Health Consensus California

Consensus Commentaries
Consumer Stories
Press Releases
Our Common Problems
Employer Health Survey Results
Get Involved


News Coverage

San Jose Mercury News (California)

Court case testing HMOs;


by Barbara Feder Ostrov; Mercury News
June 4, 2003

A long-running court case pitting the state's HMO watchdog agency against health insurer Blue Shield will continue after a recent ruling appeared to reinforce the agency's ability to regulate HMO prescription drugs but questioned whether it should apply to contracts negotiated before a new law took effect in January.

The ruling sets the stage for legal fine-tuning of how the agency may exercise its powers under a new state law strengthening its oversight of HMO prescription drugs. Since the Department of Managed Health Care was established in 2000 to monitor health maintenance organizations and advocate for HMO patients, insurers have tested its authority in a series of legal challenges.

The complex case centers on Blue Shield's refusal to provide Xenical, a weight loss drug that can also be used to lower cholesterol, to an obese woman. Blue Shield contended that it had the right to deny the drug because it was expressly excluded in the woman's contract. However, the insurer provided the drug to the woman as the case progressed.

The Department of Managed Health Care argued that it had the power to force Blue Shield to provide the drug because it was critical for controlling the woman's cholesterol.

At first, an administrative law judge upheld Blue Shield's position. But California lawmakers and Gov. Gray Davis later pushed through legislation granting the Department of Managed Health Care oversight over HMO prescription drugs. That law took effect Jan. 1, 2003.

Last month, Sacramento County Superior Court Judge Emily Vasquez ruled that the state law provided the agency ''unambiguous'' authority to regulate HMO drugs. But she also questioned whether the obese woman was covered under the new state law because her contract was in place before the law took effect.

Blue Shield and the Department of Managed Health Care differ sharply in their interpretation of the ruling.

Steve Fisher, a spokesman for the agency, views the decision as a victory for the department because it reinforces its overall authority over prescription drugs.

''I wish Blue Shield spent less time fighting patients in the courtroom and more time helping them in the doctors' office,'' Fisher said. ''They're fighting a losing battle to deny Californians lifesaving drugs.''

Blue Shield spokesman Tom Epstein says the ruling means the agency cannot force Blue Shield to provide drugs excluded by plans negotiated before Jan. 1.

''A health plan can't really operate a business if they price a product based on certain contract parameters and the contract is subsequently changed by the department,'' he said.

Jerry Flanagan, of the watchdog group Foundation for Taxpayer and Consumer Rights, said the ruling could be bad news for consumers if the judge's ruling excludes contracts in place before Jan. 1. ''Clearly, there's going to be more litigation here.''

The Department of Managed Health Care can be reached at
Contact Barbara Feder Ostrov at [email protected]