Battle brews over HMOs Bill would let clients bypass arbitration in some serious cases.

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The Sacramento Bee

A bill that would allow patients to forgo mandatory arbitration in certain HMO disputes and turn directly to the courts is shaping up as the patients’ rights battle of the year.

The measure – SB 458 by state Sen. Martha Escutia, D-Montebello – faces a crucial hearing today in the Assembly Health Committee.

Under the proposal, patients would be allowed to bypass arbitration when a health maintenance organization interferes with doctor-recommended treatment and substantial harm results.

Daniel Zingale, director of the Department of Managed Health Care, said Gov. Gray Davis has not taken a position on the measure.

When Davis signed a package of HMO bills in 1999 that he called the toughest patients’ rights legislation in the nation, he said: “Nobody is required to sign a document limiting their right to arbitration.”

But consumer advocates note that most HMOs in the state do require patients to submit disagreements to binding arbitration as a condition of medical coverage.

Advocates argue the system is stacked against patients because HMOs are more familiar with the process and deal regularly with arbitrators.

Jaime Court, director of the Foundation for Taxpayer and Consumer Rights, charged forced arbitration has also allowed the industry to evade accountability.

HMO officials contend the reason Court’s group objects to arbitration is that the system makes it difficult for trial lawyers to win large jury awards by exploiting emotional cases.

“Arbitration awards are more moderate and frequent than jury awards and keep insurance costs more affordable,” said Kathleen McKenna, a spokeswoman for Kaiser Permanente.

She said Kaiser has used arbitration to resolve all legal claims since 1971, and noted a similar proposal to weaken the system died last year in the Legislature.

Court denied the current bill will lead to runaway litigation. He said a similar change in Texas law has resulted in only a dozen lawsuits since 1997, and HMOs have been more willing to approve necessary medical care.

Walter Zelman, president of the California Association of Health Plans, defended the arbitration system and noted it is widely used in other industries.

“Arbitration has proven to be a faster, less-expensive approach to resolving disputes to the benefit of consumers,” Zelman said.

But Court said arbitration can also be as time-consuming and costly for HMO patients as court proceedings – with fewer safeguards.

Warren Goold, 44, said it took him two years and a lawsuit before his health plan allowed him to receive two surgeries he needed for a degenerative disk disease he developed after an automobile accident.

“In this system, I have been asked to pay extraordinary costs, $11,000, just to file a case in arbitration because of the extreme damage,” said Goold, who lives in Kern County.

“A person in my situation who collects long-term disability from my employer is in no position to pay that cost.”

The California Nurses Association also supports the pending legislation.

“We think it’s important for HMOs to be held fully accountable for their practices and that there be a maximum deterrent,” said Sara Nichols, a lobbyist for the 45,000-member nurses group.

Zingale said he shares “some concerns” raised by critics of the arbitration system, noting that HMOs may indeed have the upper hand by virtue of being “repeat customers.”

Zingale said because HMOs also require patients who settle before arbitration to sign confidentiality agreements, it’s difficult for state investigators to compile information on the industry.


The Bee’s Aurelio Rojas can be reached at (916) 326-5539 or [email protected].

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