Right to Sue HMOs Upheld
In a major victory for consumers, a federal judge on Friday upheld an unprecedented Texas law that allows patients to sue their health plans for malpractice.
The ruling, consumer activists say, could bolster efforts to pass similar legislation in California and more than a dozen other states.
After hearing of the ruling, California Assemblyman Martin Gallegos (D-Baldwin Park) said he plans to reintroduce a similar law when the Legislature reconvenes in December.
“Consumers need this kind of protection because it is the ultimate deterrent against the abuses perpetrated on them by HMOs,” Gallegos said. “Fear of a lawsuit causes HMOs to act and give patients the treatment they need.”
Friday’s decision by U.S. District Judge Vanessa D. Gilmore means that consumers in Texas can sue to collect damages in state court against health insurers and employer health plans that deny them medical treatment.
The Texas law circumvents a federal law known as the Employee Retirement Income Security Act, or ERISA. That 1974 law prevents nearly 125 million Americans from collecting damages for denial of medical treatment that results in death, injury or economic loss.
Making HMOs liable for damages has become a hot-button health issue. Both candidates for California governor--Republican Dan Lungren and Democrat Gray Davis-- have said they would sign legislation that gives consumers the right to sue their HMOs for damages. Congress is also considering similar bills, but that effort may die as lawmakers turn all their attention to the sex scandal involving President Clinton.
The Texas case was being closely followed across the nation because it involves the first state law that exposes HMOs to lawsuits from consumers who belong to employer-paid health plans.
Called the Health Care Liability Act, the Texas law held that HMOs could be liable for such damages caused by their “failure to exercise ordinary care when making a health-care treatment decision.”
Aetna Health Plan, one of the nation’s largest HMOs, immediately filed suit last September challenging the law after Republican Gov. George W. Bush signed the legislation. Aetna argued that the state law improperly sought to circumvent ERISA.
But the judge disagreed.
The Texas law “addresses the quality of benefits actually provided,” wrote Gilmore, a Clinton appointee, in a 53-page opinion. “ERISA simply says nothing about the quality of benefits received.”
Gilmore, however, struck down a section of the law requiring HMOs to submit to a third-party review panel when patients appealed their denial of treatment. The state cannot pass a law requiring such review because that was already covered by ERISA, the judge said.
Consumer activists praised Gilmore’s decision.
“This ruling is a tremendous victory for patients who deserve to be able to take HMOs to court and receive damages,” said Jamie Court, director of Consumers for Quality Care, a Santa Monica-based watchdog group. “This bolsters our efforts to pass state-based legislation. “
Attorneys for Aetna were not available Friday for comment.
HMOs and their supporters have vigorously opposed such legislation, arguing that it would lead to higher premiums and could even force some employers to drop health coverage.
