Oakland, CA — The Foundation for Taxpayer and Consumer Rights (FTCR) and California Nurses Association joined with the daughter of an HMO casualty to discuss the deceased patient’s plight in the forced arbitration system of Kaiser Permanente, which has its national headquarters in Oakland.

The groups championed new California legislation preventing HMOs from forcing patients into pre-dispute binding arbitration as a condition of health coverage. AB 1751, authored by Assembly Member Sheila Kuehl and sponsored by FTCR, guarantees that HMO arbitration be voluntarily entered into only after a dispute arises.

Aina Engalla Konold, daughter of a Kaiser lung cancer patient who faced gross delays in the HMO’s arbitration system that were condemned by the California Supreme Court, said, “My dad had hoped to have his day in court. Kaiser knew he was dying. He was their patient and he was on oxygen when they took his deposition. But Kaiser only stalled and made us wait until after my father had died. He never got to tell his story or see the result of his case.”

In 1998, a joint commission of the American Bar Association, American Medical Association, and American Arbitration Association concluded “In disputes involving patients, binding forms of dispute resolution should be used only where parties agree to do so after a dispute arises.” AB 1751 requires just this.

“Patients should not have to sign away their right to a court trial simply because they join an HMO,” said Jamie Court, FTCR’s advocacy director. “HMOs must know that they will face the eyes of jurors when they deny and delay medically necessary treatment and serious harm results. Repeated quality of care violations at HMOs should not be hidden behind the curtain of mandatory arbitration. Standards agreed to by the American Bar Association, American Medical Association and American Arbitration Association should be good enough for Californians.”

FTCR filed a “friend of the court” brief in the landmark 1997 California Supreme Court decision, Engalla vs. Permanente Medical Group, where the Court sided with FTCR and the Engallas. The Court found that Kaiser, the nation’s largest HMO, “established a self-administered arbitration system in which delay for their benefit and convenience was an inherent part, despite express and implied contractual representations to the contrary.”

The Engalla family claimed that Kaiser had failed to diagnose 51 year old Wilfredo Engalla’s lung cancer until it became inoperable, and then, to avoid liability, intentionally stalled the case until after Wilfredo’s death — when his family could recover no compensation for Wilfredo’s pain and suffering. Data produced during the court case showed that while Kaiser promised an arbitrator would be appointed within sixty days, it took, on average, two years for arbitrators to be appointed.

Court noted that research among patients for his new book, Making A Killing: HMOs and the Threat To Your Health (Common Courage Press), found that forced arbitration can be lengthy, costly, unfair, and conceals quality of care violations from public scrutiny.

• Arbitrators often depend on repeat business from HMO corporations
  and are more likely to rule in their favor.

• Patients complain of abuse and delays by attorneys who are not subject to discipline by judges.
• Arbitrators generally charge $100-$400 per hour, compared to $350 per day generally for court costs.
• None of the abuses or documents uncovered in the process can be made public.
• There is no media scrutiny, publicly accountable judge, or jury of one’s peers.
• There is judicial review only in cases of outright fraud, not judicial error. ¹

Under state HMO liability legislation, passed in 1999 and to take effect in 2001, patients will be able to recover damages from an HMO that interferes with the quality of their care. But an HMO enrollment contract can still force patients into a private arbitration system controlled by private lawyers, rather than by a judge or jury.

Assembly Member Kuehl said, “I was thrilled with Governor Davis’ leadership and vision in granting Californians the right to finally have their disputes with their HMOs heard by a jury of their peers. HMOs must not be allowed to subvert the Governor’s and the Legislature’s patient protections in this area. Private arbitration is just that: private. My bill will protect patients and make sure that HMOs can finally be held accountable to the patients and the public.”

FTCR is a non-profit, non-partisan consumer group based in Santa Monica.
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1 “Thus even though an error of law appears on the face of an arbitration award and causes substantial injustice it is not subject to judicial review,” Moncharsh v.Blasé California Supreme Court, No. S-02099-7.