Pennsylvania court rules that ERISA does not exempt health plans from liability

Federal law doesn't protect HMOs from being sued in state court when they make medical decisions, the Pennsylvania Supreme Court says.

By Tanya Albert, AMNews staff. May 7, 2001.

The Supreme Court of Pennsylvania last month put another chink in health plans' federal shield from medical malpractice lawsuits.

The Employee Retirement Income Security Act of 1974 protects HMOs from lawsuits if they are making administrative decisions. But companies that make medical decisions are subject to state laws that govern medical negligence, the majority of the court said. One justice dissented.

"Any decision made by an HMO that involves medical judgment ... is going to have to be a good decision," said Stephen A. Ryan, the Philadelphia attorney who represented the plaintiffs in the case, Pappas v. Asbel. "They are going to have to be accountable for their decisions."

For doctors, the decision could mean fewer disagreements between what the treating physician believes is best for the patient and what the managed care company says is the best treatment.

"This at least ought to get the physicians out of the middle," said Ken Jones, general counsel for the Pennsylvania Medical Society, which, along with the AMA, filed a brief in the case.

The closely watched decision continued the nationwide trend in federal and state courts of chipping away at the broad protection from lawsuits ERISA once provided HMOs.

This is the Pennsylvania court's second ruling on the Pappas case. The U.S. Supreme Court asked the state court to look at its first decision in light of a ruling in June 2000 by the federal high court concerning ERISA protection.

Many experts interpret that case, Pegram v. Herdrich, to mean that the U.S. Supreme Court said ERISA should preempt claims where the HMO was making an administrative decision, but that plans should be held liable under state medical malpractice laws for harmful medical decisions. [...]