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The Houston Chronicle

High court to consider Texas law on HMOs

by POLLY ROSS HUGHES, Houston Chronicle
November 4, 2003

AUSTIN - The U.S. Supreme Court agreed Monday to decide the legality of a Texas law under which HMOs can be sued for punitive damages when injuries result from denied coverage.

The court will consider the cases of a Sugar Land woman who was given one day in the hospital for a complicated hysterectomy and a North Texas man who says he nearly died from a cheaper drug recommended by his HMO.

In the first case, Cigna Healthcare appealed a ruling favoring Ruby Calad, who landed in the hospital emergency room just days after an HMO decided a longer hospital stay wasn't medically necessary.

The court also will consider issues involving a similar case in which patient Juan Davila had sued Aetna Health Inc., after the HMO required him to try a less expensive alternative to the painkiller Vioxx.

Davila claims he nearly bled to death from ulcers caused by the drug substituted for his arthritis pain. Also, he says he can no longer take pain medications absorbed through the stomach.

The court's decision to consider the HMO liability issue pleased insurers, which said lower court decisions around the country conflict over whether federal or state law should apply to the plans.

The insurance industry argues that federal law, with far more limited remedies for patients, trumps HMO liability laws in a dozen states.

Under the 1974 federal Employee Retirement Income Security Act, or ERISA, a patient can only sue for the value of the denied medical treatment. The state laws allow actual and punitive damages to be recovered as well.

When passed, the Texas law equated HMO denials of what is "medically necessary" treatment as tantamount to practicing medicine.

Health insurance administrators, however, say they simply administer whatever´┐Żbenefit plans the employers decide to offer.

"The issues in this case are important to employers who offer benefit plans to employees, including those in the state of Texas," said John Shely, an attorney representing Aetna Health Inc.

Consumer groups counter that if the Texas law is deemed irrelevant by the high court, abuse by health maintenance organizations will rise to levels that prompted passage of the state law.

"This issue matters to Texans because this is a Texas law," said Lisa McGiffert, a health policy analyst at Consumers Union's southwest regional office.

"This is a law that was passed in 1997 that gave consumers the right to sue an HMO for medical malpractice if they were harmed by a medical decision made by an HMO," she added.

In Washington, the Foundation for Taxpayer and Consumer Rights asked President Bush to speak on behalf of patients by sticking up for the Texas law.

"President Bush took office bragging he had enacted the toughest HMO accountability law in the nation as governor of Texas. Now he has a duty to defend the law as president," Jamie Court, the group's president, said in a prepared statement.

Susan Pisano, spokeswoman for the recently merged Health Insurance Association of America and American Association of Health Plans, said the plans merely administer coverage.

"We're pleased the court has decided to take the cases," she said, adding that employers decide what they can afford to cover, and health plans make coverage decisions based on the employer's contract.

Attorney George Patterson Young, who represents Davila and Calad, said the Texas law was passed to protect patients against "HMO horror stories" of the past.

"If they say Texas law can't be used, then there's no accountability for HMOs, and we go back to the '90s where HMOs can make these decisions willy-nilly," he said.