In my last article, “Insurance Companies, 1 — Patients, 0,” which appeared in the August issue of Skin & Aging, I began discussing the Employee Retirement Income Security Act (ERISA) and the effect on the provision of medical care of a recent Supreme Court ruling involving ERISA. In that article, I discussed the June 2004 Supreme Court ruling that ruled that patients couldn’t sue their HMOs in court when an HMO had denied payment for medical services. This article will further explore the effects of ERISA on the provision of health care and the bases for lawsuits against HMOs for failing to pay for medical care and the responsibilities of HMOs to pay for care. This information is important for us to know because understanding ERISA is critical because it touches on all aspects of health care. Knowing more about ERISA’s effects gives us a better understanding about the payment for and provision of health care in the United States. Court Rulings Interpreting ERISA Several U.S. Supreme Court rulings that explicate ERISA are mentioned here. First, under ERISA, insurers’ financial incentives to limit payment to physicians to limit care given to patients can not provide the basis for a lawsuit against an HMO/Insurer. Second, states may legally require HMOs and other insurers to accept into their networks all doctors, hospitals and other providers that agree to the insurer’s terms of service under ERISA’s specifications. Third, ERISA does not bar patients from obtaining a second opinion paid for by their HMO or other insurer. A Look at the Issue from Both Sides The limitations that ERISA puts on patients’ right to have their health care paid for and right to sue HMOs are well recognized. While HMOs are happy with these limitations, others, including physicians, patients’ rights groups and medical malpractice lawyers (each for their own reasons) would like limitations lifted. Limiting ERISA’s limitations is at the heart of federal legislation termed a “Patients’ Bill of Rights” that has occupied Congress for years. Such a Patients’ Bill of Rights would likely force HMOs to provide more rights to patients and doctors in accessing and providing care. What the Law Says In Herdrich v. Pegram 530 U.S. 211 (2000), the Supreme Court ruled that patients cannot file lawsuits against an HMO/Insurer using breach of ERISA’s fiduciary requirements over health plan financial incentives to physicians to restrict access to care. The facts of Herdrich are as follows: In 1991, Cynthia Herdrich, after feeling an unusual pain in her stomach, was examined by Lori Pegram, a physician affiliated with Carle Clinic and Health Insurance Management, a for-profit HMO. Pegram then required Herdrich to wait 8 days for an ultrasound of her inflamed abdomen. The ultrasound was to be performed at a facility staffed by Carle more than 50 miles from where Herdrich lived. During that period, Herdrich’s appendix ruptured. Herdrich sued Carle, alleging that Carle’s HMO organization provisions rewarding its physician owners for limiting medical care, entailed an inherent or anticipatory breach of an ERISA fiduciary duty. That is, the payments to doctors to provide and refer in a certain pattern created an incentive for physicians to make decisions in the physicians’ self-interest, rather than the plan’s patients’/participants’ interests. In a unanimous opinion delivered by Justice David H. Souter, the Court held that mixed treatment and eligibility decisions to delay medical treatment by sending a patient to an HMO-owned facility, with adverse consequences, made by an HMO through its physician, are not fiduciary decisions under ERISA. Thus, Herdrich did not state an ERISA claim. “Herdrich’s remedy — return of profit to the plan for the participants’ benefit — would be nothing less than elimination of the for-profit HMO,” wrote Justice Souter. “No HMO organization could survive without some incentive connecting physician reward with treatment rationing,” he added. Justice Souter noted that “the Federal Judiciary would be acting contrary to the congressional policy of allowing HMO organizations if it were to entertain an ERISA fiduciary claim portending wholesale attacks on existing HMOs solely because of their structure.” The law can be summarized simply: Paying for care is not providing care. ERISA lets HMOs and insurers decide how to pay for care with severe limitations on their liability for the implications of their decisions. Other Limitations There are also limitations on the effects of ERISA in areas that don’t pertain to healthcare litigation. On April 2, 2003, the U.S. Supreme Court unanimously (9-0) ruled in the case of Kentucky Association of Health Plans v. Miller 123 S. Ct. 1471 (2003), that states can require HMOs and insurers to accept into their networks all