practice of medicine and had “failed to meet the standard of care”. The board proposed that the doctor pay $5,000 fine and accept a public reprimand and a 2-year “probated suspension” of his medical license. UnitedHealthcare sued the state board in March in federal court in Dallas, Texas and so the board’s disciplinary action against the doctor is on hold pending the outcome of the suit.
Different states have different opinions about whether medical licensure is needed in the state to determine medical necessity issues, i.e. whether the determination of medical necessity by health insurance providers amounts to the practice of medicine.
The care did ultimately get paid through a spouses health insurance policy (coordination of benefits) that happened to be a subsidiary of United Healthcare.
This case looks at the Employee Retirement Income Security Act (ERISA) issue where HMOs say they only pay for care, they do not render care and that the case deals with federal issues so it belongs in federal court as compared to cases of negligence and medical malpractice issues that are typically heard in state courts.
A federal Appeals Court in Chicago decided a case, Moran and State of Illinois v. Rush Prudential HMO, Incorporated, in October, 2000 that held when the patient’s primary care physician and HMO disagree about medical necessity of a treatment proposed by the primary care physician and an independent review by a physician reviewing the claim agrees with the primary care physician then the HMO must provide the proposed treatment. This case looks at the various issues falling under Employee Retirement Income Security Act (ERISA) and reverses the state court’s opinion that state law was preempted by ERISA.
In this case Ms. Moran opted to have some complicated surgery provided by an out-of-network provider that her primary care physician agreed in a letter to the HMO would best serve the patient. However, the HMO disagreed and denied coverage based on the ground that the procedure was not “medically necessary” as defined by the plan, and stated that it would cover the standard procedure by an in-network surgeon. Ms. Moran’s surgery took 14 hours and cost $94,841.27 and Ms. Moran paid for the surgery herself. The month before she had surgery, Ms. Moran made a written demand to Rush for it to comply with the HMO Act and to provide a mechanism for a review by an independent physician when the patient’s primary care physician and HMO disagree about medical necessity of a treatment proposed by the primary care physician. A review by an independent physician was made and this physician determined that the surgery performed was medically necessary, however this physician proposed that a different procedure would have been less intrusive and less time consuming than the one performed. Rush’s medical director concluded that the surgery performed was not “medically necessary”.
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