For review: ERISA v. State HMO Acts

Contract Language. By Steven M. Harris, AMNews contributor. Nov. 12, 2001.

CONTRACT LANGUAGE

A column examining the ins and outs of contract issues

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This column has previously addressed the emerging trend of state and federal legislation advancing patients' rights initiatives and its direct impact on the negotiation and implementation of managed care agreements.

Now there's a case before the U.S. Supreme Court to throw into the mix. Rush Prudential HMO Inc. v. Moran is being viewed by many as the highest-profile health law case on the court's docket for this term.

The case raises the issue as to whether the independent physician review provision of the Illinois HMO Act, similar to laws adopted in 37 states and the District of Columbia, is preempted by the Employee Retirement Income Security Act of 1974.

Such laws can force managed care health plans to accept an independent second opinion before refusing to pay for some operations or other medical care under ERISA.

The impact of the court's decision in this case will be the future viability and enforcement of current state laws, which are designed to help physicians deal with recalcitrant HMOs.

The court's decision will ultimately determine any state's ability to regulate managed care, and material modifications of managed care agreements may be necessary after the decision is rendered.

The case involves an Illinois woman, Debra Moran, who decided to pay for a $94,841.27 operation herself after her HMO, Rush Prudential, refused coverage. Moran sued the insurer and won a state court order that required Rush Prudential to submit to independent physician review as mandated by the Illinois HMO Act. The insurer complied but denied, as medically unnecessary, Moran's request for full coverage of the microneurolysis surgery by the outside surgeon. [...]