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U.S. Supreme Court to decide if patients can sue health plans

This session will mark the fourth time in as many years that justices have weighed in on states' rights to regulate health plans.

By Tanya Albert, amednews staff. Nov. 24, 2003.

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After more than a decade of debate, the question of whether patients can sue their health plans in state court for denials of physician-recommended treatment is set to be settled by the U.S. Supreme Court.

Doctors and patients argue that health plans that get involved with medical decision-making should, as a measure of last resort, have to answer for harmful decisions in state court. But health plans say the federal Employee Retirement Income Security Act of 1974 shields them from state lawsuits, which they believe would drive up already rising health care costs.

The high court is expected to end the debate -- which was at the center of controversy over patients' bill of rights legislation in Congress -- when it hears two cases involving patients who sued their health plans under a 1997 Texas law. That statute was the first in the nation to give citizens the right to sue health plans in state court.

The Supreme Court's decision to hear the cases "is very significant because it's taking up a matter that has been in very hot contention for the past 15 years," said Mark Rust, managing partner of Barnes & Thornburg's Chicago office and chair of its health care department. "There is concern that a person who makes a medical decision be held equally responsible whether it was made by a treating physician or whether it was made by a medical director of an HMO."

The Supreme Court's decision, expected next summer, will affect 11 state laws.

Medical decision vs. coverage decision

The facts in the two cases are good illustrations of disagreements between health plans and their subscribers.

Both patients suing their managed care companies claim they had health complications after their employee-sponsored plans paid for a treatment different from what their physicians recommended. The plaintiffs believe they should be compensated.

Arthritis patient Juan Davila said in court documents that he had been taking Vioxx without complications, then almost died after his HMO, Aetna Health Inc., required him to try two different drugs on its formulary before it would pay for the Vioxx.

Ruby Calad, in court documents, claims that her physician recommended she stay in the hospital longer after a complicated hysterectomy, but her health plan, CIGNA HealthCare of Texas Inc., decided she should be discharged. She ended up in the emergency department a few days later with complications, court records show.

The patients argue that their health plans made medical decisions and should be held liable for the harm those decisions caused. The patients believe the plans should be held accountable in state court, just as physicians are.

The American Medical Association has argued that point as well.

"If a health plan wants to play doctor, a health plan should be held accountable," said AMA President Donald J. Palmisano, MD. "ERISA was never meant to shield health plans from lawsuits when they make treatment decisions."

That same view led the Texas Medical Assn. to seek the Texas patients' rights law. "The concern was managed care entities were dictating to physicians how to practice medicine," said Rocky Wilcox, the TMA's general counsel.

Health plans see Aetna's and CIGNA's decisions from a different perspective. The companies appealed their cases to the Supreme Court after the 5th U.S. Circuit Court of Appeals, based in New Orleans, last year ruled that Davila and Calad could go forward with their claims in state court.

The health plans argue that the decisions not to pay for the care rested solely on whether the proposed treatment or service was covered by insurance, not whether the insured patient should receive it. Consequently, they say, the companies shouldn't be held accountable in state court. Instead, ERISA -- a federal law designed to give a "uniform framework for regulating the administration of employee benefit plans" -- should apply because the decisions were about coverage.

"The 'certificate of coverage' for the [plan] expressly states that ... [Aetna] may determine whether any benefit provided under the certificate is medically necessary," Aetna said in its petition to the court. "The certificate further emphasizes in bold print that 'this certificate applies to coverage only and does not restrict a member's ability to receive health care services that are not, or might not be, covered benefits under this certificate.' "

Spokesmen for Aetna and CIGNA said the companies were pleased the court chose to review their cases.

"It is our view that there are important issues in this case, and we look forward to any clarification that comes from the court," Aetna spokesman David Carter said.

Susan Pisano, spokeswoman for the American Assn. of Health Plans-Health Insurance Assn. of America, agreed. "We hope the court will be using this as an opportunity to provide clarity around health care decisions," she said. "There has been confusion around administrative decisions and treatment decisions."

When the court in November said it would take the case, it marked the fourth time in as many years that the justices have heard a case involving ERISA, health plans and state laws. In previous cases, the high court has ruled that ERISA doesn't automatically shield health plans from state laws governing the insurance industry.

That has been a shift from the blanket protection the federal law offered.

"The hope is the court will continue that shift and rule that this is an area of state concern and not federal concern," said George Parker Young, the Texas attorney representing Davila and Calad.

But Pisano said opening plans to state court lawsuits would further drive up costs. "As physicians know with the broken medical malpractice system, we should be looking for alternative ways to solve disputes, such as independent review. Consumers and employers pay the bill when there is an increase in court activity."

Young said there have been few lawsuits filed under the Texas law and that most people work out differences through the appeals process. "As a last resort, you have to have a jury available."

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