Verdict Against Aetna Is an Omen of Clash Over HMOs

In his memorable closing argument in the punitive damage phase of the case of Goodrich vs. Aetna, plaintiff’s attorney Michael Bidart told the San Bernardino jury that the insurance industry “can’t buy you the way they buy a legislator. . . .”

“None of you have ever had a vote so important,” he said. “When this message is sent, it will have more power than any Legislature. . . .”

“You need by your award to make it so uncomfortable for the defendants that they will never forget this jury.”

A few hours later, the jurors rendered a $116-million punitive damage verdict, the largest ever assessed against an HMO, for “malice, oppression and fraud” in Aetna’s restrictive treatment decisions regarding David Goodrich, a deputy district attorney, who died in 1995 of a rare form of cancer.

The verdict may be reduced or reversed on appeal, but national media coverage was massive (Time magazine gave it two full pages) and Aetna’s reaction was fierce.

The company’s chief executive, Richard L. Huber, told the Hartford Courant, “You had a skillful ambulance-chasing lawyer, a politically motivated judge and a weeping widow. That’s no way to get justice.”

A few days later, he expanded his complaints, telling me that juries are customarily not intelligent enough to consider complicated contractual issues and that this one in particular was too ill-informed, as a result of the judge’s evidentiary rulings, to render a sound verdict.

In fact, Bidart--the plaintiff’s attorney--is no “ambulance chaser.” More clients solicit his services than he can accept, and it was the San Bernardino County district attorney, Dennis Stout, who asked him to take his former deputy’s case.

The judge, Christopher Warner, worked eight years for an insurance company and defended other insurance companies full time before being appointed to the bench by Gov. Pete Wilson, an industry supporter, in 1996. If Warner kept certain matters out of the trial, he also refused to let the national Aetna company be sued directly, confining the suit to Aetna’s wholly owned California subsidiary. Had he made the insurer’s national company a party to the suit, the punitive damage verdict would have been even higher.

It’s true, Goodrich’s widow, Teresa, broke into tears while testifying. But that occurred under cross-examination by Aetna attorneys. A friend of mine, general counsel of a major insurance company, comments, “It’s generally not a good strategy to have the grieving widow have an emotional collapse on the stand. It affects the jury. It helps the plaintiff.”

As for Huber’s criticism of the jury system, it has shortcomings, perhaps, but this is American justice, and it was designed in part to check abuses by powerful people and institutions.

The insurance industry, as Bidart suggested, has been mighty fortunate in its dealings with legislatures and Congress. Maybe it’s just as well to let an occasional jury express contrary views on HMOs. It may be a countervailing influence to all the industry’s lobbyists.

*

Unlike most of us, Teresa Goodrich could sue her husband’s health insurer for big damages, including punitive ones, because he was a government employee. The 125 million Americans insured through private employer-paid plans are not allowed under the so-called ERISA exemption to sue for anything other than the actual costs of the care withheld.

So such jury verdicts are not occurring too often. When they do, they illuminate the popular discontent that exists.

There are larger issues in the background here, and Huber brought them up.

Although proponents of lifting the ERISA exemption and allowing more lawsuits contend that under the threat of suits, HMO behavior toward policyholders would change for the better, Huber said it would mainly add to costs.

“It would make health care more expensive,” he said. “This would happen if insurance companies were to approve additional procedures” to stave off suits. “Insurance is nothing more than mutualization of costs of bearing risks. And the industry now has a profit margin of only 3 1/2% to 4%.”

Huber told the Courant the Goodrich verdict “is going to alert the employers of America to the huge risks” of higher costs. “If ever there was a wake-up call to the employers of America, this is it.”

This amounts to a suggestion that employers faced with higher costs would bail out on insurance for their workers or pass on more of the costs to them.

Some of the same points were made after the verdict by Walter Zelman, president of the California Assn. of Health Plans.

“One of the things consumers ought to be thinking about is what’s going to be the impact if HMOs have much more liability,” Zelman said.

“There could be several negative outcomes. The first is cost. . . .”

“The analogy I always use is, think of the HMO as caught between the proverbial rock and the hard place. The rock is the patient-consumer who wants all the new drugs, all the new technical procedures, unlimited access to specialists, and the hard place is the employer and the government that don’t want to pay for them.”

So that is the grim prospect held out by defenders of the current system. They are telling us health care can’t really be improved very much.

They imply that Aetna may have been right in withholding from David Goodrich experimental treatments and permission to go outside its network of doctors.

The San Bernardino jury, which Huber thinks was ignorant of facts and their implications, didn’t accept that.

So I suspect a clash is coming. Maybe when the impeachment proceedings are over and there is time for something else, these matters may come more to the forefront as an issue requiring decisions on the alternatives.

*

Ken Reich can be contacted with your accounts of true consumer adventure at (213) 237-7060, or by e-mail at ken.reich@latimes.com.