Both sides ready for HMO liability fight

In a case before the Supreme Court, organized medicine says health plans should be held accountable for medical decisions; insurers say they make only coverage determinations.

By Tanya Albert, AMNews staff. Feb. 16, 2004.

Physicians and patients are looking forward to a U.S. Supreme Court ruling expected to settle the question of whether patients can sue HMOs in state court for injuries incurred when plans deny doctor-recommended treatments. But insurers and businesses are looking forward to it, too.

The opposing sides just hope the decision the court makes this year goes their way.

Doctors and patients say an HMO should be held responsible in state court if its decision ventures into medical decision-making. Insurers and businesses argue that the federal Employee Retirement Income Security Act of 1974 preempts state lawsuits because HMOs make plan determinations, not medical decisions.

The two camps spelled out their opinions in seven friend-of-the-court briefs. In all, about a dozen groups weighed in on the debate, which has been brewing at the state and federal level for more than a decade.

The high court has taken up two Texas cases on the HMO liability issue. Both cases involve patients who sued health plans under a 1997 Texas law that was the first in the nation to give patients the right to sue. The decision would impact similar laws in Arizona, California, Georgia, Maine, New Jersey, North Carolina, Oklahoma, Oregon, Washington and West Virginia.

A lower court already has ruled that the two Texas patients have the right to sue. The Supreme Court is scheduled to hear oral arguments March 23.

Both sides agree that this is an opportunity for the court to offer clarification. In several rulings in recent years, the Supreme Court has said ERISA doesn't offer the blanket protection from lawsuits that it once did. But it is unclear whether the federal act would prevent state lawsuits in these situations.