doctors, hospitals and other providers that agree to the insurer’s terms of service. Kentucky v. Miller, upheld the legality of Kentucky’s any-willing-provider (AWP) law, which requires managed care plans to reimburse healthcare providers who are willing to provide services to the plans’ members and who meet the plans’ conditions for participation. About half of the states in the country have similar laws, but most apply only to pharmacies. The court’s opinion, written by Justice Antonin Scalia, noted ERISA’s inclusion of an exception for state laws regulating “insurance, banking or securities” and stated AWP laws do regulate insurance “by imposing conditions on the right to engage in the business of insurance.” Justice Scalia noted that previous lower court rulings have not been completely clear on the boundaries of state versus federal law under ERISA and wrote that from now on, a state law will be considered a regulation of insurance if it: 1. is “specifically directed toward entities engaged in insurance” 2. affects the “risk pooling arrangement between the insurer and the insured.” A year later, the effects of this decision are still unclear, and it has not affected rules that allow insurers to steer patients toward network doctors by offering lower out-of-pocket costs. Kentucky vs. Miller follows another limitation on the attempts by HMOs to use ERISA to limit their obligations. In, Moran v. Rush Prudential HMO 122 S.Ct. 2151 (2002), a divided Supreme Court ruled 5-4 in 2002, upholding an Illinois law, that patients in 42 states can demand an unbiased second opinion when their HMO won’t pay for surgery or treatment. The state laws are intended to let people get second opinions from doctors not affiliated with the HMO, and sometimes to force HMOs to pay for treatments if the independent review shows a surgery or other care is justified and necessary. The HMOs argued that they were not opposed to independent review boards, but wanted one national standard instead of varied state laws (of course, without a Patients’ Bill of Rights no standard has been established). Moran v. Rush Prudential HMO, involved Debra Moran, who had a rare, debilitating nerve problem. Surgery to treat this condition was $95,000. Doctors affiliated with Rush Prudential HMO, her HMO, said the operation was unnecessary, and the HMO refused to pay for it. Using an Illinois law, she consulted an independent doctor at Johns Hopkins Medical Center, chosen under the state law, to get a second opinion. This doctor maintained that the surgery was required. The HMO still balked at paying for the surgery. Justice David H. Souter, writing for the majority, said that when an HMO guarantees “medically necessary” care as Moran’s company did, then states can allow an independent reviewer to look at necessity, and the care can be ordered. Justice Clarence Thomas said in a dissent that the ruling “undermines the ability of HMOs to control costs, which, in turn, undermines the ability of employers to provide healthcare coverage for employees.” The Ramifications for Dermatology The practical implications of Moran v. Rush Prudential HMO, Kentucky Association of Health Plans v. Miller and Herdrich v. Pegram are manifold for dermatology. If an insurance plan gives incentives to primary care doctors not to refer patients to dermatologists or to limit payment only to a consultation and not continuing care, there’s little liability to the HMO/Insurer. So, while patients might get better, more cost-effective care for their acne or psoriasis, a primary care doctor can refer a patient to a facility that the primary care doctor deems proper — with no liability for the HMO. If a patient really needs Mohs surgery or phototherapy and a patient’s request for such medical services is backed by his dermatologist’s opinion and a second opinion (which the HMO must pay for) saying that the service is medically necessary, then an HMO without legal liability might still claim it won’t pay for the Mohs surgery or phototherapy. However, assuming the patient’s insurance covers such services, with primary and secondary opinions saying the Mohs surgery or phototherapy is medically necessary, the HMO could be forced to pay. Finally, if a state’s law says that any willing provider, such as a dermatologist, is to be included in an HMO’s panel, then that provider (if he complies with the HMO’s credentialing requirements) must be included in the panel. Of course, if there’s no AWP state law, then an HMO isn’t compelled to accept the physician. Cornerstone of Understanding ERISA touches on all areas of the provision of medical care, and beginning to learn about ERISA is a cornerstone for physicians to understanding how healthcare is provided and paid for in the United States.
