Insurance Companies, 1 — Patients, 0

A recent Supreme Court ruling is likely to have far-reaching negative implications for our patients — and there will be little we can do about it. In June 2004, the Supreme Court ruled that patients couldn’t sue their HMOs in state court for a denial of payment for medical service. How Did this Happen and What Does It Mean? The ruling actually has happened as a byproduct of an overall ruling involving the Employee Retirement Income Security Act of 1974 (ERISA). ERISA was created to set minimum standards for most voluntarily established pension and health plans in private industry, including employer provided health insurance, such as HMOs. ERISA was created to provide protection for individuals in these plans. This powerful legislation, however, pre-empts any right a state might try to give patients to sue their HMOs for a denial of health care that a physician has recommended. The implications of the June ruling have resulted because ERISA does not specifically say that a patient can sue for such a denial of coverage. So, by default, that means that such suits can’t go forward in state courts against the HMO. And since most malpractice cases are brought in state courts, this is a very significant decision. I’d like to discuss the impact this ruling will have in this article — the first in a three-part series. In part one, I’ll also very briefly summarize and review ERISA. In part two, I’ll highlight several other important ERISA decisions that relate to healthcare. The third article will discuss the ways in which this could impact insurance coverage. A Closer Look at ERISA ERISA establishes federal standards for employee benefits including healthcare insurance — and as stated above — this legislation pre-empts state law that cover ERISA’s subject matter. Congress often attaches pre-emptive power to legislation to allow companies to set national standards for their business dealings and contracts, rather than having 50 different state standards exist. Members of Congress thought that ERISA would encourage employers to adopt health insurance plans for employees because of its national standardization of pension and healthcare insurance law. ERISA covers 60 to 70 million employees in the United States and 120 to 130 million people when counting family members of employees who are covered. ERISA provides for an array of things including the following: • Benefits plans must provide employee/participants with plan information, including important information about plan features and funding.1 • Those who manage and control plan assets have a fiduciary responsibility toward employees/participants. A fiduciary responsibility or relationship is a relationship where the government and courts expect that the fiduciary put the interests of the dependant party first and to always deal in good faith. • ERISA requires benefits plans to establish a grievance and appeals process for employees to get benefits the employees think they are entitled to from their plans. Under some circumstances, ERISA gives participants/employees the right to sue for benefits and breaches of fiduciary duty. • If an employer maintains a pension plan, ERISA specifies: • when an employee/participant must be allowed to become a participant • how long an employee/participant has to work before having a non-forfeitable interest in a pension • how long employee/participant can be away from their job before it might affect their benefits • whether the employee/participant’s spouse has a right to part of the pension if the the employee/participant dies.2 Related Laws of Note Important laws followed the enactment of the original ERISA legislation, but which are related to and actually part of ERISA, such as: • The Consolidated Omnibus Budget Reconciliation Act (COBRA). This act provides some workers and their families with the right to continue their health coverage for a limited time after certain events, such as the loss of a job. • The Health Insurance Portability and Accountability Act (HIPAA).This act requires patient information to be kept private and secure and establishes healthcare transaction standards. • The Newborns' and Mothers' Health Protection Act. • The Mental Health Parity Act • The Women's Health and Cancer Rights Act.1 Generally, ERISA does not cover insurance that a patient buys directly from an insurance company, nor does it cover group health plans established or maintained by government entities, churches for their employees, or plans that are maintained solely to comply with applicable workers compensation, unemployment or disability laws. ERISA also does not cover plans kept outside the United States primarily for the benefit of nonresident aliens or excess benefit plans that not are not paid for up front (unfunded plans).1 An Eye on the Ruling On June 21, 2004, U.S. Supreme Court unanimously ruled that patients can’t sue health insurance companies under a Texas state law for refusing to pay for doctor-recommended medical care. The reason why is because ERISA pre-empts the state law on which such a suit would be based because ERISA covers the dealings of HMOs.3 The justices reversed a U.S. Appeals Court ruling that the two lawsuits in state court in Texas could proceed to trial. The decision was a victory for the U.S. Justice Department and insurers/healthcare maintenance organizations (HMOs). They stated that allowing the lawsuits to proceed in state courts would increase healthcare litigation and healthcare costs. The particular cases in question involved a Texas law that allowed patients to sue HMOs and other insurers over the denial of payment for patients’ medical treatments. Nine other states — Arizona, California, Georgia, Maine, New Jersey, North Carolina, Oklahoma, Washington and West Virginia had enacted similar legislation. The state laws have become especially significant in recent years as patients grapple with their insurers/HMOs over coverage for medical services because Congress has not been able to enact national legislation that would allow patients to sue their HMO in federal court for medical malpractice. Proponents of the Texas state law argued that patients should be able to sue their managed care plans for the harm caused when payment for needed health care has been denied since most patients can’t pay for expensive medical care out of pocket. The pair of Texas cases involved suits brought against divisions of Aetna and Cigna.3 One lawsuit had been brought by Juan Davila, who was covered by an Aetna HMO through a plan provided by his employer. In 2000, Davila’s primary care physician prescribed the COX-2 inhibitor rofecoxib (Vioxx) for his arthritis. Before filling the prescription, Aetna required Davila to try less expensive anti-inflammatory medications (non-steroidal anti-inflammatory drugs [NSAIDs]).3 After taking the NSAIDs for 3 weeks, Davila was rushed to the emergency room after suffering from peptic ulcers, bleeding and anemia. The other lawsuit involved Ruby Calad, who was discharged from the hospital in 1999 after a hysterectomy. Cigna’s nurse/coverage reviewer decided that the standard 1-day hospital stay would be sufficient, although Calad’s doctor had recommended a longer stay; several days after her release, Calad suffered complications.3 She then sued Cigna. Both the Calad case and Davila cases against the HMOs will now be dismissed in state court. The Long Arm of ERISA ERISA has wide-ranging effects. A key effect it has is to insulate HMOs from lawsuits based on state laws. The effect of the Davila and Calad cases on the practice of dermatology is unclear. It can be speculated that some insurance companies/HMOs will continue efforts to require the use of methotrexate or phototherapy before approving the use of biologic therapies for psoriasis — or just not pay for biologic therapy at all. Other prescription payment patterns of HMOs (for example, only paying for generic topical steroids or oral antibiotics) will likely gain additional impetus. The passage of federal legislation allowing patients’ suits against HMOs for not paying for medical services recommended by their physician might mitigate such effects but could indeed drive up the price of health care. As always, the practice of medicine is, and continues to be, complex.