Court rules HMO patients entitled to 2nd opinion

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The San Francisco Chronicle

States can entitle patients to a second medical opinion if their HMO refuses to pay for treatment, a closely divided U.S. Supreme Court ruled Thursday in a decision that upholds laws in California and 39 other states.

The 5-4 ruling upholds states’ authority to let patients seek independent medical review if their health maintenance organizations decide a requested treatment is unneeded. HMOs argued that such regulation could be imposed only nationwide, by Congress.

The ruling is important because it gives patients a way to challenge medical decisions by HMOs, which have become the primary provider of health coverage for Americans.

In a statement praising the ruling, Gov. Gray Davis said the medical review program in California “has given patients security that doctors have the final word on their HMO care.”

But the decision, which came out of a case from Illinois, does not cover a sizable minority of the population whose employers are self-insured. Nor did it address the more contentious issue of damages for those harmed by HMO decisions, the subject of a long-standing partisan deadlock in Congress. A state medical review panel can require an HMO to pay for a procedure but can’t award compensation for illness or injury caused by the delay.

“Today’s decision protects the status quo of the states’ medical review processes, but a federal patients’ bill of rights is needed” to cover all HMO patients and let them sue for damages, said Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights in Los Angeles.

But the American Benefits Council, an association of major businesses that provide health plans, said backers of an “expansive patients’ bill of rights” would be “sorely mistaken” if they believe employers would support such legislation.

The proposed law would set a national standard for challenging HMO decisions. The sticking point has been the availability of damages beyond the cost of the disputed health benefits.

A California law that took effect last year, with HMO support, lets
patients appeal the denial of coverage to a three-doctor panel provided by a state contractor. According to the state Department of Managed Health Care, 817 decisions have been appealed so far, and the HMO has been upheld 529 times, or 63.5 percent. That compares to about a 50 percent reversal rate in other states.

Thursday’s ruling involved Debra Moran, a Chicago-area speech therapist who was denied coverage by Rush Prudential HMO for an unconventional surgical procedure recommended by her doctor to repair a painful nerve ailment in her right shoulder.

Moran got the operation anyway, paying $95,000, and later went to an independent physician designated by state law and won a decision that the procedure was medically necessary. The HMO argued that its decision could be challenged only in court, under a legal standard that defers broadly to the company’s medical judgment.

Upholding a lower-court ruling that required the HMO to pay, the Supreme Court said an HMO is at least in part an insurance company, which Congress has authorized states to regulate. Insurance is exempted from a 1974 federal law that otherwise prohibits state regulation of employee benefits.

“HMOs have taken over much business formerly performed by traditional indemnity insurers,” said Justice David Souter. He said requiring a second opinion was part of regulating medical practice — also a traditional state function — and did not interfere with the workings or the terms of benefit plans.

In dissent, Justice Clarence Thomas said that by providing additional rights to HMO patients, the state was thwarting the intent of the 1974 federal law, known as ERISA, to establish “a uniform federal law of employee benefits so that employers are encouraged to provide benefits.”


E-mail Bob Egelko at [email protected].

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