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The Long Arm of ERISA
In my last article, “Insurance Companies, 1 — Patients, 0,” which appeared in the August issue of Skin & Aging, I began discussing the Employee Retirement Income Security Act (ERISA) and the effect on the provision of medical care of a recent Supreme Court ruling involving ERISA. In that article, I discussed the June 2004 Supreme Court ruling that ruled that patients couldn’t sue their HMOs in court when an HMO had denied payment for medical services. This article will further explore the effects of ERISA on the provision of health care and the bases for lawsuits against HMOs for failing to pay for medical care and the responsibilities of HMOs to pay for care. This information is important for us to know because understanding ERISA is critical because it touches on all aspects of health care. Knowing more about ERISA’s effects gives us a better understanding about the payment for and provision of health care in the United States. Court Rulings Interpreting ERISA Several U.S. Supreme Court rulings that explicate ERISA are mentioned here. First, under ERISA, insurers’ financial incentives to limit payment to physicians to limit care given to patients can not provide the basis for a lawsuit against an HMO/Insurer. Second, states may legally require HMOs and other insurers to accept into their networks all doctors, hospitals and other providers that agree to the insurer’s terms of service under ERISA’s specifications. Third, ERISA does not bar patients from obtaining a second opinion paid for by their HMO or other insurer. A Look at the Issue from Both Sides The limitations that ERISA puts on patients’ right to have their health care paid for and right to sue HMOs are well recognized. While HMOs are happy with these limitations, others, including physicians, patients’ rights groups and medical malpractice lawyers (each for their own reasons) would like limitations lifted. Limiting ERISA’s limitations is at the heart of federal legislation termed a “Patients’ Bill of Rights” that has occupied Congress for years. Such a Patients’ Bill of Rights would likely force HMOs to provide more rights to patients and doctors in accessing and providing care. What the Law Says In Herdrich v. Pegram 530 U.S. 211 (2000), the Supreme Court ruled that patients cannot file lawsuits against an HMO/Insurer using breach of ERISA’s fiduciary requirements over health plan financial incentives to physicians to restrict access to care. The facts of Herdrich are as follows: In 1991, Cynthia Herdrich, after feeling an unusual pain in her stomach, was examined by Lori Pegram, a physician affiliated with Carle Clinic and Health Insurance Management, a for-profit HMO. Pegram then required Herdrich to wait 8 days for an ultrasound of her inflamed abdomen. The ultrasound was to be performed at a facility staffed by Carle more than 50 miles from where Herdrich lived. During that period, Herdrich’s appendix ruptured. Herdrich sued Carle, alleging that Carle’s HMO organization provisions rewarding its physician owners for limiting medical care, entailed an inherent or anticipatory breach of an ERISA fiduciary duty. That is, the payments to doctors to provide and refer in a certain pattern created an incentive for physicians to make decisions in the physicians’ self-interest, rather than the plan’s patients’/participants’ interests. In a unanimous opinion delivered by Justice David H. Souter, the Court held that mixed treatment and eligibility decisions to delay medical treatment by sending a patient to an HMO-owned facility, with adverse consequences, made by an HMO through its physician, are not fiduciary decisions under ERISA. Thus, Herdrich did not state an ERISA claim. “Herdrich’s remedy — return of profit to the plan for the participants’ benefit — would be nothing less than elimination of the for-profit HMO,” wrote Justice Souter. “No HMO organization could survive without some incentive connecting physician reward with treatment rationing,” he added. Justice Souter noted that “the Federal Judiciary would be acting contrary to the congressional policy of allowing HMO organizations if it were to entertain an ERISA fiduciary claim portending wholesale attacks on existing HMOs solely because of their structure.” The law can be summarized simply: Paying for care is not providing care. ERISA lets HMOs and insurers decide how to pay for care with severe limitations on their liability for the implications of their decisions. Other Limitations There are also limitations on the effects of ERISA in areas that don’t pertain to healthcare litigation. On April 2, 2003, the U.S. Supreme Court unanimously (9-0) ruled in the case of Kentucky Association of Health Plans v. Miller 123 S. Ct. 1471 (2003), that states can require