State Close to Allowing Suits Against HMOs

The first of long-promised reforms for the troubled managed health care industry overwhelmingly cleared the Assembly on Wednesday, one that would enable 14 million Californians to sue their health care providers for damages.

The proposal, supported by consumer advocates, doctors and labor unions and opposed by the state’s multibillion-dollar health maintenance organizations, is the pivotal piece of an overhaul package negotiated with Gov. Gray Davis in recent weeks.

With only brief discussion and no debate, the Assembly’s Democrats and Republicans joined in a rare display of bipartisanship to approve the legislation 68-2, far more than the 41 votes needed to return it to the Senate for expected final approval today or Friday.

“The governor worked very hard to make sure he could get a bill that he could sign,” said press secretary Michael Bustamante. “This bill, with some very minor language tweaks, fits the bill.”

The bill (SB 21) by Sen. Liz Figueroa (D-Fremont) had been a divisive issue for months, and its easy passage by the Assembly came as a surprise.

As soon as the vote was announced, Figueroa and a “euphoric” Assemblywoman Sheila Kuehl (D-Santa Monica), who piloted the bill through the Assembly, hugged in a victory embrace and accepted the congratulations of other members.

Currently, government employees, including legislators, can sue their HMOs for punitive damages, but about 14 million Californians whose health care insurance is provided by private employers cannot file such lawsuits.

The bill, which would become law Jan. 1, was heavily amended from an earlier and much broader version to reflect Davis’ insistence that Californians’ ability to sue be limited to cases showing “substantial harm.”

Under the bill, substantial harm would include death, loss or significant impairment of limbs or bodily functions, disfigurement, severe and chronic pain or “substantial financial loss.”

Backers of the bill, including its chief sponsor, the Foundation for Taxpayer and Consumer Rights, argued that HMOs are largely unaccountable for harm they cause and that exposing them to liability lawsuits would force them to be more accountable for decisions about patients’ care.

However, the health care industry insisted that exposure to costly litigation would dramatically undermine a major principle of managed care: holding down costs for the consumer.

“This opens up health plans to tens of millions of dollars in damages. People may say, ‘That’s what they deserve.’ But we’re talking about tens of millions of dollars . . . that are aimed at punishing the health plans,” said Walter Zelman, president of the California Assn. of Health Plans, whose HMOs cover 20 million people in California.

Assemblyman Martin Gallegos (D-Baldwin Park), a health care expert and backer of the bill, dismissed that assertion.

“There’s going to be no stampede to the courtrooms,” Gallegos said. “We haven’t seen that in Texas and we haven’t seen it in California with the public employees suing their plans.”

Under GOP Gov. George W. Bush, Texans have the right to sue.

Gallegos and Kuehl said a second bill in the still-evolving health care reform package would head off many disputes between patients and their HMOs before they reached the courtroom. That bill (AB 55) would create a system in which independent physicians would review disagreements over whether a health plan inappropriately interfered with a doctor’s recommendation for treatment or service. The reviewing physician’s decision would be binding.

Kuehl told the Assembly that the Figueroa bill would “create a very, very narrow doorway for litigation.” She called it a “great compromise and a great move forward for the people of California.”

Even Republicans, who typically vote against anything that paves the way for more lawsuits against businesses by trial attorneys, joined in supporting the bill.

“It is completely appropriate as a Republican value to hold people accountable when they do harm,” said Assembly GOP leader Scott Baugh of Huntington Beach, who voted for the measure.

But he warned that some unforeseen and “unintended consequences” of the Figueroa bill may surface. He asked for and received a promise from Kuehl to try to correct any that arise.

“At least HMOs will have something to fear,” said Jamie Court, advocacy director of Foundation for Taxpayer and Consumer Rights. But he complained that the final compromise is so watered down that it represents only a “half loaf compared to remedies in Texas under Gov. Bush.”

A dozen other health care reform bills are pending, including legislation that would create a regulatory Department of Managed Care and legislation to put fiscally unstable doctor groups under tighter state scrutiny.

Davis waited until July to jump into the health reform fray, sending the Legislature an outline of what he would accept. Several bills have been tailored to meet his demands.

But others are advancing without his blessing toward a potential showdown. They include measures that would require health plans to offer new covered benefits, ranging from prescription contraceptives for women to blood-sugar testing kits for diabetics.