Push Is On for All or Nothing in State HMO Reform Legislation

In a move that could sink HMO reform in California this year or alter it dramatically, Assembly Democrats have decided on an all-or-nothing strategy to give patients the right to sue for a full range of civil damages.

By next week, Democrats expect to have attached that provision to the major HMO reform bills in the Legislature, Assembly leaders said, including one written by an Orange County Republican.

Civil “liability is the true deterrent to abuse by health plans, and everything else can only function if health plans know there is the ultimate deterrent of the consumer having the option of taking them to court,” said Assemblyman Martin Gallegos (D-Baldwin Park), chairman of the Health Committee.

Gov. Pete Wilson opposes giving patients full civil liability rights against HMOs. Rather, he and the HMO industry support reform legislation that would give patients the right to appeal HMO decisions to external review panels.

While legislation permitting both types of reforms are pending in the Legislature, Assembly Democrats this week moved to limit the options. They began amending key HMO bills to include external review and liability protection for patients.

Only one major HMO measure, written by Assembly members Scott R. Baugh (R-Huntington Beach) and Carol Migden (D-San Francisco), survives without the liability provisions. That bill, however, is expected to be altered next week or withdrawn, said several Democrats.

The issue has posed a dilemma for some Senate Democrats, who say any reform would be better than none.

“I am not against imposing civil liability on HMOs and even introduced that this year, but I am convinced the governor will veto both if they are linked,” said Sen. Herschel Rosenthal (D-North Hollywood).

A spokesman for Wilson said Friday that the governor would veto such legislation and reiterated the governor’s view that making HMOs liable for compensatory and punitive damages would aid lawyers not consumers.

“Linking the bills . . . is essentially a Christmas tree for trial lawyers and is unacceptable to us,” said spokesman Ron Low.

Trial lawyers, a key contributor to Democrats, are dictating strategy, Baugh said. “It is all about politics and money,” he said. “It is not about helping consumers.”

But several Assembly Democrats argued that Republicans want to tame the public clamor against HMOs by offering limited, ineffectual change.

Currently, HMOs that serve private employers are liable only for the cost of any denied medical service, not damages, costs or injury caused by the denial of treatment.

“If you are an HMO, you are never worse off by denying benefits,” said a key legislative staffer. “At worst, you only have to pay for the original service. That kind of system is dysfunctional.”

The two reforms must be linked, Gallegos said, or injured patients are defenseless.

“If we can’t get the types of consumer protection that patients deserve, then we ought not give them a system that can still be controlled by health plans and gives consumers nothing,” he said.