HMOs and insurers to accept into their networks all doctors, hospitals and other providers that agree to the insurer’s terms of service. Kentucky v. Miller, upheld the legality of Kentucky’s any-willing-provider (AWP) law, which requires managed care plans to reimburse healthcare providers who are willing to provide services to the plans’ members and who meet the plans’ conditions for participation. About half of the states in the country have similar laws, but most apply only to pharmacies. The court’s opinion, written by Justice Antonin Scalia, noted ERISA’s inclusion of an exception for state laws regulating “insurance, banking or securities” and stated AWP laws do regulate insurance “by imposing conditions on the right to engage in the business of insurance.” Justice Scalia noted that previous lower court rulings have not been completely clear on the boundaries of state versus federal law under ERISA and wrote that from now on, a state law will be considered a regulation of insurance if it: 1. is “specifically directed toward entities engaged in insurance” 2. affects the “risk pooling arrangement between the insurer and the insured.” A year later, the effects of this decision are still unclear, and it has not affected rules that allow insurers to steer patients toward network doctors by offering lower out-of-pocket costs. Kentucky vs. Miller follows another limitation on the attempts by HMOs to use ERISA to limit their obligations. In, Moran v. Rush Prudential HMO 122 S.Ct. 2151 (2002), a divided Supreme Court ruled 5-4 in 2002, upholding an Illinois law, that patients in 42 states can demand an unbiased second opinion when their HMO won’t pay for surgery or treatment. The state laws are intended to let people get second opinions from doctors not affiliated with the HMO, and sometimes to force HMOs to pay for treatments if the independent review shows a surgery or other care is justified and necessary. The HMOs argued that they were not opposed to independent review boards, but wanted one national standard instead of varied state laws (of course, without a Patients’ Bill of Rights no standard has been established). Moran v. Rush Prudential HMO, involved Debra Moran, who had a rare, debilitating nerve problem. Surgery to treat this condition was $95,000. Doctors affiliated with Rush Prudential HMO, her HMO, said the operation was unnecessary, and the HMO refused to pay for it. Using an Illinois law, she consulted an independent doctor at Johns Hopkins Medical Center, chosen under the state law, to get a second opinion. This doctor maintained that the surgery was required. The HMO still balked at paying for the surgery. Justice David H. Souter, writing for the majority, said that when an HMO guarantees “medically necessary” care as Moran’s company did, then states can allow an independent reviewer to look at necessity, and the care can be ordered. Justice Clarence Thomas said in a dissent that the ruling “undermines the ability of HMOs to control costs, which, in turn, undermines the ability of employers to provide healthcare coverage for employees.” The Ramifications for Dermatology The practical implications of Moran v. Rush Prudential HMO, Kentucky Association of Health Plans v. Miller and Herdrich v. Pegram are manifold for dermatology. If an insurance plan gives incentives to primary care doctors not to refer patients to dermatologists or to limit payment only to a consultation and not continuing care, there’s little liability to the HMO/Insurer. So, while patients might get better, more cost-effective care for their acne or psoriasis, a primary care doctor can refer a patient to a facility that the primary care doctor deems proper — with no liability for the HMO. If a patient really needs Mohs surgery or phototherapy and a patient’s request for such medical services is backed by his dermatologist’s opinion and a second opinion (which the HMO must pay for) saying that the service is medically necessary, then an HMO without legal liability might still claim it won’t pay for the Mohs surgery or phototherapy. However, assuming the patient’s insurance covers such services, with primary and secondary opinions saying the Mohs surgery or phototherapy is medically necessary, the HMO could be forced to pay. Finally, if a state’s law says that any willing provider, such as a dermatologist, is to be included in an HMO’s panel, then that provider (if he complies with the HMO’s credentialing requirements) must be included in the panel. Of course, if there’s no AWP state law, then an HMO isn’t compelled to accept the physician. Cornerstone of Understanding ERISA touches on all areas of the provision of medical care, and beginning to learn about ERISA is a cornerstone for physicians to understanding how healthcare is provided and paid for in the United States.
