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The California state Senate has passed a bill that would give patients a choice of suing health maintenance organizations in court or through arbitration–under specific circumstances.

The California Association of Health Plans opposes the measure, favoring arbitration as a “fair, more inexpensive way to resolve disputes” than going to court, said Bobby Pena, a spokesman for the association.

“If arbitration is fair, people will choose it voluntarily instead of being forced into it,” said Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights, a nonprofit group supporting the bill. “There’s a lot of evidence…that (arbitration) isn’t a fair system.”

The bill, which was approved by a 21-14 vote on May 29, would end mandatory arbitration agreements for patients who wish to sue HMOs for corporate negligence, according to the foundation.

The proposed statute is intended to make HMOs responsible for injury caused when health-care and treatment decisions were made “in the guise of cost management,” the nonprofit foundation said. Bad faith, unfair business practices, medical negligence and other causes of action could still be subject to mandatory binding-arbitration agreements, the foundation said. SB 458, sponsored by Sen. Martha Escutia, D-Montebello, clarifies that under California’s new HMO right-to-sue statute, enacted in 1999 and effective Jan. 1, patients don’t have to give up their right to trial as a condition of health coverage.

“SB 458 gives HMO patients the choice of going to court or binding arbitration under California’s new right-to-sue law,” Escutia said in a statement. “California’s HMOs force more than 80% of their enrollees into binding arbitration as a condition of health coverage.”

However, even the state government of California requires contractors to agree to settle any disputes with arbitration, Pena said. “Arbitration cases are still lawsuits, they’re just held in different venues,” Pena said, noting that disputes with HMOs aren’t as big a problem as some might think. About 70% of the 144 managed-care disputes that went to arbitration so far this year have been resolved in favor of the insurer, Pena said. “People suggested that health plans are making wrong decisions,” but the arbitrated cases prove health plans do good work, Pena said. The bill will be heard next by the state Assembly, he said.

The California Association of Health Plans supports SB 1040, which would improve the arbitration process by making monetary awards equal to those in civil court cases.

California is the only state among those with right-to-sue laws where patients can be forced into binding arbitration to receive health-care coverage. The state constitutions and case law in Texas, Washington, Maine and Georgia preclude binding arbitration by HMOs in those states, the Foundation for Consumers and Taxpayers Rights said.

In Texas, where the right-to-sue law has been in effect since 1997, there have been only six lawsuits under the HMO liability statute. The Texas Medical Association reports, however, that the right to sue in court has had a deterrent effect, with HMOs more readily approving necessary medical care, the foundation said.

Nine other states–Connecticut, Florida, Maryland, Minnesota, Missouri, New Jersey, Oregon, Tennessee and Virginia–are considering right-to-sue legislation this year (BestWire, Jan. 24, 2001). Only seven states–Texas, Arizona, California, Georgia, Maine, Oklahoma and Washington–have right-to-sue laws on the books. But 40 states, plus Washington, D.C., have adopted laws that require HMOs to provide an external review of any disputed treatment decision, according to the Health Insurance Association of America.

A joint 1998 panel of the American Arbitration Association, American Medical Association and American Bar Association recommended that patients only be asked to enter arbitration agreements voluntarily after a dispute occurs, according to the foundation.

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