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2003-11-04 -- Summary: Supreme Court will hear Suits Against HMOs

Kaiser Daily Health Policy Report, Tuesday, November 04, 2003

Supreme Court Agrees To Decide Whether People Have Right To Sue Health
Plans That Deny Care Recommended by Doctors

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The Supreme Court on Monday agreed to hear the appeal of two related
cases -- Aetna Health v. Davila and Cigna v. Calad et al. -- to
determine whether patients can file suit against HMOs for malpractice
or other torts in state courts, the Washington Post reports.

In addition, the cases will determine whether the administrative
decisions of HMOs are protected from state lawsuits under the 1974
Employee Retirement Income Security Act, under which the federal
government has the exclusive authority to regulate employee benefit
plans (Lane, Washington Post, 11/4).

The issues are "at the core of the tension between insurers' efforts
to rein in health care costs and patients' fears that they might be
denied needed treatment," the Baltimore Sun reports (Salganik,
Baltimore Sun, 11/4). The decision in the cases will determine the
legal rights of the more than 130 million U.S. residents enrolled in
employer- or union-sponsored HMOs, according to the Los Angeles Times
(Savage, Los Angeles Times, 11/4).

The Case Histories

In the Aetna case, Texas resident 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 room for bleeding ulcers (Greenberger, Wall Street Journal,
11/4).

In the Cigna case, Texas resident 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,
but the health insurers argued that ERISA covered the cases and had
them transferred to Federal District Court in Dallas, which ruled in
favor of the companies (Greenhouse, New York Times, 11/4). However,
the 5th Circuit Court of Appeals in New Orleans ruled in 2002 that
Davila and Calad could file suit in state court because "decisions on
whether to pay for a particular treatment are decisions about both
insurance," which is regulated under ERISA, and medical care, which is
regulated under state laws, the Post reports (Washington Post, 11/4).
Under ERISA, plaintiffs can sue HMOs in federal court for the cost of
denied treatments but not for damages (Baltimore Sun, 11/4).

Supreme Court Case

Aetna and Cigna appealed the decision of the 5th Circuit Court of
Appeals to the Supreme Court based on arguments that HMO coverage
decisions are only about insurance, not about medical care, and as a
result, are regulated under ERISA (Washington Post, 11/4).

"The very reason for the HMOs' existence is to maximize the
cost-efficiency of the health care services provided to their
members," Aetna said in a brief filed with court, adding,
"Cost-efficiency necessarily involves the institution of
cost-management policies like the one at issue in this case, which
holds certain more expensive prescription medications in reserve and
gives more readily accessible medications a chance to work" (Baltimore
Sun, 11/4).

In a friend-of-the-court brief, the merged American Association of
Health Plans/Health Insurance Association of America, the U.S. Chamber
of Commerce, the National Association of Manufacturers and the
American Benefits Council warned that if the court rules that patients
can file suit against HMOs in state courts, consumers will face
"higher copayments, deductibles and premiums, while being subject to
restricted benefits and drug selection" (Washington Post, 11/4).

The brief added that Congress passed ERISA "to ensure that plans were
not subject to a costly patchwork of conflicting and open-ended state
law remedies" (Wall Street Journal, 11/4). Stephanie Kanwit, legal
counsel to AAHP/HIAA, said that "there is an important legal
distinction to be made" about medical care decisions and coverage
decisions, the Sun reports.

However, George Parker Young, the attorney for Davila and Calad, said,
"How can they say a medical necessity decision is not a medical
decision? That's goofy. That's double-speak" (Baltimore Sun, 11/4). A
brief filed on behalf of the plaintiffs argues that Congress did not
pass ERISA to exempt HMOs from "the duties imposed on all medical
decision-makers by the states," the Post reports. "ERISA has 'nothing
to say' about medical standards of ordinary care, a topic left
entirely to the states," according to the brief (Washington Post,
11/4). The Supreme Court will likely hear oral arguments in the cases
early next year and issue a decision by July (Lemke, Washington Times,
11/4).

Washington Post article
http://www.washingtonpost.com/wp-dyn/articles/A59853-2003Nov3.html


Baltimore Sun
http://www.sunspot.net/news/health/bal-bz.hmo04nov04,0,1427953.story?c
oll=bal-health-headlines


Los Angeles Times
http://www.latimes.com/news/printedition/asection/la-na-scotus4nov0400
0423,1,7075761.story?coll=la-news-a_section


New York Times Article
http://www.nytimes.com/2003/11/04/politics/04SCOT.html