In my last article, “Insurance Companies, 1 — Patients, 0,” which appeared in the August issue of Skin & Aging, I began discussing the Employee Retirement Income Security Act (ERISA) and the effect on the provision of medical care of a recent Supreme Court ruling involving ERISA. In that article, I discussed the June 2004 Supreme Court ruling that ruled that patients couldn’t sue their HMOs in court when an HMO had denied payment for medical services. This article will further explore the effects of ERISA on the provision of health care and the bases for lawsuits against HMOs for failing to pay for medical care and the responsibilities of HMOs to pay for care. This information is important for us to know because understanding ERISA is critical because it touches on all aspects of health care. Knowing more about ERISA’s effects gives us a better understanding about the payment for and provision of health care in the United States. Court Rulings Interpreting ERISA Several U.S. Supreme Court rulings that explicate ERISA are mentioned here. First, under ERISA, insurers’ financial incentives to limit payment to physicians to limit care given to patients can not provide the basis for a lawsuit against an HMO/Insurer. Second, states may legally require HMOs and other insurers to accept into their networks all doctors, hospitals and other providers that agree to the insurer’s terms of service under ERISA’s specifications. Third, ERISA does not bar patients from obtaining a second opinion paid for by their HMO or other insurer. A Look at the Issue from Both Sides The limitations that ERISA puts on patients’ right to have their health care paid for and right to sue HMOs are well recognized. While HMOs are happy with these limitations, others, including physicians, patients’ rights groups and medical malpractice lawyers (each for their own reasons) would like limitations lifted. Limiting ERISA’s limitations is at the heart of federal legislation termed a “Patients’ Bill of Rights” that has occupied Congress for years. Such a Patients’ Bill of Rights would likely force HMOs to provide more rights to patients and doctors in accessing and providing care. What the Law Says In Herdrich v. Pegram 530 U.S. 211 (2000), the Supreme Court ruled that patients cannot file lawsuits against an HMO/Insurer using breach of ERISA’s fiduciary requirements over health plan financial incentives to physicians to restrict access to care. The facts of Herdrich are as follows: In 1991, Cynthia Herdrich, after feeling an unusual pain in her stomach, was examined by Lori Pegram, a physician affiliated with Carle Clinic and Health Insurance Management, a for-profit HMO. Pegram then required Herdrich to wait 8 days for an ultrasound of her inflamed abdomen. The ultrasound was to be performed at a facility staffed by Carle more than 50 miles from where Herdrich lived. During that period, Herdrich’s appendix ruptured. Herdrich sued Carle, alleging that Carle’s HMO organization provisions rewarding its physician owners for limiting medical care, entailed an inherent or anticipatory breach of an ERISA fiduciary duty. That is, the payments to doctors to provide and refer in a certain pattern created an incentive for physicians to make decisions in the physicians’ self-interest, rather than the plan’s patients’/participants’ interests. In a unanimous opinion delivered by Justice David H. Souter, the Court held that mixed treatment and eligibility decisions to delay medical treatment by sending a patient to an HMO-owned facility, with adverse consequences, made by an HMO through its physician, are not fiduciary decisions under ERISA. Thus, Herdrich did not state an ERISA claim. “Herdrich’s remedy — return of profit to the plan for the participants’ benefit — would be nothing less than elimination of the for-profit HMO,” wrote Justice Souter. “No HMO organization could survive without some incentive connecting physician reward with treatment rationing,” he added. Justice Souter noted that “the Federal Judiciary would be acting contrary to the congressional policy of allowing HMO organizations if it were to entertain an ERISA fiduciary claim portending wholesale attacks on existing HMOs solely because of their structure.” The law can be summarized simply: Paying for care is not providing care. ERISA lets HMOs and insurers decide how to pay for care with severe limitations on their liability for the implications of their decisions. Other Limitations There are also limitations on the effects of ERISA in areas that don’t pertain to healthcare litigation. On April 2, 2003, the U.S. Supreme Court unanimously (9-0) ruled in the case of Kentucky Association of Health Plans v. Miller 123 S. Ct. 1471 (2003), that states can require HMOs and insurers to accept