For years, HMOs have played hide-and-seek with the law. HMOs overturn doctors’ decisions, deny treatment and then claim in court that they don’t practice medicine, only provide coverage, so that HMOs cannot be sued for medical malpractice. When patients dispute coverage denials, HMOs too often duck behind the curtain of binding arbitration to avoid juries.
If an employee tries to take an HMO to court, the HMO hides behind a loophole in federal law governing employee-employer benefits, the Employee Retirement Income Security Act. The companies claim they cannot be held accountable to state laws or in state courts where damages are available. (HMOs that lose the federal grievance only pay the cost of the procedure they denied, no other damages or penalties.)
The ERISA law must be changed to conform with the realities of the modern, for-profit managed-care system–HMOs are notorious for putting money ahead of good medicine, but can they injure with impunity because of ERISA’s shield of immunity. No matter how egregious their conduct, HMOs administering employer-paid health care never pay damages to the patients they wrong.
Debra Moran’s managed-care ERISA nightmare began in July of 1995 when she developed pain in her hand, wrist, elbow, shoulder and neck. The pain came from two related conditions that impair circulation and neural transmission. As the conditions worsened, the pain grew. The Winfield, Ill., woman could not cook, clean, go to work or feed herself. According to Moran, she continued to get the run-around from her HMO, which refused to refer her to the right specialists and, ultimately, denied coverage for the surgery that even the primary-care physician at her HMO deemed necessary.
Moran was forced to find out about her condition herself–through research and an out-of-pocket evaluation by a specialist in Virginia. The specialist recommended surgery to repair the nerve and restore circulation. Unfortunately, Moran’s HMO denied payment for this $110,000 procedure, claiming it was not medically necessary. Under ERISA, the denial will have no consequences for the HMO. Because Moran received her health-care coverage through an employer, she can never recover damages, only what the HMO should have paid in the first place. There is no cost to stonewalling. And ERISA’s standard for proving an “arbitrary and capricious” denial to recover even those costs is much higher than the “medically necessary” standards under state law.
The cost of inaction on reforming ERISA is being shouldered by patients like Moran and cancer patients who die before their families can navigate ERISA’s arcane grievance procedure. If a patient dies before getting his or her treatment, the HMO is liable for nothing.
Fortunately, Sen. Richard Durbin (D-Ill.) is sponsoring federal legislation to end ERISA’s preemption of damages available in state courts.
The HMO industry has spent millions to scare legislators away from reforming ERISA with cries of increased health-care costs, even though recent studies counter these claims. Texas, for instance, recently became the first state in the nation to offer its citizens a way around ERISA by allowing HMOs to be taken to state court for medical negligence. The HMO industry made similar arguments to deter the Texas reform–claiming a billion-dollar price tag. When an actuarial analysis of the bill’s impact was performed after it was passed, the cost was estimated to be a mere 34 cents per member per month (about 0.3 percent). The Texas law became effective Sept. 1, 1997 and, according to the Republican author of the bill, at most one lawsuit has been filed under the statute.
Deterrence, not litigation, is the goal of holding HMOs to the same state-based liability other industries face. Unless there are consequences to an HMO for denying expensive treatment, the financial calculus of “managing care” will always weigh toward withholding and delaying costly care, no matter how sorely the treatment is needed.
Genuine HMO reform efforts must create consequences for wrongdoing. Patients like Debra Moran deserve more from their HMOs and their politicians than the game of hide-and-seek that has been going on for too long at too great a toll.