into their networks all doctors, hospitals and other providers that agree to the insurer’s terms of service. Kentucky v. Miller, upheld the legality of Kentucky’s any-willing-provider (AWP) law, which requires managed care plans to reimburse healthcare providers who are willing to provide services to the plans’ members and who meet the plans’ conditions for participation. About half of the states in the country have similar laws, but most apply only to pharmacies. The court’s opinion, written by Justice Antonin Scalia, noted ERISA’s inclusion of an exception for state laws regulating “insurance, banking or securities” and stated AWP laws do regulate insurance “by imposing conditions on the right to engage in the business of insurance.” Justice Scalia noted that previous lower court rulings have not been completely clear on the boundaries of state versus federal law under ERISA and wrote that from now on, a state law will be considered a regulation of insurance if it: 1. is “specifically directed toward entities engaged in insurance” 2. affects the “risk pooling arrangement between the insurer and the insured.” A year later, the effects of this decision are still unclear, and it has not affected rules that allow insurers to steer patients toward network doctors by offering lower out-of-pocket costs. Kentucky vs. Miller follows another limitation on the attempts by HMOs to use ERISA to limit their obligations. In, Moran v. Rush Prudential HMO 122 S.Ct. 2151 (2002), a divided Supreme Court ruled 5-4 in 2002, upholding an Illinois law, that patients in 42 states can demand an unbiased second opinion when their HMO won’t pay for surgery or treatment. The state laws are intended to let people get second opinions from doctors not affiliated with the HMO, and sometimes to force HMOs to pay for treatments if the independent review shows a surgery or other care is justified and necessary. The HMOs argued that they were not opposed to independent review boards, but wanted one national standard instead of varied state laws (of course, without a Patients’ Bill of Rights no standard has been established). Moran v. Rush Prudential HMO, involved Debra Moran, who had a rare, debilitating nerve problem. Surgery to treat this condition was $95,000. Doctors affiliated with Rush Prudential HMO, her HMO, said the operation was unnecessary, and the HMO refused to pay for it. Using an Illinois law, she consulted an independent doctor at Johns Hopkins Medical Center, chosen under the state law, to get a second opinion. This doctor maintained that the surgery was required. The HMO still balked at paying for the surgery. Justice David H. Souter, writing for the majority, said that when an HMO guarantees “medically necessary” care as Moran’s company did, then states can allow an independent reviewer to look at necessity, and the care can be ordered. Justice Clarence Thomas said in a dissent that the ruling “undermines the ability of HMOs to control costs, which, in turn, undermines the ability of employers to provide healthcare coverage for employees.” The Ramifications for Dermatology The practical implications of Moran v. Rush Prudential HMO, Kentucky Association of Health Plans v. Miller and Herdrich v. Pegram are manifold for dermatology. If an insurance plan gives incentives to primary care doctors not to refer patients to dermatologists or to limit payment only to a consultation and not continuing care, there’s little liability to the HMO/Insurer. So, while patients might get better, more cost-effective care for their acne or psoriasis, a primary care doctor can refer a patient to a facility that the primary care doctor deems proper — with no liability for the HMO. If a patient really needs Mohs surgery or phototherapy and a patient’s request for such medical services is backed by his dermatologist’s opinion and a second opinion (which the HMO must pay for) saying that the service is medically necessary, then an HMO without legal liability might still claim it won’t pay for the Mohs surgery or phototherapy. However, assuming the patient’s insurance covers such services, with primary and secondary opinions saying the Mohs surgery or phototherapy is medically necessary, the HMO could be forced to pay. Finally, if a state’s law says that any willing provider, such as a dermatologist, is to be included in an HMO’s panel, then that provider (if he complies with the HMO’s credentialing requirements) must be included in the panel. Of course, if there’s no AWP state law, then an HMO isn’t compelled to accept the physician. Cornerstone of Understanding ERISA touches on all areas of the provision of medical care, and beginning to learn about ERISA is a cornerstone for physicians to understanding how healthcare is provided and paid for in the United States.
